30 December 2016

Working for a living

It doesn't matter whether the cat is black or white, as long as it catches mice. Deng Xioping
I'm not sure I fully understand the recent article entitled Shared stakes, distributed investment: Socially engaged art and the financialization of social impact by Emily Rosamund, but it did make me think about the apparent disdain that some have for worthwhile activities when they are undertaken mainly for financial gain. Social Policy Bonds have been in the public arena for something like 28 years now and their non-tradeable variant, Social Impact Bonds, are now being issued in about 15 countries. In my experience, it's been the ideologues on the left that are most opposed to the concept.

Often implicit, sometimes explicit, is their feeling, or argument, that Social Policy Bonds are a means by which investors make money out by doing what they should be doing anyway. It is true that some wealthy bondholders could become even more wealthy by first buying Social Policy Bonds, then doing something to achieve the outcome that they target, then selling their bonds for a higher price. This some call "profiting from others' misery" and it offends their sensibilities.

But it can also be called "working for a living while doing something socially useful". In the long run it's quite probably that only a few people or organizations will amass huge fortunes under a bond regime, even if they do successfully achieve society’s goals and profit from their bondholding. The way the market for Social Policy Bonds works would mean that excess profits could be bid away by competitive would-be investors. The market for the bonds would openly transmit a huge amount of information, that will indicate the constantly varying estimated costs of moving towards a targeted goal (see chapter 5 of my book for a full explanation). Barriers to entry into helping with target achievement could be low, especially if most bonds are held by investment companies who would contract out the many diverse approaches necessary to achieve most social and environmental goals.

The absolute sums of money at stake might be huge, particularly for Social Policy Bonds that target apparently remote, national or global goals, but there’s no particular reason to assume that, in the long run, it would be shared out any less equitably than, say, teachers’ salaries. Teachers? Yes, and nurses, doctors and social workers, all of whom perform socially valuable services for which nobody, even on the left, begrudges payment.

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