The National Governance and Policy Context of Social Impact Bond Emergence: A Comparative Analysis of Leaders and Skeptics

Abstract

Proponents of the Social Impact Bond (SIB) model put forward a value-for-money case for SIBs based on new resources, efficiency enhancements and innovation for social service delivery, suggesting broad potential for SIB uptake in varying national contexts. SIB use has however been concentrated in Anglo-Saxon liberal market economies. This paper analyses the possibility that SIBs are proceeding given their alignment with particular governance and policy regimes, as opposed to any universal superiority from a cost-effectiveness or efficiency perspective. A comparative analysis is undertaken of the United Kingdom and the United States, leaders in SIB implementation, with France and Germany. A range of indicators representing the adoption of neoliberal governance approaches are reviewed and linked to their complementarity with the SIB model. Policy implications for SIB governance are then explored.

Keywords:

• social impact bonds
• neoliberalism
• financialization
• comparative analysis
• welfare regimes

Acknowledgments

An earlier version of this paper was presented at the Government Outcomes Lab conference “Comparing SIBs and Outcomes-based Approaches” at the Blavatnik School of Government, Oxford, UK. The author would like to thank the participants of the conference, in particular Mildred Warner, as well as Duncan Foley, Ian Hudson, John Loxley, Rachel Meltzer, Sanjay Reddy, Paulo dos Santos, and two anonymous reviewers for helpful feedback on earlier iterations of this work.

Notes

1. For example, based on data published by the Nonprofit Finance Fund (2017), 90 per cent of US SIBs have been using programming with an evidence base of effectiveness, and 90 per cent include at least one service provider that had previously delivered the same service intervention.

2. Note: five projects did not publicly report participant data, including two UK, and one US project.

3. Note: total investment is calculated based on exchange rate at time of contract signing. Sixteen of the 100 projects did not publicly report investment data, including eight from UK, one from the US, both French SIB projects and two of the German projects. The average investment per bond for the US is $11m, and $2.1m for the UK.

4. While active labor market programming (ALMP) is included in total SPE, the OECD Social Expenditure Database does not classify it as either an in-kind or cash benefit. In this section our reference to in-kind expenditure includes all ALMP spending.

5. Based on authors’ calculations and data reported in Audet (2003) and OECD (2018).

6. OECD (2018) data on compensation to government employees as a proportion of total government expenditure also provides similar results, suggesting the US as heavily reliant on in-house provision, with the US as having the highest share at just under 26 per cent, while Germany has the lowest, at 17.3 per cent.

7. However with respect to trends, only Germany has seen government expenditures decrease since 1995.

8. See also Carter et al. (2018).

Additional information

Funding

This research was supported by the Social Science and Humanities Research Council of Canada through the Manitoba Research Alliance Grant: Partnering for Change: Community-based Solutions for Aboriginal and Inner-city Poverty, and the Dean’s Fellowship at the New School for Social Research.

Notes on contributors

Jesse Hajer

Jesse Hajer is an Assistant Professor in the Department of Economics and Labour Studies Program at the University of Manitoba, in Winnipeg, Canada. His research areas include the political economy of public policy and procurement, with a focus on the social economy, poverty alleviation and inequality.