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Are social impact bonds immoral? 12 March 2013

Posted by cooperatoby in social economy, Social enterprise.
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What are the moral and social limits of markets?

I caught a brilliant and cruelly guillotined final 4 minutes of the BBC’s Today programme just now, when Evan Davis pitted Sir Ronald Cohen, chairman of Big Society Capital, against Anders Lustgarten, author of the play (which unfortunately closed on Saturday) If you don’t let us dream, we won’t let you sleep. The play explores what would happen if speculators started to ‘short’ social impact bonds! The logic is that if you foresee social disorder, then you can make a financial killing by in effect betting that the value of social impact bonds will fail. For instance if an SIB is issued that would pay out if the number of rapes falls, then if on the contrary the number of rapes rises, then you can profit from selling such bonds cheap.

Sir Ronald was generous enough to say he liked the play, but pointed out that SIBs were invented to fund not-for-profit enterprises, and there is no market in which you can trade them. However he did admit that such a market could develop over time if SIBs took off as a financial instrument (14 are now in force or planned in the UK).

Anders Lustgarten’s point was that the finance industry is taking a model that has failed so spectacularly in meeting one human need – housing – and applying it to other needs. He believes that money is there, it is just that it is salted away out of reach of the taxman. The play is not against money as such, it’s against the exploiting of human need for profit. Sir Ronald’s rebuttal was simple: “You can’t do anything without money.” And after all we don’t want to abolish mortgages…. or do we?

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