May 19th, 2013

Social Change in the Face of Austerity

May 19th, 2013

The increasing popularity of social finance and social enterprise may be symptomatic of a growing impatience with government response rates in making essential changes. It also is a sign of a modern societal eagerness to accomplish good at a pace accustomed to the Internet Age. Today’s generation has little tolerance for artificial structures and bureaucratic rationales for why something can or cannot be done.

The notion that private businesses must function within bottom-line financial silos is simply no longer true. Moreover, the idea that government funded not-for-profits altruistically exist to solely support the welfare state is equally deemed absurd. It has been widely acknowledged that we now live in a reality where there is a sector-wide responsibility to achieve sustainable gains across all financial, social and environmental domains. This new reality has brought into question the role of government and the value proposition of neoclassical liberalism in the face of austerity.

Neoclassical liberalism is a political ideology that advocates civil liberties and political freedom, limited government and a belief in the free market. This stance largely aligns with the social finance and social enterprise movement. Impact investors and social entrepreneurs want to accomplish good in a sustainable manner without the bureaucratic vehicle of politics slowing them down.

The idea of these high net-worth individuals and empowered citizens taking action into their own hands is exciting, but what does this mean for our society as a whole? What if one impact investor can provide a greater social return on investment than an elected government? What if a single social entrepreneur can provide poverty-alleviation faster than an entire team of policy experts from a dedicated department? What if a successful capitalist is more effective at achieving social outcomes than an elected president or prime minister? Or alternatively, what happens if these new influential individual investors, entrepreneurs and capitalists make a mistake or abuse their influence?

Advocates for this type of progressive change may wish to pursue an alternative trajectory if the long-term consequences of this social finance and social enterprise movement lead to a form of market totalitarianism. However, proponents would argue, this probably will not be the case, as social finance and social enterprise are all about social justice and social change. As long as we keep bridging such terms with the word ‘social’, we can surely talk ourselves out of applying any critical thought to the long-term consequences of such a philosophical shift.

The current laissez-faire approach to the development of social finance and social enterprise could lead the triple-bottom-line astray, resulting in a single-top-line proprietorship. While governments can always reduce or expand their role in this space, they should never delegate the responsibility. If governments endorse social finance and social enterprise development, they are invariably transferring at least some of the decision-making power to investors and entrepreneurs away from politicians and policy experts. If this new power goes unchecked, there is nothing in place to hold these new ‘social capitalists’ accountable. Furthermore, there would not be any systems in place to react to market fluctuations affecting social ventures, which supposedly would be serving those in need. This is not to say we should not pursue such undertakings, but governments need to clarify their position in this movement by reexamining their roles and responsibilities in the social/economic sphere, as well as the turf they currently occupy and why. Otherwise, governments may lose their credibility, leading to a power transfer where the checks and balances that we largely take for granted would be lost, all in the name of “social change.”