$1.5 bn investment to create social value in the US, but...

A whopping $1.5bn investor commitment to ventures creating social value has been announced in the US. It coincides with a string of recent announcements in the UK. But as a fraction of the money flowing around the globe, the space for impact investment is still tiny.

I agree with the point above made by Pioneers Post:

The Crisis in Ukraine

In 2006, by coincidence, it was precisely the amount called for in a proposal for supporting social investment in Ukraine, with these words from a proposal for social enterprise development.

"It is proposed that the United States of America be actively engaged in supporting this project, financially and any other way possible. Ukraine has clearly demonstrated common will for democracy. Ukraine has also unilaterally taken the first critical step to fulfill this program, thus clearly demonstrating initiative and commitment to participation required in the original Marshall Plan sixty years ago. The US side is presumably attempting to foster democracy in another country, which never expressed much interest and shows little real interest now.  That of course is Iraq, where recent estimates indicate a cost of $1.5 billion per week.

That same amount of money, spread over five years instead of one week, would more than cover the investment cost of the initial components of this project, and allow a reserve fund for creating new projects as Ukraine’s intelligentsia invents them in the Center for Social Enterprise. It is proposed that Ukraine and the US provide equal portions of this amount. Ukraine is certainly able to provide that level of funding, given that projects are designed with the same fiscal discipline employed in the traditional business sector. That means they pay for themselves, one way or another.

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 program provides for near-term social relief for Ukraine’s neediest citizens, most particularly children who normally have least possible influence and no public voice. Over a few years time, the net cost financially is zero. Every component is designed to become financially solvent, through mechanisms of cost-savings and shared revenue with other components. One component, Internet, provides essential communications infrastructure as well as a cash surplus to be used to offset any lingering costs of other components such as childcare, and otherwise goes to a permanent social benefit fund under oversight of the aforementioned independent, citizens-based non-government board of directors.

Any number of other social enterprises can be created. Furthermore,  any number of existing for-profit enterprises are entirely free to contribute any percentage of profits they wish to increase the proposed initial $1.5 billion social investment fund. If for example the total fund comes to $3 billion, that amount would generate at least $300 million per year in a hryvnia deposit accounts at any one of several major Ukrainian banks, to provide ongoing funding to continue to create and expand social enterprises. "

In February 2008, a direct call was made to USAID and the Senate Committee on Foreign relations where Barack Obama was a member and Joe Biden chaired .It concluded:

"Thank you for your time and attention to this. I and others will look forward to hearing from you. I hope we continue to realize ever more fully that outside the box and inside the box have only a box in the way. We outside the box know quite a bit of what’s going on, many times in exquisite detail, perhaps in ways that those inside the box can’t quite as easily access if at all. We are grossly underfunded in favor of missiles, bombs, and ordnance, which is about 100% backwards. Now, with even the US Pentagon stating that they’ve learned their lesson in Iraq and realize (so says top US general in Iraq ten days or so ago) that winning hearts and minds is the best option, I and others shall continue to think positive and look for aid budgets and funding spigots to be opened much more for people and NGOs in silos, foxholes and trenches, insisting on better than ordnance, and who understand things and how to fix them. We can do that. We can even do it cost-effectively and with far better efficiency than the ordnance route. Welcome to our brave new world. Except it’s not so new: learn to love and respect each other first, especially the weakest, most defenseless, most voiceless among us, then figure out the rest. There aren’t other more important things to do first. This message has been around for at least two thousand years. How difficult is it for us to understand?"

The Crisis in America

Later that year, the United States was hit by the economic crisis and in October, president elect Barack Obama described his intentions to support social enterprise. it was reported in Skoll Social Edge:

"The second thing I'll do is invest in ideas that can help us meet our common challenges, because more often than not the next great social innovation won't be generated by the government."

"With these words, candidate Obama promised to create a Social Entrepreneurship Agency within the Corporation for National and Community Service. He proposed $3.5 billion a year for social investment, paid for by ending the war in Iraq and eliminating corporate tax loopholes."

What they got eventually was $100 million. issued in tranches to major foundations 

As we all now know, social unrest led to an uprising in Ukraine in which $1.5bn now seems like small change 

Omidyar chip in

In the Pioneers post article my attention was drawn to the contrbutors which include the Omidyar network. In 2007, this was a network which inclxded many of us grassroots innovators. The Omidyar network encouraged project ideas for funding support and the Marshall Plan' for Ukraine was one I introduce to them. I wonder if this indicates la ck of understanding, or simply that it was a closed group to us.   

Creating Shared Value

 

You may have noted the expression in the opening paragraph  - "creating social value"

 

In 2011 irt dawned on Harvard economist Michael Porter that there was shared value between business and communities and the term Creating Shared Value was born. It would reason that capitalism could be deployed for social benefit - as had the 'Marshall Plan'

As our study guilde to the economic crisis reveals, Harvard and Larry Summers in particular had a significant part in creating the economic crisis

It's a pretty clear indicator that this funding isn't going to support NGOs "in silos, foxholes and trenches" nor children in 'Death Camps' as we described. It will go to a risk averse financial elite, who have so far only talked the walk.