Today’s SIB News begins with a full frontal attack from a Canadian trades union. I have not read the entire report yet but would note they do hit on one or two salient points. Actually guaranteeing returns to investors defeats the SIB model of risk bearing. If the likes of Goldman Sachs are indeed indulging in such predatory tactics it can harm the industry.
However, at the core of the paper’s argument appears to be an other worldly approach to understanding economics – if not outright fiscal denial. There are those in the trades unions and the NGO sector who see SIBs as merely an attack on their existing fiefdom. Cries of privatisation are a rallying call to elicit a response to encourage maintenance of an expanding state. The difficulty is the state has reached the logical limits to its growth in terms of spending. An ageing western population will cause huge problems for jurisdictions where government have inadequate pension coverage and where already creaking social services cannot hope to survive in the long term under existing financial arrangements.
I came to SIBs because I understand that the public financing status quo will not do. That is a very difficult concept for many unions and NGOs to fathom as it goes against what they see as the core of their DNA. Yet the DNA of these movements has surely been best defined as service to their stakeholders? Simply holding out a begging bowl for more government funding on all fronts is unsustainable. Schumpterian creative destruction is clearly terrifying for the NGO/union movement but the alternative of ignoring the problem and not innovating new solutions is much worse for all of society.
There are many civil servants and NGOs doing good work and there are many who are clearly finding it a challenge to meet the ongoing budgetary reductions which are an increasing fact of life as government can no longer afford to expand. The best solution I have seen revolves around pay for success strategies which deliver the best value to society. SIBs can directly help stakeholders who need assistance and make our world a better place. If that involves an eventual return to private investors for supporting such industry and improving society then so be it.
…Our second article is another profile of the sort of person SIBs can aid. It repeats much of what was discussed yesterday but is an ideal balance to our first story today.
As always, all feedback will be welcome, I appreciate your input.
New Flaws Emerge With SIBs Privatization Schemes, Says National Union
NUPGE
“With SIBs, if a project fails, charitable donations will go to a company that made $7.9 billion in 2012,” said James Clancy, NUPGE National President.
A new report, Privatization by Stealth: The Truth about Social Impact Bonds, released this week by the National Union of Public and General Employees (NUPGE) confirms fears that the only difference between Social Impact Bonds and older forms of privatization is the packaging.
Public-Private Partnerships Show New Way To Pay For Success
Boston.com
Ralph Bonano was living a life of crime on the streets of Chelsea. A high school dropout who was selling drugs, robbing people and participating actively in gang life, he had been arrested five times by the time he turned 17.
Recidivism is such a rusty gear in the poverty cycle that few entities have had the will, the resources, and the fortitude to confront it, particularly in an era of tight public budgets. Young ex-offenders simply disappear into the margins of society, where they find few opportunities and lots of negative temptation.
Fortunately, a small movement is afoot to address this issue, and Massachusetts is leading the way. Ralph is in the midst of a remarkable transformation thanks to Roca, a Boston-based nonprofit which has a strong track record fighting recidivism. Of the 115 high-risk young men who were in the advanced stages of Roca’s programming last year, 89 percent had no new arrests and 69 percent retained employment.
Expanding promising programs like Roca’s to scale is a critical bridge to long-term change, and last week, Governor Deval Patrick stepped forward and announced that the Commonwealth of Massachusetts and a group of private sector collaborators will use an innovative approach to doing just that with Roca.