Author: Andrei Guter-Sandu
Public Policy and Social Finance: Between Democratisation and Financialisation
Since the launch of the first social impact bond (SIB) in the UK in 2010, social finance has increasingly been seen as an alternative and more efficient channel through which public policy can be delivered. Social finance, the story goes, has precisely the power to overcome the budgetary constraints necessitated by overburdened but underfunded welfare states, by tapping into private capital markets and essentially acting as a surrogate on behalf of the welfare state. In this manner, all funding and delivery risks are entirely borne by the private sector, with the public only having to pay for measurable and evidenced improved social outcomes. At the same time, scholars critical of the idea of blending social with financial return have decried this phenomenon as a form of the encroachment of finance on the social and the financialisation of public policy. What is generally missing from this account is what exactly is the structure that sustains this process of financialisation.
By building on the emerging scholarship on valuation – which looks at how value (in this case, social value) is established, assessed, negotiated, constructed and/or contested – this paper addresses the socio-technical complex fashioned and mobilised in the field of social investment in order to gauge social value creation. I analyse two interrelated aspects that constitute this complex: the governance model that fuels the engine of social impact bonds, and the performance management tools that were set up to measure social impact. I find that the process of financialisation is buttressed, on the one hand (and paradoxically), by the agenda, first laid out by New Labour and then celebrated by the Coalition Government, of devolving and opening up public policy delivery to horizontal and network-like forms of governance, and, on the other hand, by the bottom-up proliferation of calculative tools designed, originally, for measuring impact, but which had the side-effect of crystallising particular and narrow forms and understandings of social value and social value creation. I then discuss the implications of this process of financialisation to the future of the welfare states and outline potential avenues for contestation or resistance.