A Back to The Future Economy

5 min read·

 

The federal government spends $350 Billion of our money each year, including $150B on welfare, $60B on health and $30B on education. Why?

Benefit

Benefit. It’s a fairly simple concept. One that businesses mostly had right. Business benefited communities, serving a community, buying their stuff from and selling their stuff into that community, and the resulting profits again being spent in that community. Until the mid 20th century. Then things changed, with automation, scale of production, and more recently globalisation, technology, competition, and the evolution of corporate democracy and consolidation, creating market behemoths…

Behemoths

Behemoths that own entire supply and value chains, with directors legally required to focus on profit first and last, resulting in stuff and labour being made and bought as cheap as possible (usually overseas) and profits being distributed to shareholders far and wide.

Some ‘give back’ to community as well, in the form of CSR and philanthropy. At best, those that embed sustainability into their entire value chain are part of a moral shift that benefits and re-opens long-closed links with the community. At worst (and unfortunately in many cases) CSR’s ‘giving back’ is greenwashing or conscience laundering (in the words of Peter Buffet) by folks who have been busy accumulating everything up to that point.

Government

These days it’s governments that have to benefit communities.. welfare benefits, health care benefits, education, rebates, concessions. No one likes this. Depending on where we sit, it’s either too little, not enough, or in the wrong place. This is not to say that there isn’t a very firm case for direct government service funding, because business is not the answer to every problem, and a business model cannot simply be imposed on every problem. However, the system has been broken. Government’s job is to lead and to intervene where the market fails, and as community degradation ensued and public welfare and general spending increased under the big business model of recent decades, successive governments have seen the answer being more of the same. More globalisation. More free market deregulation. Like a version of conscience laundering, successive governments’ policies have led to devastating social and environmental impact in developing countries that now house the business’ new cheaper production facilities.

while the Australian economy and social structure is hollowed out through offshoring of jobs and entire industries, along with said companies tax obligations, and in many cases, their shareholders returns as well.

Back to the future.. Business focusing and facing communities can be the answer

Unlike traditional business structures, social enterprises, community owned businesses, and benefit corporations offer profit AND sustainable social and environmental solutions to both governments’ and communities’ challenges.

Over the past 10 years many of our key trading partners have realised this and passed enabling legislation for these social impact businesses/benefit companies to incorporate or re-incorporate (think Kickstarter or Patagonia in the US)…

These are companies that provide market rate returns to shareholders through a business model that simultaneously creates positive social and environmental impact outcomes. Supporting this growing legislative change movement and ecosystem are organisations like B Lab who provide an important advocacy, audit, branding and certification benefit layer to these social impact/benefit corporations, which are increasingly gaining market share through a tide of conscious consumers.

The Australian Government

Today the federal government spends $350 Billion of our money each year, including many unsustainable billions on band-aid solutions to problems that require systemic changes to address their underlying causes.

Governments’ role in enabling a social impact/benefit corporation business structure is as critical to Australian innovation as its support for innovation more broadly.

To focus tech innovation while overlooking social innovation fails to unify the conversation and is possibly the greatest missed opportunity to ‘catch a wave’ we’ve seen in public policy in recent years given the sectors’ combined capacity for positive large scale disruption.

Beyond some states’ patchy and limited procurement policy support for not-for-profit social enterprises and toe-in-the-water of social impact bonds, the Australian federal government’s lack of focus and priority on social innovation — such as legislation for social impact/benefit businesses to incorporate and thrive — years after some of the world’s other advanced economies have, is telling..

The truth, and its painful cost to the public purse..

Not only does the absence of support for social impact/public benefit corporations constrain social innovation and increase the public cost of delivering social outcomes, but it contributes to this country looking like and becoming a dinosaur in investment and economic development circles, while inequality — in a declining jobs market, and environmental degradation are rising.

Lets be frank in conversation with and within Australia’s governments on catching up with the US, UK and Canada in the impact investment market. By leveraging trillions of dollars globally in private equity it is potentially more innovative and impactful than the rest of the ‘innovation and ideas boom’ combined, it speaks to an increasingly conscious consumer in the kick, as well as having government spending upsides far less myopic and much more inclusive than a simple budget cut.

Legislation

No, it doesn’t have to be an oxymoron.. where there’s a political will there’s a way. All our representatives in government need is political pressure, and that’s where we come in. Passionate people who care enough to have a public voice.

Creating a legal structure for impact driven companies is a free win for policymakers as it costs the budget nothing, while being both a small step and a giant leap towards generating a world-class social impact and impact investment market.

Why? Because sometimes a simple act by our political leaders of signalling with policy (‘nudging’ for fans of behavioural economics) can create a seismic shift in entire industries..

Australia’s zero to top-10 global ranking in renewable energy in the past decade years is an example.. Positive disruption from industrial scale right down to consumers with solar+battery homes.

Delaying or pushing down the priority list this simple and zero-cost legislative action which our trading partners in the US, UK and Canada have already taken, will only cost us all.