A ‘hatchet job’ the end the week. – albeit I do sympathise (even as a financier) with those who are uneasy by the ‘great vampire squid’ itself, Goldman Sachs, endorsing pay for success but that ought not to invalidate the model. However those stuck in a big tax time warp around 1980 continue to cling to the notion that the big state milk and honey era for NGOs is heading towards an abrupt halt.
I know it upsets many folk (usually former readers!) to appreciate that the future is less government spending and hence more SIB structures but I would rather the truth was out there than soft soap what is a delusion: that government spending can continue to expand from its already extreme highs in western states. I am not a heartless capitalist in this respect, just somebody with sound track record in observing major structural changes and acting accordingly. It will not be an easy pivot and for those enshrined in the idea money flows from government there is genuine austerity to come (not the current tiny flakes of cutbacks in the UK or US: I mean a really huge shock as the state is forced to take a step back from what has become widely regarded as its funding obligations)…
I am not sure if you have seen it elsewhere – a slightly off topic discussion by in my latest RT #Op-Edge column looking at the new altcoin (cryptocurrency cousin of Bitcoin) Auroracoin. This illustrates the alternatives that are appearing – there are interesting ways to insert this into community programmes as this de facto disintermediation of Iceland’s government shows.
We are few in number in this newsletter and it is amazing so few in the NGO community want to listen but the change is happening and only those prepared will help their stakeholder groups – thank you for reading SIB News, all feedback is, as always, welcome.
In 2012, Mayor Michael Bloomberg announced that New York City would be the site of a new experiment very dear to his billionaire’s heart. He declared that Wall Street megabank Goldman Sachs would provide a loan of nearly $10 million to pay for a program intended to reduce the rate at which adolescent men incarcerated at Rikers Island reoffend after their release (currently almost half reoffended within a year).
The city government was short of money, so Goldman Sachs would step in to do what anemic public investment could not accomplish on its own: keep young men out of jail.
If the program succeeded, the giant bank would profit. The more recidivism dropped, the more taxpayers would have to pay Goldman Sachs. On the other hand, if recidivism didn’t drop significantly, Goldman would lose its investment.
So far, it’s too early to tell whether or not the program, which focuses on cognitive behavioral therapy, will meet its goals, but according to reports from the Department of Corrections, fighting has already been reduced at Rikers, so Goldman may just cash in.
The Rikers experiment is an example of a new trend in what are called “social impact bonds.” Burning questions about who profits and who loses in these schemes have become the subject of debate as the trend catches hold. Let’s explore.