Homelessness and social investment

A recent study attributes the rise of homelessness in England to welfare reforms with London now the centre of homelessness.

In 2012 David Cameron announced investment of £600 million into Big Society Capital, saying:

"Big Society Capital is going to encourage charities and social enterprises to prove their business models – and then replicate them. Once they've proved that success in one area they'll be able – just as a business can – to seek investment for expansion into the wider region and into the country. This is a self-sustaining, independent market that's going to help build the big society."

There seems to be quite a lot the Alternative Commission on Social Investment has overlooked.

Eight years earlier, a homeless man arrived in London to be a guest in my home. . A business which distributes no dividend and commits at least 50% of profit to social benefit, by locking it into an irrevocable trust fund.

The business plan described how the self-sustaining model could replicate on a regional and national level, by re-investing profit in seeding new social enterprises. It was shared widely with social enterprise support organisations and had a message for government:

"Dealing with poverty is nothing new. The question became ‘how does poverty still exist in a world with sufficient resources for a decent quality of life for everyone?’ The answer was that we have yet to develop any economic system capable redistributing finite resources in a way that everyone has at minimum enough for a decent life: food, decent housing, transportation, clothing, health care, and education. The problem has not been lack of resources, but adequate distribution of resources. Capitalism is the most powerful economic engine ever devised, yet it came up short with its classical, inherent profit-motive as being presumed to be the driving force. Under that presumption, all is good in the name of profit became the prevailing winds of international economies — thereby giving carte blanche to the notion that greed is good because it is what has driven capitalism. The 1996 paper merely took exception with the assumption that personal profit, greed, and the desire to amass as much money and property on a personal level as possible are inherent and therefore necessary aspects of any capitalist endeavour. While it is in fact very normal for that to be the case, it simply does not follow that it must be the case.

"Profits can be set aside in part to address social needs, and often have been by way of small percentages of annual profits set aside for charitable and philanthropic causes by corporations. This need not necessarily be a small percentage. In fact, there is no reason why an enterprise cannot exist for the primary purpose of generating profit for social needs — i.e., a P-CED, or social, enterprise. This was seen to be the potential solution toward correcting the traditional model of capitalism, even if only in small-scale enterprises on an experimental basis.

"Traditional capitalism is an insufficient economic model allowing monetary outcomes as the bottom line with little regard to social needs. Bottom line must be taken one step further by at least some companies, past profit, to people. How profits are used is equally as important as creation of profits. Where profits can be brought to bear by willing individuals and companies to social benefit, so much the better. Moreover, this activity must be recognized and supported at government policy level as a badly needed, essential, and entirely legitimate enterprise activity.”

Whereas charites and social enterprise was often based on zero hours contracts, it made a commitment to economic rights based on an international standard

"All employees of P-CED are to be paid at minimum a wage sufficient to guarantee a decent standard of living in accordance with the International Covenant of Economic, Social and Cultural Rights. "

Interviewed in 2004 about his work in Eastern Europe, P-CED's founder said  "The P-CED model is not a charity sort of operation. It is business. What we choose to do with profits is entirely up to us, and we choose before anything else happens to set most of our profits aside to assist poor people. In fact, our corporate charter requires us by law - UK law, where rule of law is very well established - to use our profits only for social benefit. We cannot do anything else with it."

This had been shared, free to use. Not with purpose, with progress or any other diminunitive.

His proof of concept had been in leveraging the Tomsk Regional Initiative and $6 million for a community microfinance bank which became self sustaining in its second year It had been replicated by USAID in Novisibirsk and Georgia.  . 

Though homeless himself, his work in Crimea had focussed on resolving the problem of homelessness for the repatriated Tatar community.  His proposal delivered to USAID introduced this model as a Community Funding Enterprise (CFE) describing how it could partner with a credit union for mutual benefit, using its profit to subsidise the high cost of unsecured lending.      

Working together to deliver our social enterprise development proposal for Ukraine we'd argued the case for investing in children whose instutionalised life would typically end by graduation to street prostitution and crime. Many were living in sewers, having escaped such instutions.

The argument was that the transition from institutions to foster care would mean an overall reduction in state budget.  

"According to years of research within Ukraine and the former Soviet bloc by Every Child, 90% of children could possibly be returned to their families, with relatively small financial support to families. The cost of financial support needed is estimated to be less than half the cost of keeping the children in state children homes with dozens or hundreds of children per institution. If children can be safely removed from state homes back to their own families, at half the cost of keeping them in state homes, it makes absolutely no sense not to return them to their families."

 

In February 2008, calling on their support for this social enterprise development plan, USAID were advised:

There is increasing congruence and synchronicity in play now, to the point of attunement. What Ms. Fore is describing has been central to P-CED’s main message, advocacy and activity for a decade. That, and helping establish an alternative form of capitalism, where profits and/or aid money are put to use in investment vehicles with the singular purpose of helping the world’s poorest and most vulnerable people. The paper on which that is based is in Clinton’s library, dated September 16, 1996, author yours’ truly. That is reflected in P-CED’s home page and history section. In fact, you might notice a number of ideas and writings there that have now made their way into the mainstream of economics and aid thinking, how to make business and aid work smarter and more effectively in relieving poverty and the misery and risks that result.

In November 2009, presidential candidate Barack Obama announced plans for a social enterprise investment fund as we had described. Paid for by ending the war in Iraq and closing tax loopholes,.

In 2010 as David Cameron took office, I petitioned him appealing for him to follow the US lead, describing our efforts to place children in loving familiy homes:    

Impact has been demonstrated, in that changes to payments for adopters has led to an increase in domestic adoption and government have pledged 400+ rehabilitation centres. As yet, there has been little progress on the latter.

To our call for a faculty for social enterprise and supporting social investment fund, there has also been some response in the provision of a new USAID foundation.

In recent news we've learned of the Obama administration's aims. That "development will be "elevated as a central pillar of national security strategy, equal to defence and diplomacy".

May we suggest that UK government takes a similar stance, beginning with support in this instance for "those who suffer most, and those in greatest need, who must be helped first -- not secondarily, along the way or by the way".

David Cameron would now seem to be an advocate for our model: 

So what went wrong?

It would be easy to lay all of the blame on Tory austerity policies but hold in mind that it was the New Labour government who were called upon to support business which takes the bottom line past profit to people. An idea at odds with the neoliberal philosophy which underpinned their government.   

Neoliberalism means deregulating markets and privatising the public sector. By 2008, the former had been the primary cause of the economic crisis, as we described in our study guide for those attending the Economics for Ecology conferences in Sumy.

The National Health Service was cleary the main target for privatisation.

Arguing for a national scale social enterprise development program in Ukraine, we'd made this point about the need for transparency:

"Project funding should be placed as a social-benefit fund under oversight of an independent board of directors, particularly including representatives from grassroots level Ukraine citizens action groups, networks, and human rights leaders."

This was not the case with Big Society Capital, where for profit intermediaries were assigned to allocate public funds.

One light on the horizon, is a new social enterprise called Uprise 

"Uprise London is a CIC that believes homes are for people – not for profit. The company started in 2014 with a group of like-minded individuals from  varied social and commercial backgrounds that aimed to deliver truly affordable, quality homes for rent or to buy,  for Londoners who live and work in London and pay UK taxes. Uprise is a CIC and its profits are then reinvested to build homes for social purpose – long term accommodation for women and children leaving refuges and situations of domestic violence or trauma."