By Gerard Di Trolio
On the surface, social finance seems like the perfect policy to be proposed by the Trudeau government. It’s supposedly a modern approach to solving social problems that claims to be innovative and results oriented.
But many forms of social finance, like social impact bonds (SIB), are unproven and could easily act as a Trojan Horse for large financial institutions and other wealthy investors to gain a foothold into public services and promote their own agendas.
But by 2016, a House of Lords Committee was told that SIBs were a lot of hype and the failure of local governments into the UK to invest as much in SIBs as Cameron had envisioned was very much due to their complex financing agreements and the high costs caused by the need for investors and their intermediaries to make a return.
Trying to offer up SIBs as some sort of solution to society’s ills was also never going to work while Cameron’s government pursued punishing austerity. In this case, SIBs were floated as a way to pursue social justice despite the fact that austerity was always going to have more negative effects than any modest SIB program. This sort of cover for austerity politics using social finance is not restricted to the UK.
In the United States, SIBs have also failed to deliver major positive results, acting as mere window dressing to mask far more regressive policies.
SIBs used to expand child care centres run by Chicago Public Schools will ultimately be more expensive than the traditional publicly financed model.
And while Chicago Mayor Rahm Emanuel supported expanding child care spaces in this manner he over the course of his stint in the city’s top job has gone to war with the Chicago Teachers Union and closed schools in African American majority neighbourhoods. These are not the kind of policies one would pursue in order to actually solve Chicago’s social ills, especially since social finance is often touted as way to help marginalized communities.
And here in Ontario, we should be skeptical of using the private sector to deliver traditionally publicly funded goods. Ontario Auditor General Bonnie Lysyk’s finding that public-private partnerships (P3s) have cost the provincial government an additional $8 billion over nine years should have been wake up to governments at every level in Canada about using the private sector to perform traditional roles of government.
The collapse of construction giant Carillion in the UK also shows the folly of shovelling billions to corporations to build P3 projects. Governments have shown little willingness to closely scrutinize their contractors or make sure private financiers for public services do not seek to influence governments in ways that will help their bottom line.
However, there is an alternative. Some municipalities in Canada have been bringing services like waste collection, snow removal, and water treatment back under public control over the last several years. And even in Tory governed Manitoba, the government recently realized that using P3s to build new schools was not a good idea. After years of conservative demonization that the state cannot run any services competently, the public is becoming more aware of the superiority of public services not delivered by the private sector.
In terms of policy, the answer is simple: public services should be run by governments and they should tax the wealthy and corporations to pay for them instead of offering them high rates of return on investments for delivering them.