28 October 2020

Forget grand ideologies

Haonan Li and Victor Yaw write:

If there is a lesson from Singapore’s development it is this: forget grand ideologies and others’ models. There is no replacement for experimentation, independent thought, and ruthless pragmatism. Haonan Li and Victor Yaw, , 'Palladium', 13 August

Social Policy Bonds have been in the public arena for something like 32 years now and their non-tradeable variant, Social Impact Bonds, are now being issued in about 25 countries. In my naivety,  I thought in the early years that my original concept, which, simplistically is a right wing method (markets) aimed at achieving left-wing (social) goals, would appeal to everyone, rather than...not many people. 

Unsurprisingly, perhaps, 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 of doing what they should be doing anyway. It is true that some wealthy bondholders, whether they be individuals, corporations of government or non-government bodies,  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 is what 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 probable that only a few people or organizations would 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 would-be investors in a competitive market for the bonds. The market would openly transmit a huge amount of information about 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 joining the coalition of bondholders and helping achieve the target 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, nurses, and social workers, all of whom perform socially valuable services for which nobody begrudges payment—--not even those on the left

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