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The sacred hunger of social investors 5 November 2013

Posted by cooperatoby in EU, social economy, Social enterprise.
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The unsuspected and silent protagonist of Barry Unsworth’s (1992) novel of the slave trade is money itself – the ‘sacred’ need of capital to find a return.

Topic drift

social economy-investmentI’ve become increasingly worried by the insidious topic drift that is turning talk of social economy, via social enterprise and social business, into talk of social investment. Money has its own logic. I’ve noticed this during meetings both of foundations and of microfinancers, who are surely the most socially conscious of money managers. You start off taking about what to do with money and you inevitably end up talking about how you do it. Someone mentions risks and returns and suddenly the discussion is reframed in terms of the needs of the money itself. Who owns the money, how they got it in the first place, the rights they have over it and how you use it are suddenly irrelevant – the money itself “needs” this or that return, such and such will be impossible because investors see it as too risky… how often have you heard that?
I think this is a smokescreen. There are certainly ethical investors who want to do good with their money, and are searching for ways to do it without losing their life savings. But they are in the hands of the financial professionals when it comes to actually doing it. We’ve seen the disastrous effects that resigning control over money to bankers has had. They have dreamt up ever more abstruse formulae for minimising risk and maximising returns, built castles in the air… and when they collapsed, we have had to pick up the pieces. Result – astonishing and continually mounting inequalities in wealth, both within countries like the USA and UK, and globally.
As social finance becomes more sophisticated, it also becomes less transparent (though initiatives like Ethex help). It develops its own language and can only be discussed by specialists. This leads to the lack of accountability and the self-justifying in-crowd behaviour which has brought us the world financial crisis.

Reframing through terminology

This sleight of hand is now being applied to the social economy and social services. First, there was Commissioner Michael Barnier’s invention of the “Social Business Initiative”. Welcome though this is, I think the choice of the word “business” instead of “enterprise” was significant. “Enterprise” at least implies some sort of noble aims – to create something – while “business” implies not much more than doing a deal, from which one or ideally both parties gain. The choice of the term “social business” suggests an intention to change the underlying assumptions – it means that someone makes money out of the operation, rather than that it produces worthwhile benefits.
Money needs to find a return. In a depressed market, where do you go to find returns? You seek out those basic services that everybody needs to consume, whether they have disposable cash or not – those services that are inelastic with regard to price. They are not cyclical – i.e. they will continue to be consumed whether we are rich or poor, because our lives depend on them. Things like food, utilities, housing and social services. They will produce a steady return to investors when the market is failing to offer spectacular returns elsewhere in sectors like technology. They also have the benefit that governments are always there to subsidise them when things go pear-shaped. You then lobby to get governments to give you a slice of the action. Aditya Chakrabortti has a wonderful piece in yesterday’s Guardian showing that in 2012 the private rail operators to whom Britain’s railway system was sold off 20 years ago made a return of no less than 147% – a multiple of 2½ in a single year – on the small amount of money they have put in. The public was assured that what passengers needed was private firms who could invest in better services – but what we have is fat controllers creaming off massive profits. The public sector can run much better railways, as Directly Operated Railways has done with the East Coast Main Line – and it is to be reprivatised lest this good example should undermine the myth that private enterprise is best.
Once the SBI got under way, the practitioners – the people who are actually doing it on the ground – needed to be got on board. It became apparent that it would be no easy matter to impose an alien notion of “social business” on the relatively stable and well-rooted traditions of European social enterprise, and so the two ideas have been elided – the Commission treats them as synonymous. And the European definition includes three dimensions: not only a primary social objective and limits to profit distribution and asset disposal, but also participative management. This is a significant victory.

Why the emphasis on investment?

I’m suspecting that although DG MARKT puts the SBI forward as putting financial institutions at the service of society, there’s a double agenda: it also opens up opportunities for them to make reliable counter-cyclical profits.
At its worst, transforming public and social enterprises into vehicles for “social investment” is a mechanism to ensure a steady and relatively low-risk flow of money from disadvantaged service uses to capital owners – which is socially regressive.
Talk of business rapidly elides with talk of investment, but business is about much more than returning a stream of rewards to the people who put in the money. It’s about balance: a good business creates returns for all its stakeholders by providing worthwhile goods and services and satisfying, decent jobs.
Politicians placate us by saying that “we cannot go back to business as usual”. I fear that an over-emphasis on social investment is doing exactly that. Social enterprise is more a matter of solidarity, networking and mutual support and peer learning than it is about being able to borrow money.

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Comments»

1. ‘New’ social economy means non-social economy | Toby at tipp(l)ing point - 15 May 2015

[…] social innovation and social investment, all of which, brandished in the wrong hands, seek to take the mantle of the social economy and depoliticise it, we now have a takeover bid for the very term social economy itself. It comes from about as far […]


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