News Ticker

Social Bonds

The Initiative has made the case for Social Impact Bonds in our recent report Investing for Success. This is why we welcomed the government’s announcement this week to issue New Zealand’s first ever social bond in the area of mental health.

Not everybody shares our passion for social bonds, however. After TVNZ broadcast a story on the new programme, which featured our report, I received the following email from an arts lecturer at a NZ university:

Dear Mr. Hartwich
I write with full expectation that this note is an exercise in futility.
How ironic your NZ Initiative ‘About’ page quotes Adam Smith’s famous caution: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public,-”
Your recent public/private partnership abomination – financial bonds to be issued in connection with independent mental health providers to government agencies – is in fact a open-air conspiracy against public well-being. Or, perhaps, simply an amoral, ideologically driven, financial scheme. Wrapped though it is in high-flown babbitries like ‘initiative’, ‘targeted results’, and other unmeasurable political-bromides.
As you well know, financial entities, such as Goldman Sachs and ghoulish, international, penal-service-corporations already profit fabulously from ever-increasing populations of incarcerated souls (refugees and criminal offenders alike) so why not reach even deeper into the suffering sectors of socially disadvantaged communities. Communities that already supply profit-takers with the largest proportion of prison populations . And in doing so, siphon profit streams – of formerly public money – into the trading accounts financial speculators.
The ancillary advantage of your mental-health-bond scheme (you’d call it an initiative) will be to drive the mentally ill (via cold statistical, profit-driven, targets) off the roster of support agencies (and service providers) and onto the already burgeoning rolls of prison population. A place already, inappropriately, hosting large populations of the mentally ill. It will be a win win situation for investors in prison stocks & mental-health-bonds.
I write this for my own peace of mind. And as an insignificant burr beneath your saddle-blanket. Please spare me any business-school-sociological rationalizations.
Be Well

After this rant, I was not sure what to say. This is how I replied:

Dear Mr …,

Thank you for your message.

Since you asked me to spare you “any business-school-sociological rationalizations”, I will not explain the idea behind social impact bonds. Should you be interested, you can find a short summary of how these projects work on our website.

What I would like to share with you, however, is just a personal observation. After I finished school, I worked at day-care centre for mentally ill people for 15 months. It was run by a registered association and paid for by the state government. We offered a wide range of services to the people we cared for: occupational therapy, assisted living, social and cultural activities. For a lot of our clients (we never called them patients), this was an important step towards an independent and fulfilled life. I am proud of the work we did.

I wish there were more such organisations out there to provide assistance to mentally ill people. There is a dire need to invest more in mental health services. You are right that there are severe mental health problems in prisons, which makes it even more important to address these mental health issues in the community before things go wrong.

I welcome the introduction of social impact bonds precisely because I believe that the mental health sector will benefit from an increased range of service providers. They could be registered associations such as the one I worked for. They could be charities. And, yes, they could be for-profit operators, too. All I care about are the results achieved for the people we talk about – and since private investors also stand the chance to lose their investment if their schemes are unsuccessful, it is only fair that they will get a return when they succeed.

Since you seem to have already made up your mind about social impact bonds, I do not expect a response from you. I am writing this mainly for my own peace of mind because I do not like to be accused of amoral, ideologically driven conspiracies against the public, and certainly not by people who do not even know me.

Best wishes,

Oliver Hartwich

I have not received a reply just yet. Maybe my correspondent is still rethinking his position?

About Oliver Hartwich (3 Articles)
Economist, columnist, and executive director of The New Zealand Initiative.

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