Authors: F.S. Michaels
Tags: #Business and Economics, #Social Science - General
According to the former Chief Marketing Officer and Managing Director Corporate Opportunities of the Boys & Girls Club of America (B&GCA), the organization is practicing social entrepreneurship by developing “mutually beneficial” marketing alliances with corporate partners. The alliances are based on the idea that the B&GCA brand is worth something to a corporation and can help it achieve its goals. B&GCA has developed alliances with Coca-Cola worth $60 million, and alliances with JCPenney ($7 million), Circuit City ($3 million), Crest/P&G ($3.3 million), Compaq ($7.5 million), Microsoft ($100 million), The Sports Authority ($3.3 million), and others.
In the economic story, traditional philanthropy doesn’t work, but if you cross charity with the principles behind venture capital, you get something even better — venture philanthropy. Venture philanthropists aren’t donors who fund grant proposals — they’re investors who invest in business plans. From this point of view, investment is more effective than charity; emerging venture philanthropists “don’t want to hear about the have-nots and the negativity associated with this dependency syndrome.”
Market concepts should be used to design social goods and services. Programs funded shouldn’t be evaluated at some future date — their performance should be measured, and they ought to demonstrate innovation, measurable outcomes, and tangible results. Venture philanthropists can calculate their social return on investment by quantifying things like how much income tax revenue is generated by a homeless person who gets a paying job; the higher the return, the better the investment.
The economic story also tells us that venture philanthropists ought to manage the relationship between themselves and the not-for-profit organizations they invest in. They can provide management expertise as well as cash, maybe get a seat on the board, monitor the organization’s performance and make it accountable for results, then develop an exit strategy that’s based on the organization becoming self-sufficient. Research suggests, though, that the U.S. nonprofit sector’s adoption of market values and methods has weakened democracy and citizenship — weakened the ability of those organizations to create and maintain a strong civil society. The market’s emphasis on being entrepreneurial and satisfying customers is incompatible with the sector’s traditional emphasis on citizenship, collective action for the public interest, and the democratic ideals of fairness and justice.
Nevertheless, venture philanthropists are to throw their support behind programs that focus first on economic and educational improvement, believing that spiritual and social wealth will follow.
One form of shared wealth that is critically important in the economic story is the environment. The story tells us that we ought to value the natural world because the environment is literally worth money. Biodiversity is natural capital — a storehouse of economic resources that exists for our benefit, something we can literally put a price tag on. Mother Earth is a service provider who provides life-fulfilling and life-sustaining ecosystem services. Those ecosystems, including the species of which the ecosystems are made, are delivered to all of us free of charge.
Ecosystems like the polar regions matter because they give us commercially valuable fish, provide food, shelter, clothing and tools from the caribou, give us fuels from wood, sod and peat, and turn on the “global air-conditioning.” The oceans and seas matter because they represent a renewable energy potential and a desalinated water supply, regulate the climate, provide protein for one billion people, give us sea sponges from which we make fibre-optic technology, and facilitate the shipping and transport means for 90 percent of our international trade in goods.
Because nature’s ecosystems provide us with so many goods and services for free, in the economic story, the loss of those systems represents an enormous financial liability. The best way then, to demonstrate just how much these ecosystems are worth is to price them out so we can see how much it costs us when nature is destroyed. In Germany, a meeting of the G8+5 Environment Ministers in 2007 led to a global study on the economics of the loss of biodiversity and ecosystem degradation. The study highlighted countries saving or making money from conservation efforts. In Venezuela, “investment in the national protected area system is preventing sedimentation that otherwise could reduce farm earnings by around U.S.$3.5 million a year. Planting and protecting nearly 12,000 hectares of mangroves in Vietnam costs just over $1 million but saved annual expenditures on dyke maintenance of well over $7 million…Investment in the protection of Guatemala’s Maya Biosphere Reserve is generating an annual income of close to $50 million a year, created 7,000 jobs, and boosted local family incomes.”
The Natural Capital Project — a collaboration of The Nature Conservancy, the World Wildlife Fund, and Stanford University’s Woods Institute for the Environment — is looking “for practical ways to quantify the seemingly unquantifiable: What is the dollar value of a wetland? Can you put a price tag on a rainforest and the many services it provides humanity?”
One of the project’s internationally renowned scientists says, “Our goal is…to show how one can actually get a really high return on investing in living natural capital through conservation.”
In other words, the economic story tells us we ought to save nature because it
to save it. In economic terms, it’s win-win. The story doesn’t concern itself with what happens if it
us to save our environment. How will we justify sparing a rainforest or protecting a species from extinction if it’s literally worth more to cut the forest down or to let the species die? Still, in the economic story, “If you want to save the Amazon, go to business school and learn how to do a deal.”
Government is instituted for the common good; for the protection, safety, prosperity, and happiness of the people; and not for profit, honor, or private interest of any one man, family, or class of men.
—JOHN ADAMS, U.S. PRESIDENT, 1776
The biggest challenge is going to be how to best utilize taxpayer dollars to the benefit of industry.
—MIKE SMITH, U.S. DEPARTMENT OF ENERGY, 2002
FOR ALMOST AS LONG as we’ve been coming together in groups and sorting out how to get along, we’ve regulated how we live together in community through different levels of government. When the economic story spreads through your community and into your government, it changes how the government understands itself and makes decisions on your behalf, which means it also ends up profoundly changing arm’s-length government organizations like prisons and public libraries.
Before the economic story began to spread, we lived together and governed ourselves based on the assumption that the public and private sectors served different purposes. The public sector operated in the public interest, developing and investing in public goods like health, education, and safety for the good of the community. The private sector, at the other end of the spectrum, operated for monetary gain. The two sectors were even governed by different bodies of law: constitutional and administrative law for the public sector, and corporate law for the private sector.
Public servants subscribed to a set of values that came to be known as the public service ethos. According to that ethos, public officials were ideally to be law-abiding citizens of upright and honest character who were accountable to the democratic process, loyal to the common good, and impartial and fair in their treatment of others — no special favors for friends and higher-ups.
Civil servants carried out the work of the government and were answerable to it. The government, being democratic, was in turn answerable to you, the public, so the whole system was ultimately answerable to the people. That public service ethos gave us a vision of political life as a noble calling, a life lived in dedication to the public good and in service to your community and country. Not everybody in public service lived up to that ideal, but the ideal existed, and people aspired to it.
Then the story changed.
In the 1970s and 1980s, researchers began to notice that governments in Australia, Canada, New Zealand, the United Kingdom, and the United States had shifted from using one set of values and practices to another. The basic difference between these two ways .of doing and being government (one called Public Administration and the other called New Public Management) revolved around whether or not the public and private sectors really were distinct. Public Administration said yes, the sectors were different and ought to be managed differently. New Public Management said no, the sectors weren’t distinct, and that the tools and techniques of the private sector could be used to manage the public sector too. In this way, the rise of New Public Management in government represents the spread of the economic story.
The economic story says that the public sector is rife with problems: it’s inefficient and ineffective, wastes money by not controlling costs, has low standards of quality, lets its employees have too much influence through trade unions and professional associations, and so makes citizens unhappy. Civil servants and politicians aren’t responding to a noble calling of service to community and country — instead, they are rational, self-interested individuals just like the rest of us. Civil servants are entrepreneurial and want to maximize their departmental budgets. Politicians, on the other hand, want to maximize their chances of reelection.
Given all of these problems in the public sector, the economic story says the solution is to run government like a business. Citizens become customers. Governments start to focus on what businesses focus on: improving quality and performance, cutting costs, being productive, providing better customer service, being more responsive to customers, and benchmarking against best practices. Cost control and performance improvement supersede the old philosophy of development and investment for the public good. Competition is introduced into government through outsourcing, deregulation, privatization, and commercialization, in order to make government effective and responsive and therefore worthy of your support.
According to the economic story, civil servants who once provided public services in-house should outsource that work to the private sector and supervise the delivery of those services instead.
But because the private sector is not answerable to the democratic process, that outsourcing raises concerns that community, democracy, and the public interest are being eroded as the public service ethos fades.
As the economic story spreads in government, a language based on economics develops along with a new way of thinking and reasoning about what goes on in government — a kind of accounting logic.
That accounting logic makes two assumptions; first, that anything and everything your government does can be assessed in terms of what value is added, and second, that the value added can be linked to how much money is spent on the activity in the first place. An accounting logic says that if a program or action is worth more than it costs, it is a good investment and worth doing. If it is worth less, it is a bad investment and not worth repeating.
On the surface of things, an accounting logic seems neutral and objective, independent and fair — a way of comparing numbers to numbers. In reality, it’s less than straightforward. Public goods like health, education, literacy, and security are notoriously difficult to measure. If your city decides to set aside green space for a park, what is that park worth, in dollars? And how is that number arrived at exactly?
An accounting logic can also be used to indirectly control what civil servants do. By evaluating their work in terms of value-added, an accounting logic weakens professional independence and skews civil servants’ behavior toward what they are being evaluated for. (If your performance review is suddenly based on how many paperclips you can link together, you will probably start linking together paperclips.) But what professionals do — the “outputs” that the accounting logic wants to measure — has never been easy to assess or even to compare from person to person to begin with.
Nevertheless, by 2000, New Public Management was recognized as the main paradigm being used by governments around the world even though no one was sure whether governments were actually becoming more efficient and effective as promised or not.
In the economic story though, values like efficiency and effectiveness are equivalent to the common good. The question, “What should we do?” comes to have one answer: “Whatever is efficient.”
That philosophy changes how governments think and act.
Government is the only body in society that’s legally allowed to use force and coercion against you in order to keep the social order. If you break the law, it’s the government that can take away your freedom and sometimes even your life as part of its exercise of authority. In America, when you’re convicted of a crime, the government takes away your freedom by sending you to prison.
Prisons have existed for thousands of years — once used only sporadically though because of the expense — but governments haven’t always been involved in punishing crime. In the Middle Ages in England, crime was thought to concern only the criminal and the victim, not the criminal and the rest of society, so government, representing society’s interests, didn’t have a role to play. Blood feuds developed as a result, but even so, the tradition of non-government intervention lasted until the 1800s.
It wasn’t until the Enlightenment that crime became thought of as something that affected all of society and not just the victim. Crime became a public issue, an offence against the state that now had to be handled by the state’s officials.
Governments protected the public and the public interest by sending criminals to prison as retribution (because they deserved it), deterrence (so they wouldn’t do it again), incapacitation (so they couldn’t do it again), or reform and rehabilitation (changing behavior and attitudes).
All of that government activity cost money, and during the 1800s, the government started contracting out prisoners as workers across America, sometimes into appalling conditions; slave labor was disappearing after abolition, and prison labor was seen as a substitute for it. The practice of contracting out prisoners as workers was widespread. In 1825, the state of Kentucky, in financial crisis, leased its prisoners to a businessman for $1,000 a year for five years. New York’s Sing Sing had its prisoners work in marble quarries. Other prisons had their occupants make shoes, clothes, carpets, or furniture to help defray the public cost of crime.
Contracting prisoners out served two purposes: prisons started making the government money instead of costing it, and work, said the Protestant work ethic, could itself be used to reform a prisoner’s character.
Not everyone was happy with the arrangement. Unions and manufacturers complained that prison labor undercut the work of free men and entrepreneurs. Too, prison conditions ended up being so bad and inmate exploitation so widespread that public agencies were eventually forced to assume responsibility for prisons.
Leasing convicts out as workers ended in 1923, and contracting prisoners out to private firms had mostly disappeared by 1940. Prison became an expensive proposition for government again.
In the 1970s, those costs worsened; America’s prison population doubled. The practice of contracting out prisoners was restarted. Then, in the 1980s and 1990s era of tough sentencing, stringent political attitudes, and the “war on crime”, the prison population doubled again. By early 1992, the United States had the highest number of people incarcerated per capita in the world. Federal and state prison operating costs jumped from $3.1 billion in 1980 to over $17 billion in 1994 — an increase of almost 550 percent based on inflation-adjusted dollars.
Both government and the public loathed the financial burden that prisons represented. In the economic story, one solution to skyrocketing costs is to introduce competition and outsource operations, either piecemeal or in their entirety. As costs rose, the prison management services offered by cost-cutting private firms started to look more attractive. Corporations were already involved in the justice system anyway through drug treatment centers, electronic surveillance, halfway houses, juvenile detention centers, work programs in adult prisons, and food and laundry services. Outsourcing adult prisons in their entirety simply represented the next level of private sector involvement.
Advocates said outsourcing prison management would cut costs by about 20 percent and that corporations couldn’t possibly do a worse job of running prisons than the government, what with overcrowding, ballooning expenses and lousy living conditions. Private prisons would be cheaper, more efficient, and more responsive, offering better security, better food, and better medical care.
Critics questioned whether corporations should be allowed to be responsible for the lives and freedom of prisoners and to profit from their suffering. Critics also worried that as the prison industry grew, more and more people would have a financial stake in keeping the prisons full, whether that happened through longer sentences or stricter sentencing.
In the 1980s, the management of adult prisons started to be transferred from governments to corporations. Firms that managed prisons were typically paid a per diem per inmate by the government. The lower the corporation could spend in daily costs per inmate, the higher the profits, which weren’t inconsequential. Total revenues for private correctional services were estimated at $1 billion in 2001, and of 184 privately-operated prisons and jails around the world, 158 were in the United States, mostly in Texas and California.
Did private prisons deliver on what they promised? A report compiled for the U.S. Bureau of Justice Assistance said no; private prisons proved no more efficient or safe than publicly managed ones. The 20 percent promised cost-savings turned out to be worth about 1 percent on average — realized mostly from lower labor costs since private prisons tend to hire non-unionized staff and fewer of them, then save money by paying lower wages and offering fewer benefits.
Still, according to the economic story, transferring the management of prisons to corporations is worth doing. And the story says the same thing is true of public libraries.
For many people, public libraries are iconic. Gary Paulsen, author of over 175 books, many for young adults, credited a public library with saving his life. As a teenager in northern Minnesota with an unhappy home life, he ducked into a small-town library one night to warm up. The librarian offered him a library card and kept feeding him books. Paulsen said, “It saved me, it really did. I still read like that, like I tell kids, like a wolf eats. I read myself to sleep every night. And I don’t think any of the good things that have happened to me would have been possible without that librarian and libraries in general.”
Legendary science-fiction author Isaac Asimov said, “I received the fundamentals of my education in school, but that was not enough. My real education, the superstructure, the details, the true architecture, I got out of the public library. For an impoverished child whose family could not afford to buy books, the library was the open door to wonder and achievement, and I can never be sufficiently grateful that I had the wit to charge through that door and make the most of it.”