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(Big) Society and (Market) Discipline:
Social Investment and the Financialisation
of Social Reproduction
David Harvie
School of Business, University of Leicester
d.harvie@le.ac.uk
Abstract
The United Kingdom is at the forefront of a global movement to establish a social-
investment market. At the heart of social investment we nd nance – and nan-
cialisation. Specically, we nd: a nancial market (the social-investment market); a
series of nancial institutions (Big Society Capital, for example); a nancial instru-
ment (the social-impact bond); and a nancial practice (social investing). Focusing
on the UK, given its pioneering role, this paper rst provides a brief history of social
investment, tracing its development from the politics of the ‘Third Way’ to the social-
impact bond. It then maps the terrain of the social-investment market, explaining the
main institutions and actors, and the social-impact bond. Finally, it proposes a frame-
work for analysing the disciplinary logics of nance, which it uses to understand the
promise or threat (depending on one’s perspective) of social investment and the social
-investment market.
Keywords
Big Society – discipline – nance – nancialisation – social investment – social-impact
bond – social reproduction
Introduction
From its launch in November 2009, when he was still leader of the opposition,
UK prime minister David Cameron’s ‘Big Society’ burned very brightly, casting
its light – though perhaps more blinding than illuminating – over debates into
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the deep ‘moral crisis’ aicting ‘Broken Britain’. But ‘the light that burns twice
as bright burns half as long’. By early 2012 – around the time Steve Hilton, one
of its most zealous proponents, resigned as Cameron’s director of strategy –
the Big Society seemed to have burned itself out, ridiculed by the media, many
other politicians, and the anti-austerity protests that marked the early years of
Cameron’s premiership.
But just as it was becoming extinguished as discourse, the Big Society found
itself more rmly established as political economy. Hilton quit his job and
the country, in March 2012; April 2012 saw the launch of Big Society Capital.
Recognising that ‘[s]ocial sector organisations play a critical role in our com-
munities and in our society’, Big Society Capital’s mission is to ‘transform the
supply of capital to social organisations in the UK. We want to help ambitious
social enterprises grow and better evidence the value they are creating’. In
other words, Big Society Capital’s focus is the very activities and actors so em-
phasised in the discourse or ideology of the Big Society. In fact, both in its diag-
nosis of the problems facing Britain – social exclusion, poverty, ‘moral decline’,
economic stagnation, failing/inadequate services and opportunities for young
people – and in its prescription for addressing these problems – social ‘enter-
prise’, the harnessing and valuing of civic ethics and voluntary labour – there
appeared to be many similarities, at least in their respective rhetorics, between
the burned-out Big Society of David Cameron’s Hugo Young lecture and Big
Society Capital.
Although it has received some media attention, Big Society Capital has not
burned even half as brightly as its more discursive sibling. Yet, along with asso-
ciated institutions, practices and instruments, Big Society Capital has the po-
tential to transform the fabric of British society in a far more long-standing and
fundamental way. Its focus is indeed the socially-reproductive activities, many
of them involving ‘voluntary’, unwaged labour, that take place in communities
up and down the country, what it might term ‘social enterprise’. Big Society
Capital seeks to support such activities in a very specic way, namely through
social investment: its strapline is ‘transforming social investment’, while its twin
primary objectives are ‘to be a powerful force in transforming the social impact
investment market in the UK’ and ‘to champion the development of the social
Cameron introduced the concept in his Hugo Young lecture, delivered in London on
November 9: ‘Our alternative to big government is the big society. But we understand that
the big society is not just going to spring to life on its own: we need strong and concerted
government action to make it happen. We need to use the state to remake society.’
The line is from Ridley Scott’s lm Blade Runner (Warner Bros., 1982).
Big Society Capital 2012, p. 7.
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impact investment market through spreading knowledge, dening efective
approaches and informing government policy’.
At the heart of social investment we nd nance – and nancialisation.
Specically, we nd: a nancial market (the social-investment market); a series
of nancial institutions (Big Society Capital, for example); a nancial instru-
ment (the social-impact bond); and a nancial practice (social investing). To
understand social investment, then, we must understand nance and its logic.
The logic of nance is a disciplinary logic, a logic whereby the productive ac-
tivities of human beings – across sector, across space, even across time – are
made commensurable with one another, are pitted against one another in a
competitive struggle and are thereby disciplined. The promise or threat (de-
pending upon one’s perspective) of social investment (or social nance) is to
extend such a competitive, disciplinary logic into an entirely new, social realm.
In this paper I rst review the history of social investment, tracing its devel-
opment from the ‘Third Way’ and ‘social-investment state’ through to the na-
scent social-investment market and its key innovation, the social-impact bond.
Next I survey the terrain of the social market, as it currently exists in the UK,
identifying the key actors and institutions, and explaining the workings of the
social-impact bond. Finally I outline an analytical framework for understand-
ing the way in which nance’s disciplinary logic operates, before suggesting
how the social-investment market and the social-impact bond will extend this
disciplinary logic deeper into society, further into the realm of ‘the social’.
The paper’s focus is the United Kingdom. This is because the UK is pioneer-
ing the creation of the social-investment market: more than half of the 50-plus
social-impact bonds currently in operation are in the UK. But the movement
is global. The UK is not only leading the way in terms of numbers of proj-
ects; it also used its presidency of the G8 in 2013 to establish a Social Impact
Investment Taskforce, which in 2015 morphed into a Global Social Impact
Investment Steering Group, whose membership includes 13 countries plus the
EU. Lessons from the UK experience have global relevance; the analysis devel-
oped here should be of concern to an international audience.
1 A Brief History of Social Investment
1.1 From Welfare State to Social-investment State
We can trace the idea of social investment as far back as 1956. In The Future of
Socialism, academic and Labour Party politician Tony Crosland argued that,
Big Society Capital 2012, p. 4.
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‘[t]he right way, in the eld of social expenditure, is a generous, imaginative,
long-term programme of social investment’. Later, the idea was taken up by
Anthony Giddens, whose thinking played an indispensable role in the New
Labour project of the 1990s. Giddens was responding to the profound transfor-
mations that many Western economies underwent in the 1980s, spearheaded
by the United Kingdom (under successive governments of Margaret Thatcher)
and the United States (under Ronald Reagan). During this decade, and beyond,
governments initiated neoliberal programmes of privatising state industries,
state spending was cut – particularly in the area of social services – and many
state-provided services (in areas such as health and education) were sub-
jected to processes of marketisation. The state retreated from its earlier role
in ensuring social reproduction, while the ability of markets to better serve
human needs was celebrated. This shift in perspective was well characterised
by Thatcher’s declaration that ‘there is no such thing as society’ or Reagan’s
‘government is not the solution to our problem; government is the problem’.
Giddens’s response was to propose a ‘Third Way’, an alternative model be-
tween and beyond both the postwar welfare state and neoliberalism. This re-
quired that the Left ‘get comfortable with markets’ and that the welfare state
be reconstructed as a ‘social-investment state’. We can see Giddens’s inuence
at work in the reports of the Commission on Social Justice, established in 1992
by then Labour leader John Smith. In 1994, the Commission proposed a vision
of an ‘Investors’ Britain’, arguing that ‘it is through investment that economic
and social policy are inextricably linked’.
While, in Britain at least, the social-democratic Left was struggling to adjust
to neoliberalism’s apparent triumph, the deleterious efects of many neoliberal
policies were becoming clearer to other actors. Through the 1990s, the ,
for example, published a number of reports – New Orientations for Social Policy
(1994), Societal Cohesion and the Global Economy: What Does the Future Hold?
(1997), A Caring World (1999) – agging up some of these efects and attempt-
ing to address the role of the state in social reproduction. Central here was a
Crosland 1956, p. 148.
By social reproduction, I mean broadly the ability of individuals, households and communi-
ties to reproduce themselves and their livelihoods. Under the capitalist mode of production,
social reproduction has a dual character, pertaining to the (re)production of both life and
the commodity labour-power. Capital’s interest is in the reproduction of labour-power (with
the appropriate skill-sets, proclivities and so on); humans generally have diferent interests,
which exceed this narrow understanding. See Brown, Dowling, Harvie and Milburn 2013, es-
pecially pp. 77–81 and the references cited therein.
Giddens 2000, pp. 34 and 52.
Commission on Social Justice 1994, p. 97.
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deep reframing of the state’s role in the sphere of social reproduction. Social
expenditure, on education or health, say, is no longer understood as spending
on a consumption good that brings social benets, whether to individuals or
to society, in the present. Nor is it understood as redistribution, which might
weaken economic incentives and thus inhibit wealth generation. Instead so-
cial spending is conceived as investment, as spending that will yield a return,
whether economic or social, in the future. It is conceived of as a potential
driver of economic growth and development. The temporal element of such
spending is made far more explicit in this reframing. Moreover, any mention
of future return begs the questions of rate of return and the way rates of return
might be measured. For social-investment policy-makers these questions lay in
the future; I return to them later in the paper.
Thus, in this new regime social policy is understood as a productive fac-
tor, as investment for the future and not as social protection. Associated with
this, governments pursued so-called activation policies, whose objective has
been to increase the proportion of the working-age population in employ-
ment – here, though, the welfare-state goal of full employment is replaced by
employability. Such policies have included innovations in childcare as a social
investment, supposedly working on three levels: (i) mitigating the long-term
(potentially lifetime) efects of childhood poverty; (ii) enabling the ‘activation’
of parents, especially mothers; and (iii) preparing children for labour markets
of the future.
John Smith died in May 1994, ve months before his Commission on Social
Justice published its nal report. Tony Blair, his replacement as Labour leader,
was, of course, another ‘moderniser’ and, when elected in 1997, ‘New’ Labour,
under the leadership of Blair and chancellor Gordon Brown, began putting
this social-investment approach into practice. Numerous institutions and
schemes directed at children and young people – good investments for the fu-
ture – were launched: ‘Sure Start’; ‘New Deals for Young People’; ‘Connexions’;
the ‘Childcare Strategy’; and so on. Social exclusion and poverty were also ad-
dressed, but through education and work, with the emphasis being one of in-
tegrating people into labour markets, redistributing opportunities rather than
income. Groups that ‘missed out’ included ‘those who cannot work, those who
do not have children, asylum seekers and social movements tarred … with the
brush of past identity politics such as unions and the women’s movement’, that
is, groups and individuals deemed poor investments.
Esping-Anderson, Gallie, Hemerijck and Myles 2002, p. 9; quoted in Jenson 2006, p. 33.
Jenson 2006, p. 37.
Perkins, Nelms and Smyth 2004, p. 9.
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The rationale common to these policies was summarised in 2000 by key
Blair advisor David Miliband: ‘Increasingly, social policy has economic im-
plications.… Work, welfare and family policy need to be mutually reinforcing
[because inequality is no longer merely a cost but has become] a constraint on
economic development’.
The transformation from welfare state to social-investment state has been
theorised in several competing ways. For Giddens, of course, it represents a
literal ‘third way’, an alternative to neoliberalism that does not involve ‘going
back’ to the Keynesian welfare state. Jane Jenson holds a similar view, as do
Morel et al., who posit an ‘after neoliberalism’ phase, and Perkins et al., who
suggest that the social-investment state takes us ‘beyond neoliberalism’. By
contrast, Perry Anderson has described the Third Way as merely ‘the best
ideological shell of neo-liberalism today’. Others have argued that the social-
investment approach represents not only a continuation of neoliberalism but
a development and deepening of it. Porter and Craig, for example, suggest that
the new regime is best described as one of ‘inclusive liberalism’, while Bob
Jessop theorises the shift as one from the welfare state to the ‘workfare state’.
I do not attempt to review these debates in any detail here. Suce it to say
that I believe the social-investment perspective represents a development and
deepening of neoliberalism, a view that will become apparent when I discuss
the social-investment market and the disciplinary logics of nance in the pa-
per’s nal substantive section.
1.2 From Social-investment State to Social-investment Market
In 2004, Matthew Pike, director of the Scarman Trust, ‘call[ed] for a government-
run Social Finance Investment programme that would use pension fund con-
tributions to nance public works while ofering a guaranteed 9 per cent return
and cutting income tax by 5p in the pound’. Financial Times columnist Kevin
Brown described the proposal as ‘plain batty’. Batty or not, a decade on such a
programme does not seem so far-fetched.
From 2000 onwards, we have seen the establishment of a panoply of ‘task
forces’, commissions and institutions, along with the publication or passing
of associated reports and, more recently, government White Papers and Acts,
whose purpose is to develop a social-investment market in the UK. These
Quoted in Timmins 2001, p. 611.
Jenson 2010; Morel, Palier and Palme 2012; Perkins, Nelms and Smyth 2004.
Anderson 2000, p. 11.
Porter and Craig 2004; Jessop 2002.
Brown 2004.
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include, but are not limited to: the Social Investment Task Force (; es-
tablished in 2000); the social-investment group Bridges Community Ventures
(2002); the Community Development Finance Association (2002), along
with a series of Community Development Finance Institutions; The Financing
of Social Enterprises (Bank of England 2003); the Commission on Unclaimed
Assets (2005–7); Social Finance (UK) Ltd. (2007); Putting the Frontline First:
Smarter Government (White Paper, 2009); Growing the Social Investment Market
(Cabinet Oce, 2011); Open Services (White Paper, 2011); the Localism Act (2011);
the Public Services (Social Value) Act (2012); Big Society Capital (2012).
We can detect a remarkable continuity and consistency of ideas in this his-
tory, running from the Social Investment Task Force, through the Commission
on Dormant Assets, to Social Finance and Big Society Capital. Also worth
noting is that the various changes in government over the period have not re-
sulted in any signicant shifts in policy. The tropes – articulated in the Task
Force’s rst report, Enterprising Communities: Wealth beyond Welfare, for in-
stance, but repeated in the numerous reports, from various bodies, that have
followed – can be summarised as follows:
Neoliberal capitalism has resulted in enormous wealth creation. It has
also led to widening inequality and an increase in poverty. Poor people do
not lack entrepreneurial skills – and this is not the cause of their poverty.
What they lack is capital. Redistribution of wealth via the (welfare) state,
whether to poor individuals or poor communities, although understand-
able and possibly even necessary in some cases, will never solve such
problems and may even exacerbate them. What is instead needed is to
encourage and harness the poor’s entrepreneurial skill through nance/
capital.
Over its ten-year lifetime, the Task Force made a series of policy recommen-
dations. In its nal report it proposed ‘three specic initiatives that will help
dene the future of social investment in the UK’: (i) to create institutions
such as a social-investment bank, part of the infrastructure ‘necessary to cre-
ate a dynamic market in social investment’; (ii) to create new nancial tools
and instruments, such as the social-impact bond, to ‘deliver social change’; and
(iii) to use legislation such as a Community Reinvestment Act to ‘engage’ the
The ‘pioneering force’ behind Bridges and one of its three executive directors is Michele
Giddens, daughter of Anthony (see Macalister 2003).
Social Investment Task Force 2000, p. 4.
Social Investment Task Force 2010, p. 2.
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nancial sector to invest in disadvantaged areas. Within a year, similar propos-
als were being advanced from the very heart of government, with the Cabinet
Oce and the Treasury publishing a series of policy papers. Growing the Social
Investment Market: A Vision and Strategy (published in 2011), for example, ex-
pounds on familiar themes.
It contends that Britain faces a number of ‘very stubborn and expensive’
social problems (e.g. homelessness and ‘fractured communities’) which re-
quire ‘innovative solutions’. Such solutions are frequently provided by social
entrepreneurs and ‘the social ventures they lead’. These social ventures com-
bine ‘social mission with sustainable business models’ and ‘can do amazing
things’; they ‘generat[e] social value in a way that is nancially self-sustaining’;
not only is their power ‘central to creating a bigger, stronger society – a Big
Society’, but ‘social ventures are also making a big contribution to economic
growth in what remains a challenging economic and scal environment, and
can play an important role in helping to re-balance the economy’. However, ‘so-
cial ventures … are often held back by bureaucracy and an inecient nancial
market’; ‘the key to better capitalised social ventures, and therefore greater so-
cial value, is more and better social investment’.
The vision articulated here is ambitious. At its ‘heart … is nothing less than a
new “third pillar” of nance for social ventures, to sit alongside traditional giv-
ing and funds from the state’, with ‘the creation of a new “asset class” of social
investment to connect social ventures with mainstream capital’ and ‘around
£10 billion of new nance capacity’ being ‘unlocked’. If successful, there would
be important implications for three sets of actor.
First, for social ventures and the ‘social-venture sector’: individual social
ventures would have better access to nance, and the sector as a whole would
grow both in terms of size and, importantly, ‘dynamism’. In the words of the
Cabinet Oce’s paper, there would be higher ‘“churn” – more new entrants to
the market and more frequent changes among the “leader board” of the most
successful social ventures’. What is not made explicit here – at least not at this
point in the paper – is that ‘churn’ and ‘frequent changes among the “leader
board”’ involve not only new entrants but also exit. This is the sine qua non of
market competition, its role in incentivising and disciplining social actors. I re-
turn to this in section 3.2. With more and faster-growing social ventures, more
social value will be created for their users and customers, along with a greater
‘contribution’ to the economy. Second, for nancial investors of all types –
‘individual citizens’, high net-worth individuals and philanthropists, charitable
Cabinet Oce 2011; with annual progress reports.
Cabinet Oce 2011, pp. 11–15.
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foundations and nancial institutions – who will benet from new investment
opportunities, a ‘new class of investment products’. Third, for central and local
government and the public sector more generally, this vision will provide ‘new
opportunities for better procurement of goods and public services’.
We see here the way in which social investment might address three crises:
a crisis of social reproduction (more and more successful social ventures, cre-
ating more ‘social value’, i.e. responding to social problems); a crisis of capital
accumulation or economic growth (social ventures both ‘contributing’ to the
economy and becoming a source of nancial return for investors); and the ‘s-
cal crisis of the state’ (better procurement of public goods and services).
Growing the Social Investment Market’s ‘framework for action’ again echoes
many of the initiatives proposed by the Social Investment Task Force. These
include: the extension and development of ‘payment-by-results’ in the provi-
sion of public services (e.g. through the use of Social Impact Bonds); various
tax incentives to encourage social investment; support for social ventures to
improve their ‘investment readiness and business capability’; the development
of better measures of social return; the development of secondary markets in
social-investment assets; and, of course, a ‘big society bank’, whose ‘mission
will be to catalyse the growth of a sustainable social investment market, mak-
ing it easier for social ventures to access the nance and advice they need – at
all stages of their development’.
The social-investment vision is made quite clear in the paper’s nal chap-
ter. ‘Success will look like a bigger market … that works more eciently’. This
means the following: ‘an increase in the overall amount of social investment’;
‘the number of new social venture intermediaries and social ventures enter-
ing the market increases, contributing to an increase in the total number of
social ventures, while allowing for the failure and exit of some organisations’
(emphasis added); social ventures provide a greater proportion of public
services, while accounting for a greater proportion of both and employ-
ment; ‘better measurement systems’ allow for more accurate quantication of
social return and the rating of risk; nally, a necessity for operating in such
an environment, ‘more social ventures develop advanced skills in business
and nance’.
Cabinet Oce 2011, pp. 17–18.
O’Connor 1973.
This argument is outlined in Dowling and Harvie 2014 and developed in Harvie and
Ogman 2019.
Cabinet Oce 2011, pp. 29–35 and 37–44.
Cabinet Oce 2011, pp. 47–8.
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Much of this vision is already being realised. The social-investment bank
(‘big society bank’) is, of course, Big Society Capital, while already more than
30 social-impact bonds have been launched in the UK (with a similar number
elsewhere). I will survey this nascent social-investment landscape in the next
section. Before that, however, it is worth emphasising the role of the state in
the creation of social-investment institutions. As other scholars have argued,
under neoliberalism, the role of the state is not diminished, but transformed
and its activity is essential for not only the maintenance of markets, but also
their extension and creation. As the Social Investment Task Force insisted:
‘Government, at all levels, must play an active, enabling role.’
2 Mapping the Social-investment Market
2.1 Actors and Institutions
Over the past decade, the British state has put in place ‘many essential ele-
ments of government support that underpin a functioning market’. Three of
these elements, all established in 2012, are: the Social Outcomes Fund, a £20m
‘top-up’ fund managed by the Cabinet Oce, which is designed to nancially
support ‘innovative new [payment-by-results] projects’ that would otherwise
not proceed; the Investment and Contract Readiness Fund, a £10m fund run
by the Oce for Civil Society, intended to help ‘social ventures to build their
capacity to be able to receive investment and bid for public service contracts’;
and, most important, the social-investment bank, Big Society Capital, which
was set up with funding from the four so-called Merlin banks, each contrib-
uting £50 million, and at least £248 million recovered from dormant bank
accounts. Big Society Capital has a dual mission. First, to ‘champion’ so-
cial investment, increasing awareness of and condence in social investing,
promoting best practice and improving links between the social-investment
and mainstream nancial markets. Second, to act as an investor, nancially
supporting ‘social investment nancial intermediaries’ (discussed below) and
See, for example, Martin 2002, or Mirowski 2013.
Social Investment Task Force 2000, p. 4.
Cabinet Oce 2014.
<http://blogs.cabinetoce.gov.uk/socialimpactbonds/outcomes-fund/>.
<http://www.sibgroup.org.uk/beinvestmentready/>; last accessed 22 January 2016.
<http://www.reclaimfund.co.uk/>; last accessed 8 January 2016.
Three other elements, the Open Services White Paper (2011), the Localism Act (2011) and the
Public Services (Social Value) Act (2012) are discussed in Dowling and Harvie 2014.
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‘efectively and eciently channel[ling] appropriate and afordable capital to
the social sector’.
The other body that has played an important role in championing social
investment and the social-investment market is Social Finance, set up in 2007
‘to understand the funding shortfall faced by the social sector’ and ‘to help
build a social investment market in the UK’. Since then it claims to have ‘pio-
neered the Social Investment Bank, Social Impact Bonds, Development Impact
Bonds, the application of Jam Jar Accounts, and the Care and Wellbeing Fund’.
With a staf of almost 60, Social Finance continues to publish reports, organise
events and ofer bespoke and specialist advice to actors and potential actors in
the social-investment market.
Sitting below the social-investment market-builders and champions, there
are four principal actors in the social-investment market proper: charities
and social enterprises; commissioning bodies; nancial investors; and, social-
investment nancial intermediaries.
First, there are the charities and other social enterprises, which are ‘work-
ing hard to deal with some of the most challenging issues in the UK – such
as youth unemployment, nancial exclusion and homelessness’. These so-
cial enterprises deliver services and, if the model operates as it is supposed
to, do so in an innovative way. They may employ or utilise both waged and
unwaged/voluntary labour; of course, they also interact with service users.
The dominant discourse on social investment – certainly that propagated by
its enthusiasts in the Cabinet Oce, Social Finance, Big Society Capital and
elsewhere – has it that the social sector is ‘inadequately capitalised’, that a ‘-
nance “gap” [holds] the frontline social sector back from operating as ecient-
ly as comparable mainstream businesses’. Big Society Capital, for example,
cites Social Enterprise UK survey gures showing that ‘45% of start-up and
new frontline social enterprises cited lack of and/or poor access to afordable
nance as their top barrier in setting up, while 44% of established frontline
social enterprises cited it as their top barrier to sustainability and growth’.
This dominant narrative is partly questioned, however, by the Alternative
Commission on Social Investment, which suggests that, ‘[t]here is little, if any,
<http://www.bigsocietycapital.com/about-big-society-capital>; last accessed 30 June 2015.
<http://www.socialnance.org.uk/about/how-we-work>, last accessed 30 May 2013;
<http://www.socialnance.org.uk/about-us/history/>, last accessed 30 June 2015. Social
Finance UK now has sister organisations: Social Finance US, Social Finance Israel, and the
more general Social Finance Global.
<http://www.bigsocietycapital.com/what-social-investment-0>; last accessed 30 June 2015.
Big Society Capital, n.d., p. 22.
Ibid.
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evidence of a generic social sector problem with access[; that m]ost social sec-
tor organisations aren’t interested in nance … [; and that t]hose who do want
loans are relatively successful in getting ofers of nance from banks, even
unsecured’.
Second, there are the commissioning bodies. These include central and
local government and the ‘public sector’, more generally. Under the traditional
welfare-state model, such bodies would also deliver these services, nancing
them through the usual scal tools available to the state – tax revenue and
public-sector borrowing. In the social-investment market model, the commis-
sioning bodies’ role is that of identifying priority areas of intervention, specify-
ing target outcomes and metrics, and paying by results. Commissioning bodies
are most important where a social-impact bond () is the tool selected – and
we will discuss their role in the next section, which focuses on the .
Third, there are nancial investors, which supply capital, usually in the ex-
pectation of receiving a nancial return. Big Society Capital distinguishes ve
types of investor. First, government, which, to date, has been the largest source
of capital for the social-investment market, providing roughly two-thirds of
all funding for intermediaries (see below), in the form of both grants and re-
payable loans. Second, trusts and foundations, which have provided roughly
12% of funding, typically investing sums ‘between £200,000 and £5m on a long
term, patient basis where social impact and transformational change are the
key returns alongside some nancial return’. Third, individual retail investors,
which ‘will invest small amounts of money (between £10 and £50,000) into
regulated and authorised social banks’. These investors are looking for ‘security
of capital …, competitive rates, easy access to funds and a clearly articulated
and reported social impact’ (my emphasis). Fourth, wealthy individuals, who
have supplied approximately 7% of funding. According to Big Society Capital,
‘[k]ey requirements for such investors are nancial returns linked to invest-
ment/social-impact risk, some access to funds, engagement and a direct, per-
sonal link with the social impact being delivered’. Finally, mainstream banks
and commercial institutions, who have also supplied around 7% of funding.
Such institutions’ entry into the social-investment market has thus far been
‘tentative’; the ‘bulk’ of their funding has been through their corporate social-
responsibility programmes and is ‘dwarfed by their mainstream and commer-
cial activities’.
The fourth actor in the social-investment market is the so-called social-
investment nancial intermediary (). As their name suggests, s play
Alternative Commission on Social Investment 2015, p. 19; emphasis in original.
Big Society Capital, n.d., pp. 19–20.
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various intermediary roles between the other three sets of actor, which include:
creating and raising investment for funds that provide loans or invest equity in
the social sector; managing funds on behalf of others; designing and structur-
ing nancial instruments that, for example, enable social-sector organisations
to deliver public services under payment-by-results contracts; providing plat-
forms and exchanges that directly connect investors and social-sector organ-
isations; and, supporting social-sector organisations to develop their business
models and skills so that they can take on new types of investment.
In 2013, Big Society Capital listed 129 s in its directory of intermediaries,
of which the majority appeared to ofer ‘business advice and support’. Three
years later, this number had fallen to 15. One organisation no longer listed is
Bethnal Green Ventures, which is, in reality, a venture-capital organisation. At
the time of writing (July 2017), Big Society Capital was categorising interme-
diaries into ten diferent types, including: social-venture funds, social banks,
charity-bond vehicles and, of course, social-impact bonds. We learn from
this that, as might be expected in a nascent sector, the denition of social or
impact investment is shifting and is being rened. However, the twin goals of
dened and measurable social impact and nancial returns for investors, remain
core to the social-investment project. The key innovation here is the social-
impact bond.
2.2 Instrument: The Social-investment Bond
The world’s rst social-impact bond () was launched in 2010, to nance
a £5-million probation scheme in Peterborough (a small city 120km north of
London). By 2017, 77 SIBs had been commissioned globally, with a further
35 at the design stage. Of the existing projects, 32 are in the United Kingdom,
with investment totalling approximately £36 million. The majority of these
UK projects are designed to support ‘workforce development’, ‘youth engage-
ment’ or tackle homelessness amongst so-called s, young people not in
<http://www.bigsocietycapital.com/nding-the-right-investment/>; last accessed 2 May
2013.
<http://www.bigsocietycapital.com/for-investors/intermediaries>;last accessed 19
January 2016.
<https://www.bigsocietycapital.com/what-we-do/investor/our-approach/who-we-
invest>; last accessed 18 July 2017.
Social-impact bonds had been heralded in the December 2009 White Paper Putting the
Frontline First: Smarter Government, in which the then Labour government stated it
would pilot them as ‘a new way of funding the third sector to provide services’. The Labour
justice minister Jack Straw was responsible for the Peterborough .
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employment, education or training. Tellingly, a project targeted at people
with mental-health problems is designed to ‘help them nd and maintain a
new job’.
A conventional bond pays a xed coupon (except in the case of default).
A social-impact bond is diferent: the return to social investors, the bond’s
holders, is not xed, but depends upon the performance of the social enter-
prise that their investment is nancing. In this sense a is a derivative, a
nancial asset in which cash-ows are dependent upon – are derived from –
some underlying index or other metric. In fact, the is a form of outcomes-
based contract or payments-by-results () contract. Social Finance explains:
A is a nancial mechanism in which investors pay for a set of in-
terventions to improve a social outcome that is of nancial interest to
a government commissioner. If the social outcome improves, the gov-
ernment commissioner repays the investors for their initial investment
plus a return for the nancial risks they took. If the social outcomes do
not improve above an agreed threshold, the investors stand to lose their
investment.
Referred to here are the three separate actors described in the previous sec-
tion as constituting the social-investment market proper: rst, a commission-
er, who denes the desired social outcomes and makes payments if these are
achieved; second, a delivery agency – the social enterprise – which designs
and implements the programme(s) to achieve these desired social outcomes,
but which bears no nancial risk; and third, nancial investor(s), who fund the
project, receive a nancial return if it is successful and bear at least some of the
risk if it is not. We also observe in this passage the logic underlying the social-
investment vision, whereby the tool (the ) is designed with the intention
of aligning the interests of each of these three actors. The UK government’s
Centre for Social Impact Bonds provides a complementary denition, empha-
sising, rst, the legal separation between commissioner, delivery agency and
Instiglio, ‘Impact Bonds Worldwide’, available at: <http://www.instiglio.org/en/sibs
-worldwide/>; last accessed 25 July 2017.
GOV.UK 2015; last accessed 25 July 2017.
Putting the gures in context, in 2016–17, public expenditure totalled £771 billion, with
perhaps one third of this being welfare spending; the total value of nancial assets was
almost £30 trillion. See GOV.UK 2017a, Oce for National Statistics 2016; last accessed
25 July 2017.
See Harvie, Lightfoot, Lilley and Weir, forthcoming.
Social Finance 2014, p. 2.
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investor, and second, the dependency on social outcomes of nancial returns,
with the investor also assuming the nancial risk of non-delivery of these
outcomes.
Clearly the outcome’s metric, which determines the relationship between a
project’s social outcome(s) and the associated payment to investors, is key. This
may take several forms including: comparison of ‘cohort performance’ vis-à-vis
a control group; per capita tarifs; fee for service; and, payment-by-results with
minimum service standards being specied by the commissioner.
Three examples will help illustrate the structure of s.
The Peterborough , launched in 2010, was commissioned by the Ministry
of Justice and designed by Social Finance. The (probation) service provider
was a purpose-created body called One Service, formed of a consortium of
criminal-justice and prisoner charities, including St Giles’ Trust, the Ormiston
Trust and . There were 17 investors, all charitable foundations, who to-
gether contributed £5 million. Outcome payments – for which the Ministry of
Justice and the Big Lottery Fund were liable – were dependent upon specic
reductions in rates of recidivism of the Peterborough ex-prisoners relevant to
comparable cohorts elsewhere in the country. The project involved three phas-
es, each involving up to 1,000 ex-prisoners. For each phase a positive nancial
return was dependent upon the reofending rate of the Peterborough cohort
falling by 10% or more relative to the comparator cohorts; if there was no such
fall for any cohort (i.e. no phase-specic payment was triggered) then investors
would receive an outcome payment if the reofending rate of the three cohorts
evaluated as a whole fell by 7.5% or more.
This has not been an unqualied success. At the end of its rst phase,
reofending rates had fallen by 8.4%, insucient to trigger the pay-out to bond
holders. Although the second phase proceeded, the planned third phase was
cancelled by the Ministry of Justice, with the scheme ending in June 2015.
According to the nal project evaluation, not published until July 2017, overall
reofending rates across the two cohorts (phases) fell by 9%, greater than the
7.5% threshold. Investors thus received an outcome payment equal to their ini-
tial investment plus a dividend return equivalent to a per annum return of just
over 3% over the period of their investment. Despite the project’s success in
reducing recidivism and generating a nancial return for investors, it has not
Centre for Social Impact Bonds 2013.
For an assessment of the Peterborough , see Disley, Rubin, Scraggs, Burrowes and
Culley 2011 or Harvie and Ogman 2019.
Sharman 2016; accessed 22 January 2016.
GOV.UK 2017b; <http://www.socialnance.org.uk/wp-content/uploads/2017/07/Final-
press-release-PB-July-2017.pdf>; last accessed 6 August 2017.
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resulted in reduced state spending. As early as 2011, one report predicted the
would not be ‘likely to result in substantial cashable savings to the Ministry
of Justice or other government departments’. Given this, the government cre-
ated new ‘outcome funds’ – one was the Social Outcomes Fund, mentioned
in section 2.1 above – from which to pay investors, thus contributing to an in-
crease in state spending. The nal report makes no mention of savings.
The Peterborough has now been rebadged as a ‘pilot’. Results from the
rst cohort were spun as ‘encouraging’, with the then Justice Secretary, Chris
Grayling, claiming that ‘these through-the-gate pilots are getting results’, while
for Rob Owen, chief executive of St Giles’ Trust, ‘[i]t’s almost two ngers to
the doomsayers’. Social Finance suggested ‘the project was not shut down be-
cause of problems with the model, but because it had demonstrated its
efectiveness’.
The Essex , launched in April 2013, was the rst commissioned by a
local authority, Essex County Council. The bond funds a £3.1-million scheme to
‘help 380 vulnerable 11–16 year-olds on the edge of care or custody to stay safely
at home with their families’; it uses an intervention called Multi-Systemic
Therapy, provided by the children’s charity Action for Children. Investors in-
clude Big Society Capital and Bridges Ventures, with their investment chan-
nelled via a special-purpose vehicle, Children’s Support Services Ltd. The
key outcomes metric is ‘the saving in aggregate care placement days for each
[Multi-Systemic Therapy] cohort, benchmarked against a historical compari-
son group’. The project will operate for ve years, with outcomes payments,
which will be capped at £7m, extending into the eighth year. According to the
Centre for Social Impact Bonds, ‘[t]he could see investors earn 8–12% annu-
al interest on their investment’, while the total saving to Essex County Council
(net of outcome payments) could be £10.3m over the project’s timeframe.
The Department for Work and Pensions () has been an enthusiastic
commissioner of social-impact bonds. The ten distinct s (spread across ten
locations in England, Wales and Scotland) commissioned by its Innovation
Disley, Rubin, Scraggs, Burrowes and Culley 2011, p. 8.
Ogman 2016; Harvie and Ogman 2019.
Quoted in Birkwood 2014; Ainsworth 2014; last accessed 30 May 2015.
<http://www.bigsocietycapital.com/how-we-invest/essex-social-impact-bond-0>; last ac-
cessed 30 May 2015.
<http://www.local.gov.uk/documents/10180/11467/Case+study+-+the+Essex+County+Co
uncil+Social+Impact+Bond_7+Nov+2013/356b2c4b-4228-4ea7-a349-c331f53a653d>; last
accessed 30 May 2015.
<http://data.gov.uk/sib_knowledge_box/essex-county-council-children-risk-going-care>;
last accessed 30 May 2015.
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Fund involve a more complex set of metrics than either the Peterborough or
Essex s. This is a more far-reaching set of pilots, adopting three alterna-
tive investor models (single investor, multiple investor and intermediary) and
involving a range of contracting bodies (service providers). Launched in the
summer of 2011, with the rst round of projects going live in April 2012 and the
second six months later, the pilot is expected to last three years, to draw on
£10m of external investment and to target 17,000 ‘disadvantaged young people
and those at risk of disadvantage’.
In terms of payments and the underlying metrics, a total of 25 proxy out-
comes has been dened, each with associated maximum payment. For exam-
ple, in Round 1 of the project, for children in years 10 and 11 (14–16 year-olds),
‘improved behaviour at school’ or the halting of ‘persistent truancy’ yield maxi-
mum payments of £800 and £1300, respectively. In Round 2, loosely equivalent
‘proxy outcomes’ for 14 and 15 year-olds include ‘improved attitude to school’
(£700), ‘improved attendance at school’ (£1,400) and ‘improved behaviour
at school’ (£1,300). For slightly older youths, ‘completion of rst Level 3
training/vocational qualications’ yields a payment of £3,300 in Round 1 or
£5,100 in Round 2; ‘entry into rst employment including a training element
(e.g. an apprenticeship or work-based learning)’ yields £2,600 (Round 1) or
£5,500 (Round 2). Maximum payments per participant (i.e. per young per-
son assisted) are capped at £8,200 (Round 1) and £11,700 (Round 2). These
s are designed such that bidders ‘pick and mix’ from the list of proxy out-
comes; bidders ‘also proposed the payments they expected for each proxy out-
come, up to the maximum amount set by the ’. What is interesting about
this scheme is that the onus of innovation is on the delivery bodies (not the
commissioning government department), whilst the upfront nancial risk is
borne by the investors.
Having illustrated the structure of the social-impact bond with the three
examples above, I now turn my attention – in the nal substantive section –
to the nancial-disciplinary logic that s threaten to bring to bear on the
socially-reproductive labour that they are intended to fund.
<http://data.gov.uk/sib_knowledge_box/department-work-and-pensions-innovation-
fund>; last accessed 30 May 2015.
It is not clear what the rationale is for the two separate ‘rounds’ with apparently quite
diferent payments.
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3 Finance, Social Finance and Social Discipline
3.1 Finance: A Technology of Power
Social investment is a nancial practice; the social-impact bond is a nan-
cial instrument. So, to understand the logic of the we need to understand
the logic of nance. According to mainstream economics, nance performs a
number of basic functions. These include: (1) making payments to facilitate the
exchange of assets, goods and services; (2) providing resources to fund large-
scale projects or enterprises; (3) transferring resources from surplus agents
(e.g. savers) to decit agents (e.g. borrowers); (4) managing risk; (5) provid-
ing price information required for the coordination of decentralised decision-
making; and (6) creating incentives to perform well, that is, in the stakeholder’s
interests.
Social nance, and the in particular, performs several of these functions.
Recall Social Finance’s denition, quoted in section 2.2, above. A is a mech-
anism through which ‘investors [who are surplus agents] pay for a set of in-
terventions’ and thus both fund a (relatively) large-scale project or enterprise
and transfer resources to those (decit) agents, whose income is insucient to
pay for the project, whether this decit agent is understood as the government
commissioning-body, the service provider or the end-user (or all three).
We can also see how the is designed to facilitate the management of risk.
In particular it allows the state, as commissioner of social services, to reduce
its exposure to the risk that any given intervention will not be efective – and
thus results in higher state spending. This risk is instead borne by the investors
who nance these services through their purchase of the . As we saw above,
however, in the case of the Peterborough , investors will receive a nancial
payment in spite of the project’s failure to produce savings to the state. One
would expect investors to manage their own exposure to risk by investing in
a number of alternative SIBs, along with traditional nancial assets, adopting
well-known strategies of portfolio diversication. In fact, the G8’s taskforce is
attempting to boost social investment by claiming that it ofers traditional or
mainstream investors the ‘benets of improved diversication’: ‘there is a pros-
pect that the performance of some impact assets will have lower correlation or
be totally uncorrelated with other assets’.
To be clear, here, as in the previous section, the terms ‘social investment’ and ‘social in-
vesting’ are understood as practices that take place in the context of the social-investment
market. The meaning has therefore shifted away from social investment as a framework
for conceptualising and, to an extent, justifying state expenditure, as in section 1.1.
Crane and Bodie 1996.
Social Impact Investment Taskforce 2014, pp. 40–41 and 20.
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We should recognise both the political-economic context in which social
investment is being promoted, and that the political decisions to ‘make’ a
social-investment market as a response to social problems are just that – po-
litical (and ideological). The very existence of vast surpluses, held by a rela-
tively small number of ‘surplus agents’, which social investment’s boosters seek
to harness, is a result of four decades of neoliberalism. And, of course, it is
those four decades of neoliberal policies that have been a primary cause of so
many social problems that need tackling – a point recognised by many of those
scholars and policy-advisors advocating a social-investment perspective, dis-
cussed in section 1.1. But it is not my intention here to explore these questions.
Suce it to say that we can understand social investment – and the attempts
to make a social-investment market – as very much going with the grain of
so-called philanthrocapitalism or venture philanthropy, along with other
nancial-market mechanisms (micronance, development-impact bonds, car-
bon trading, for example) directed at a broad crisis of social reproduction.
I wish instead to focus on the fth and sixth functions of nance, those con-
cerning information and incentives – or discipline.
Crane and Bodie do not use the word ‘discipline’ in their elaboration of the
functions of nance. Robert Bliss is more candid. For Bliss the two key compo-
nents of market discipline are ‘monitoring’ and ‘inuence’, which loosely cor-
respond to Crane and Bodie’s fth and sixth functions, respectively. Market
participants (i.e. investors) monitor the actions of rms and their managers.
They exert inuence when they act on the information gained from these
monitoring activities. Such inuence – or discipline – may be ex-post, when
they ‘punish’ rms whose actions they disapprove of, by withdrawing liquidity
or selling shares, say, or ex-ante, when the threat of such adverse consequences
induces managers to perform in a way consistent with investors’ interests to
begin with. Market discipline is, of course, a solution to the principal-agent
problem that arises with the separation of ownership of the corporation and
its management. For Bliss it is a good thing, and there should be more of it.
Too many books, articles and op-eds have been written boosting ‘philanthrocapitalism’;
one good critique is McGoey 2015. Roy 2010 and Bateman 2010 both provide trenchant
critiques of micronance. See Böhm and Dahbi (eds.) 2009 for the problems with carbon
markets.
Bliss 2004.
A peculiarity of the social-investment market is that its ideological proponents believe
the solution (market discipline) to be so powerful that they are willing to create the prob-
lem (separation of ownership and control). For such proponents, the decision-making
ability of the state, its ability to weigh up competing uses for scarce resource – that is to
say, commensurate – is inferior to that of private capital, via market mechanisms.
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What is rarely made explicit in mainstream discussions of market discipline
is that investors’ pressure on managers must be translated into pressure on
workers – and the ‘natural’ environment, communities and so on. This is what
bosses do!
Market discipline as understood by scholars such as Bliss is just one aspect
of the competition and discipline that happens in the capitalist mode of pro-
duction. Let us now lay out the various levels on which individual capitals (or
‘bits’ of capital in general) compete, always bearing in mind that such competi-
tion between capitals always translates into competition amongst workers. Or,
more generally, competition amongst capitals must be understood as a com-
petition to see which capitals are best at exploiting their workers and/or ap-
propriating value by externalising costs onto citizens, consumers or ‘nature’.
First, and most obviously, capital(ist)s compete in the product market.
Cadbury’s, Mars and Nestlé compete in the market for chocolate and confec-
tionary, for instance; Apple competes with Samsung in the market for smart-
phones, tablets and so on; British Gas (owned by Centrica), , E.On, nPower,
PowerGen, Scottish Power and compete (or arguably, do not compete) in
the market for electricity and gas. With economic globalisation, driven by in-
stitutions such as / and various free-trade agreements, such compe-
tition has, of course, expanded in its geographical reach, and thus intensied.
Since the advent of the joint-stock company and the development of ex-
changes upon which stock in such companies might be traded, capital(ist)s
also compete in the capital market. Cadbury’s, for example, is now part of
Mondelēz International, whose shares are traded on a number of stock mar-
kets. Indeed Mondelēz’s share price is displayed prominently on the homepage
of its website: this and other characteristics of the website suggest investors,
and not the sweet-toothed, are the target visitors. All of the companies
mentioned above are publicly listed, their shares bought and sold by nan-
cial investors. Such investors, as investors, have no interest in confectionary
or mobile-computing devices or gas and electricity. Their primary concern,
frequently their only concern, is maximising return on investment, subject to
acceptable levels of risk; they are only interested in the nal consumer product
See Moore 2015, who theorises capitalist development as a history of exploitation on the
one hand and appropriation of nature on the other.
The joint-stock company has also facilitated the pooling of resources necessary for the
funding of large-scale projects: ‘The world would still be without railways if it had had to
wait until accumulation had got a few individual capitals far enough to be adequate for
the construction of a railway. Centralisation, however, accomplished this in the twinkling
of an eye, by means of joint-stock companies.’ (Marx 1976, p. 780.)
http://www.mondelezinternational.com.
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in as much as it inuences risk and return. Investors then will constantly as-
sess the likely protability of alternative corporations – and adjust their own
portfolios (of shares) in accordance with these on-going assessments.
Simplifying only a little, the price of shares in a corporation considered
more protable than the average (i.e. to ofer a higher rate of return – whether
via dividends or equity-price appreciation) is likely to rise; the price of shares
in a corporation considered less protable than this market norm is likely to
fall. For underperforming corporations – those ofering a rate of return below
the market norm, for given level of risk – there is the threat that ‘activist inves-
tors’ will seek changes in the way the corporation is run and/or its senior man-
agement. There is also the threat that declining share price will invite hostile
take-over, with new owners seeking to improve performance, usually via some
form of restructuring. This is exactly the market discipline discussed by Bliss
in his account.
We see through this mechanism how nance creates incentives for corpora-
tions (diferent capitals) to act in stakeholders’ interests, where stakeholders
are equated with shareholders. This disciplinary function of nance is depen-
dent upon good information. It is in investors’ interests to monitor the cor-
porations (and the business environment in which they are operating) whose
shares are included – or might be included – in their portfolio. In Bliss’s discus-
sion, market participants act on the information obtained from their monitor-
ing of rms, and thus inuence asset prices. But we can also understand asset
prices and other nancial information themselves signalling to other market
actors in a feedback loop. The prices of nancial assets inform all participants
what aggregate beliefs or opinions are. This is the sense in which we can un-
derstand, as Hayek explains, ‘the price system as … a mechanism for commu-
nicating information’. Hayek, of course, and capitalist markets, go further.
Markets, including nancial markets, not only produce the price information
Typically, investors make a trade-of between risk and return, demanding a higher
expected rate of return for more-risky investments.
The pursuit of maximal returns, to the exclusion of all other considerations, is one result
of the ‘shareholder value revolution’ of the 1970s and ’80s, itself one facet of the neoliberal
shift. Although social-movement campaigners have attempted to force corporations to
behave in a more ‘socially responsible’ manner, the ‘shareholder value’ perspective has
been so dominant that even some philanthropic trusts solely consider nancial perfor-
mance when deciding where to invest their wealth. According to McGoey, for example,
‘for years, with the exception of tobacco companies, the [Gates Foundation] chose to in-
vest in companies ofering strong nancial returns regardless of negative health efects’
(McGoey 2015, p. 173). Until 2014, such investments included Coca-Cola, McDonalds and
even Group, ‘a leader in the for-prot prison industry’.
Hayek 1945, p. 526.
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that aids decentralised decision-making, they also produce an ‘impersonal
compulsion’, which ‘confronts those who depend for their incomes on the mar-
ket with the alternative of imitating the more successful or losing some or all
of their income’. The nancial markets thus channel capital towards the most
productive – read, most exploitative – uses.
As with competition in the product market, economic globalisation, and
particularly nancial globalisation, has led to more intense nancial- and
capital-market competition. Regulatory changes adopted by most advanced
capitalist economies in the 1970s and ’80s – and imposed on many Third World
countries as part of the Washington consensus – mean there are now few
barriers to ‘foreigners’ trading in shares of ‘British’ companies and even own-
ing majority stakes in them. Margaret Thatcher’s governments are, of course,
(in)famous for their privatisation programmes – which is why 90% of house-
holds in Britain now purchase energy from one of the ‘Big Six’ utilities men-
tioned above, rather than two publicly-owned, monopoly utilities. But of these
corporations, three (, nPower and E.On) are owned by ‘foreign’ capitals –
and this is only possible because of Thatcher’s abolition, in 1979, of exchange
controls. According to her memoirs, of all her activities in her rst year in of-
ce, this is the one she took ‘greatest personal pleasure in’.
We must also mention the explosive expansion in derivatives trad-
ing over a similar period. Financial derivatives may be associated – or
derived – from all manner of underlying assets, including: equity; corporate, gov-
ernment or consumer debt; interest rates; currencies; commodities, like wheat,
petroleum, copper; ‘baskets’ of equity or debt, such as share indices or – now
infamously – bundles of mortgages; interest rates; even ‘natural’ events, such
as inclement weather. In 2016, at least $6.1-trillion worth of derivatives were
traded every day, with the entire value of annual global output turning over in
the nancial markets in less than two weeks.
Hayek 1978, p. 189.
Thatcher 1993, p. 44, cited in Herold 2002, p. 8. As Herold deduces, Thatcher was quite
aware of the importance of this act: ‘But not every capitalist had my condence in capi-
talism. I remember a meeting in Opposition with City experts who were clearly taken
aback at my desire to free their market. “Steady on!”, I was told. Clearly, a world without
exchange controls in which markets rather than governments determined the movement
of capital left them distinctly uneasy.’
Figures are from the Bank for International Settlements ( 2016a, 2016b), which report
daily over-the-counter () turnover in foreign-exchange derivatives markets of $3.4
trillion (plus $1.6 trillion of spot transactions) and trading in interest-rate derivatives
of $2.7 trillion. According to the , global in 2016 was $75.2 trillion ( 2017).
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Derivatives are clearly important. But as Dick Bryan and Michael Raferty
argue in Capitalism with Derivatives, it is less the case that derivatives are
important by virtue of their large volume; rather their volume is large be-
cause they are important. Opening up the ‘black box’ of derivatives, Bryan and
Raferty seek to ‘explain the social role of derivatives … [with] the emphasis …
squarely in the sphere of class relations and, especially, competition between
capitals.’ Derivatives, it turns out, ‘go to the heart of calculation and com-
petition within a capitalist economy’. For Bryan and Raferty, the ‘system of
derivatives’ – i.e. the millions of various contracts taken as a whole – in com-
bination, perform two key functions: binding and blending. Binding refers to
derivatives’ role of ‘binding’ the future to the present. For example, a futures
contract sets in the present the price for the exchange of some commodity
three months’ hence (say). Blending is the process by which derivatives ‘es-
tablish pricing relationships that readily convert between (… “commensurate”)
diferent forms of asset. Derivatives blend diferent forms of capital into a sin-
gle unit of measure.’
From derivatives’ binding and blending attributes stem a number of ar-
guments. Of most relevance here is that ‘[d]erivatives have taken the logic
of capital beyond the bottom line (annual prot rates) and into the details
of each phase of production and distribution’. In other words, the vast sys-
tem of derivatives permits the commensuration of diferent ‘bits’ or ‘pieces’ of
capital – across sectors, across space and across time – and thus results in an
intensication of competition between these bits of capital and a sharper
focus on the human labour that (re)produces each bit of capital. By intensify-
ing the process of competition, derivatives intensify the pressures on managers
to maximise the extraction of surplus-value and upon workers to produce this
surplus-value. In short, nancial derivatives multiply or intensify – or apply
leverage to – nance’s disciplinary function.
Sotiropoulos, Milios and Lapatsioras develop a framework that to an extent
converges with Bryan and Raferty’s. For Sotiropoulos et al. nance and -
nancialisation must be understood as ‘a technology of power, which facilitates
and organizes the reproduction of capitalist power relations’. As in Bryan and
Raferty’s approach, derivatives turn out to be crucial to this organisational and
Bryan and Raferty 2006.
Bryan and Raferty 2006, p. 5.
Bryan and Raferty 2006, p. 9.
Bryan and Raferty 2006, p. 12
Bryan and Raferty 2006, p. 96.
Sotiropoulos, Milios and Lapatsioras 2013.
Sotiropoulos, Milios and Lapatsioras 2013, p. 179.
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disciplinary function of nance: what derivatives make possible is the com-
mensuration of diferent concrete risks, where such risks include various con-
crete manifestations of class struggle. Although there are diferences between
Sotiropoulos et al.’s analysis and Bryan and Raferty’s, I do not think they are
relevant for my argument here. Both sets of authors share an understanding
that nance is productive, that its social function (for capital) is to make com-
mensurable heterogeneous concrete human labour – or, equivalently, make
commensurable the various risks that diferent workers will refuse the con-
crete labour demanded of them by their managers – and thus to intensify the
competitive pressures on these heterogeneous workers.
3.2 Social Finance and Social Discipline
Let us now explore how such nancial discipline might play out in the social-
investment market. Recall the ve types of investor distinguished by Big Society
Capital (see section 2.1, above). For the government, to date the largest inves-
tor, a ‘key consideration [… is …] payment by results’, while trusts and foun-
dations (providing 12% of funding) ‘are increasingly looking for standardised
ways of assessing their investment against the social impact they return’. The
implications are clear. The rate of return on (social) investment will be used
as the standardised way of measuring social impact – because this is how the
is designed, such that there is a direct link between social impact and -
nancial return. This metric will then be used to judge and compare alternative
projects or social enterprises. A probation scheme in Peterborough, say, can be
evaluated against one in Liverpool, but also against a programme working with
disadvantaged young people in the West Midlands and a project that seeks to
help rough sleepers in London. Indeed, projects that work to reduce recidi-
vism amongst teenage detainees at New York’s Rikers Island or to ‘provide ser-
vices to strengthen 400 families’ in New South Wales can also be evaluated in
this way.
A successful social enterprise – that is, one that meets or beats the criteria
set out in the associated contract and which thus delivers a nancial re-
turn to its investors – will be rewarded with the opportunity to develop further
projects (thus generating further nancial returns for investors). A failing so-
cial enterprise will be allowed to exit. In this way, the labour – both waged
In particular concerning whether or not derivatives can be understood as money; see also
Sotiropoulos and Lapatsioras 2014.
The Liverpool probation scheme is a hypothetical example, the others are not.
Recall the quotation – in section 1.1, above – from the Cabinet Oce’s 2011 paper, Growing
the Social Investment Market: the goal is ‘an increase in the total number of social ven-
tures, while allowing for the failure and exit of some organisations’.
. () –
and unwaged – underpinning social enterprises that deliver a wide variety of
services across society will be made commensurable, will be made to compete
and will thus be disciplined.
The vision and the implications go further. In its typology of potential so-
cial investors, Big Society Capital also includes individual retail investors,
seeking ‘competitive rates [of return]’, wealthy individuals, for whom a ‘key
requirement’ is ‘nancial returns linked to investment/social impact risk’,
and mainstream banks and commercial nancial institutions. The G8’s Social
Impact Investment Taskforce, as also mentioned above, discusses the merits
of social-investment assets, in terms of their nancial performance and their
riskiness vis-à-vis traditional assets, in particular suggesting their potential
role in diversifying a portfolio. The social-nance visionaries wish to make
social-investment assets mainstream. Indeed there is some evidence of this:
Goldman Sachs was one of the leading investors in the Rikers Island probation
project, for instance.
Another part of the vision is a secondary market for social-investment as-
sets. The authors of Growing the Social Investment Market called for the pilot-
ing of a ‘social stock exchange’, suggesting the lack of such a market ‘can deter
investors. It can also hinder redeployment of capital to areas where it can most
eciently generate social and nancial return’. Two other enthusiasts pre-
dicted that, ‘[a]s the social investment market grows, it is likely that a second-
ary market for s may emerge ofering primary investors liquidity and exit
and secondary investors, such as pension funds, a potentially attractive asset
class within a diversied (and socially aware) portfolio.’
The realisation of these two additional elements of the social-investment
vision – widespread take-up of social-investment instruments amongst tra-
ditional investors and the emergence of a liquid secondary market – would
greatly facilitate the social-disciplinary power of nance. The involvement of
traditional investors would sharpen the focus on nancial returns, also bridg-
ing the binary divide between socially-reproductive activities and tradition-
ally productive activities – that is, making commensurable activities in the two
spheres. An active secondary market would extend the scope for both ‘moni-
toring’ and ‘inuence’ – Bliss’s two components of market discipline, discussed
in section 3.1. The ability to sell a bond it considered to be underperforming
Delevingne 2014.
Cabinet Oce 2011, pp. 59 and 34.
Nicholls and Tomkinson 2013, p. 42. A Social Stock Exchange was, in fact, launched in 2013,
but no s have yet been traded on this secondary market (<http://socialstockexchange
.com/membership/benets-of-membership/>; last accessed 10 February 2016).
() ()
. () –
would give an investor (and other potential investors) the incentive to moni-
tor more closely and more continuously the activities of the service provider.
Financial investors do not care whether they trade cocoa futures, the
Argentinian peso or some index linked to the 100. They seek only
the greatest risk-adjusted return. By their trading actions, the performance
of those top 100 companies is compared to the performance of the entire
Argentinian economy and to that of cocoa farmers everywhere. The implica-
tion for workers across the planet is brutal: their performance is being made
commensurable. In global ‘capitalism with derivatives’, the performance of a
Detroit car-worker can be compared not only with that of his neighbour on
the production line, or even with her counterpart in Alabama or South Korea,
but also with garment workers in Morocco, cofee-growers in Kenya, program-
mers in Bangalore, lecturers working for Kaplan and cleaners on the London
Underground. Competition and discipline are intensied, as is, of course,
class struggle.
The social-investment market model has the potential to extend this com-
petitive/disciplinary logic into the sphere of ‘the social’. The probation ocer
in Peterborough or New York, the youth-support worker in Liverpool, the vol-
unteer helping homeless people in London, the social worker in New South
Wales: their ‘performance’ will be integrated into this system of measure, com-
mensuration, competition and discipline.
Conclusion: The Way of the Future?
The key argument developed in this paper is that the social-investment mar-
ket threatens – or promises, depending on one’s perspective – to extend the
disciplinary logic of nance into the sphere of social reproduction, in particu-
lar into the domain of state ‘welfare’ spending concerned with the reproduc-
tion of that unique commodity, labour-power. The key instrument deployed
here is the social-impact bond: purportedly designed to align the interests of
social-service providers, state commissioners of social services and nancial
investors, the model has the potential to bring to bear on service providers
nance’s power to organise social relations.
The ability to sell in a secondary market a before the project’s completion would allow
investors to short the welfare state, i.e. to seek to prot from the failure of social-welfare
programmes. I am grateful to Dick Bryan for suggesting this phrase to me.
As I noted above, even philanthropists such as the Gates Foundation do not seem to care
much where they invest – the only consideration is maximising returns.
. () –
Above, I have suggested that nance (and nancialisation) make com-
mensurable heterogeneous concrete labours, across time, across sectors and
across space. Such commensurability facilitates the intensication of compe-
tition between the workers who perform these concrete labours: it is thus a
tool of capital in its class struggle with workers. My argument concerning the
model is that it applies this ‘technology of power’ in the social sphere, the
sphere of social reproduction. The model makes commensurable the la-
bour of the probation ocer in Peterborough, the youth worker in Liverpool,
the homeless-shelter volunteer in London. Thus these heterogeneous sub-
jects – both waged and unwaged – are put into competition with each other.
But not only with each other: also with other productive subjects across the
planet – the auto worker in Ulsan, South Korea, the cleaner on the London
Underground, the academic precariously employed by Kaplan.
As such, and referring back to a debate touched upon very briey at the
end of section 1.1, the social-investment market model is part of a develop-
ment and deepening of neoliberal capitalism. In this sense, it can be under-
stood alongside other neoliberal projects in the UK, to make commensurable
and nancialise the activities of university workers, for instance. The social-
investment market model thus epitomises a nancialisation of the welfare
state or a nancialisation of social reproduction – where nancialisation is
understood as a technology of power.
When compared with the magnitude of both state welfare spending and
overall private investment, the social-investment market is, at present, tiny.
There is, as yet, no secondary market for social-impact bonds, whilst investors
in s have mostly been charitable trusts and foundations. But the promot-
ers of the model are ambitious. In March 2016 Rob Wilson, then minister for
civil society, expressed his hope and expectation that the market would be
‘worth more than 1 billion pounds by the end of this Parliament. The growth of
s will continue into the next Parliament and will become the norm for the
way many public services are funded’. In his response to the Peterborough
results, Ronald Cohen, a key gure in the development of the social-
investment market, claimed with characteristic hubris: ‘it is the way of the
future’. The Economist was more cautious: in its report on the Peterborough
On this see, for example, De Angelis and Harvie 2009; McGettigan 2015.
See Dowling 2016, and also Cooper, Graham and Himick 2016, who argue that the London
Homelessness produces a ‘securitization of the homeless’.
Wilson 2016. Unfortunately for Rob Wilson, ‘this Parliament’ ended early with Theresa
May’s snap election of June 2017, in which he lost his seat …
<http://www.socialnance.org.uk/wp-content/uploads/2017/07/Final-press-release-PB-
July-2017.pdf>; last accessed 6 August 2017.
() ()
. () –
project, it notes the ‘complexity of evaluating [s’] success’ and concludes
they ‘are unlikely to spread far’.
The question of the measurement of social outcomes or impact – although
essential to a robust contract – is, in my opinion, a side issue, for two rea-
sons. First, the proponents of the social-investment market are devoting con-
siderable energy to developing techniques for evaluating outcomes. Second,
and more important, the metrics used in project evaluation do not have to be
‘sensible’ or ‘rational’ in order for the model to function as a technology of
power. We know this – many of us have direct experience of it – from the prolif-
erating measures and metrics deployed to make the higher-education market
‘work’, measures that seem irrational, counter-productive, or simply stupid.
Similarly with increasing marketisation of school education and health care in
the UK. In this sense, I agree with William Davies’s argument that neoliberal-
ism has become both ‘punitive’ and ‘incredible’.
The future of the social-investment market will not be determined by ra-
tional debate on the model’s merits and demerits as a way of addressing so-
cial problems. Rather it will be determined on the terrain of class struggle.
Understanding the model as a technology designed to impose nancial-
market discipline on actors within the sphere of social reproduction – and
thus as a means of waging class war from above – is therefore essential if we
are to successfully intervene in this class struggle from below.
Acknowledgements
I am grateful to Historical Materialism’s editors and to two anonymous referees
for generous and constructive comments on an earlier draft of this paper, and
to Dick Bryan and Mike Raferty for helpful discussions and encouragement.
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