ILPC 2027

The mainstream economics concept of innovation is about increases in productivity through process and product improvement which are in the aggregate socially beneficial. This paper argues that we need to distinguish other kinds of financial innovation which have redistributive downsides and unintended consequences; and encourage more explicitly social forms of innovation similar to that proposed by Robert Unger. Unger (2015) advocates a ‘maximalist’ approach where change is integrated/ revolutionary, not an adjunct to existing practices. Unger also notes that social innovation should not be seen as a compensation for or attempt to ‘humanise a reality’ that is unpleasant (e.g. austerity); rather, social innovation should be a way to develop new practices and institutions to deliver ‘solidarity and community’.

Using ‘follow-the-money’ method we show how financialised nursing home chain operators in the UK, who control 20% of residential care beds for the elderly, have brought debt based financial engineering to a capital intensive activity so that they need 11-12% returns to cover their cost of bond finance and generate a surplus after paying 8-9 times earnings. The aim of their financial innovation is private benefit for fund investors by capturing UK state revenues; but when cash strapped Local Government Authorities shave the price paid for residential care the unintended result is fragile firms and pressures on the care workforce. The financialised chain operations investing in the development of new residential homes/provisions are wedded to a ‘60 bedded Travelodge-type homes’ which is a format that fits their business model. This paper conceptualises a care sector that needs less financial innovation and more radical social innovation in care provision.

Unger, Roberto (2015) Conclusion: The Task of the Social Innovation Movement in Nicholls, A., Simon, J., Gabriel, M., Whelan, C. (Eds.) New Frontiers in Social Innovation Research. Palgrave (pp 233-251).