This post is based on a reading of “Counter(Imp)acting Austerity: The global trend of government support for impact investment”, a research paper done by a Yasemin Saltuk for JP Morgan: “J.P. Morgan (“JPM”) is the global brand name for J.P. Morgan Securities LLC (“JPMS”) and its affiliates worldwide.” It describes the growth and projections of this ‘new’ form of capital investment ‘initiatives’ or ‘ventures’ aimed at directly profiting from the same social problems created precisely by JP and its equals. Basically, they invest, privatize and control those social services delivery systems which they deem profitable, with the government taking the “risk” of the venture. Yes, you will see in the report that the government will assume the ‘risk’, the rules are still been drawn.
There are many names for this new investing ‘trend’. Here in good ol’ USA it’s known as “pay for success initiatives”.
After reading the document, I too came with different names for this ‘initiative’: ‘Voltaire’s ‘social contract’ on steroids’; ‘Your road to wealth starts with the squeegee guy’; ‘The wolves feeding the sheep’; ‘Betting on poverty’…well, you get my drift.
When, as you will see, even the US State Department involved in this “pay for success” business (that’s exactly what it is), you know something fishy is there. And when JP Morgan works diligently in this report, you know that this is in the hands of big government and central banking systems. This ‘approach’ is the result of big lobbying, not the result of social workers finding ways to cope with the impact of budget cuts in the lives of the under-served. RIP ‘not-for-profit’ social services industry. Although it was a looong time ago since they stopped being ‘not for profit’.
And forget about “best practices”. If it ain’t increasing profits, it ain’t best practice.
Let me share with you what I found in that report. I’ll do this in two different posts, the second will discuss how ‘pay for success’ will work and how it will be financed.
1. Origen of the new millennium’s “pay for success”: coping with debt with more debt
This ‘impact investments’ (“those intended to create positive social or environmental impact alongside financial return”) is not new. The report mentions that in France, for example, this idea is at least 100 years old. It was previously known as “social economy” in the form of ‘credit cooperatives’ with ‘social outcomes’ goals at its heart. This bank is the oldest in that tradition, supposedly:
“Crédit Coopératif is a co-operative bank…” http://www.credit-cooperatif.coop/menu-bas/english-presentation/
But today’s ‘impact investments’ ideas are the direct result of the economic crisis created by the central banks:
“As governments across the developed world grapple with austerity, many are faced with the reality of reduced public spending at a time when economies struggle to grow…”
“In a global trend, governments are increasingly turning to domestic impact investment as they balance the need for fiscal consolidation with the demand for investment in economies struggling to grow.”
“As such, this period of fiscal consolidation has been an opportunity for impact investments”
“Whether or not the motivating factor is directly caused by fiscal consolidation [they don’t care] the coincident trend is clear: governments across developed markets are increasingly turning to the impact investment sector for delivery of domestic social services as they cut spending” [yeehaaa!]
Mind you, “fiscal consolidation” means “a policy intended to reduce deficits and the accumulation of debt.” Reduce deficits means reduced social spending in order to pay the central banks, and reduce the accumulation of debt, well, in an economical system based on debt, reducing debt is impermissible and unacceptable. You will see how the report confirms that creation of debt is at the heart of this “pay for success” capital venture.
Anyway, this “pay for success” is the central banks’ medicine to the problems THEY have created with their debt collections and bailouts.
2. Why are JP Morgan and the big banking systems interested in “pay for success”?
The language of WS and central bankers gives you a huge hint:
“[to] attract private investment capital, to take a more significant role in delivering social services”
“we show the consolidation required …”
“Fiscal consolidation is insufficient, coincident investment in growth is critical” [market growth, that is]
“directed financing towards intentionally impactful and financially sustainable business – what we will refer to as “impact businesses”
“to deliver better returns”
“encourage faster market growth”
“allow businesses to improve their market position“
“opportunities for strategic investment“
“We believe this makes the market for impact investments – the investments that finance impact businesses –a key recipient of government support today and in the future.”
There can be no doubt about the nature of this ‘pay for success’ model: it is a profit-seeking, global financial market investment business. It has been thought out aaaaaall the way up there, where none of us can see or influence it. It deals with nations’ “consolidation” policies, “market growth”…This is NOT a GRASSROOTS movement.
In addition, these bankers DEMAND “fiscal consolidation” in order to participate in the shark feeding frenzy : the consolidation required”, “Fiscal consolidation is insufficient”.
And more ‘egregious’ is this:
“a key recipient of government support today and in the future.”
I thought that capitalists didn’t want the government to meddle in their business, that this ‘pay for success’ was about BIG BUSINESSES HELPING the ‘salt of the earth’, the downtrodden. But now I find here that it is about THE GOVERNMENT supporting the market! And to rub it in our face, they will finally, FINALLY take official and in-the-public’s face control of how we receive services, if any and in whatever shape they decide it will happen:
“to take a more significant role in delivering social services.”
And here we are, gingerly and happily CONSENTING to this total corporation appropriation of our lives, of how ‘recovery’ will be defined in terms of how much profit your pain gives them.
3. First ‘moral implications’ question: profiteering from poverty
How safe it is for us to entrust the repair of the damages done by that global market and the global banking industries to our society into the hands of those same people?
Is it moral to devise a system of big stock buying and investing and subject our health services to the ups and downs of the market? As you will see later in the report, these people are aware that, in order to reap the most profit, the most sick and difficult to help due to mental illness will be left behind, those who can’t be shaped into some profit-drawn box of ‘behavioral outcomes’ will be left unserviced.
If, as even they acknowledge, this is the result of the financial and austerity crisis, isn’t there ANY way to solve the problem other than surrendering our lives to the global markets? And why does it have to be PERMANENT? Today they are only finessing the TRANSFER of our lives to their hands, drawing the rules they will use to make US PAY for that too,
“today and in the future.”
Tomorrow I will post the rest of the report. It will deal with the actual rules of how they will finance ‘pay for success’.