I had intended to get back to basics as I come back after lying low for a while, but I have to take one of my periodic moves into the world of politics. A news [article](http://www.boston.com/business/articles/2011/06/27/massachusetts_others_eye_new_model_to_fund_social_programs/?page=full) in today’s Boston Globe caught my attention and triggered a flood of related thoughts. Here’s the headline and opening paragraph.
> Investors may fund social programs
> State exploring ‘pay for success’; Profits would be tied to cost savings
> Massachusetts could be among the first states in the country to raise money for social services by offering investors the chance to earn profits on programs they establish.
After reading further, what I see is another, perhaps more sophisticated, form of privatization. Enough already. This initiative would be another case where social qualities are being reduced to unvarnished monetary measures. The state would contract services to private entities that would be compensated in relation to the savings they produce. One example taken from recent experience in the UK aims at reducing the cost of recidivism among about 3000 inmates at one prison. The driving thrust is to obtain money to initiate and operate the social program with this goal. Here are the main details.
> It struck a deal with a nonprofit partnership to create an $8 million program to work with 3,000 inmates over six years at a prison in Peterborough, England, 75 miles north of London. Social Finance Ltd., which helps arrange financing for nonprofits, raised the money from 17 investors, mainly charitable foundations.
> If the nonprofits succeed in cutting recidivism by 7.5 percent, the investors will get all their money back. If they reduce the rate further, investors could receive up to $12.8 million, a nearly 60 percent profit.
> If the effort fails to reduce recidivism by at least 7.5 percent, the government won’t owe investors anything.
What a deal! I would take this any day with my eyes closed. Get some friends to read up on recidivism, form a non-profit, lobby for a contract, and go to work. No risk whatsoever. If the results are poor because recidivism is not only a result of the context of prison life, but of the context of the prisoner’s life before and after incarceration, no problem. I just fold my tent and move away. But if I get some positive results, whether due to my efforts or not, I can be handsomely rewarded.
The privatization approach must divide up complex social problems into discrete pieces, each of which is a wicked problem. (I had no idea when I was writing my recent series on wicked problems how broadly applicable the 10 items would be.) how broad that concept can be appied. These are particularly germane.
1. There is no definitive formulation of a wicked problem.
2. Solutions to wicked problems are not true-or-false, but good-or-bad.
3. There is no immediate and no ultimate test of a solution to a wicked problem.
4. Every solution to a wicked problem is a “one-shot operation”; because there is no opportunity to learn by trial-and-error, every attempt counts significantly.
5. Every wicked problem can be considered to be a symptom of another problem.
6. The planner has no right to be wrong.
As I read the article, the projects are one-off. The “contractor” gets one shot and is compensated accordingly, contravening items 3, 4, 5, and 6. The absence of risk in terms of the effectiveness of the program is particularly troublesome. The formal, bounded nature of the projects ignores the contextual issues raised in items 1 and 5. The moral, or better, immoral frame for these projects absolving the entity for failure to achieve its promises flies in the face of item 6.
There are many moral issues involved in addressing any social program. People, criminals or clergy, always have rights that must be considered in setting up and administering any action program. Governments may not always do a good job recognizing or impacting these rights, but they are the institution that has been given the responsibility for overseeing the moral center of the democratic societies involved here.
Corporate forms in general (and specifically in this case) are limited in the set of moral responsibilities they assume by the set of regulations that assign (always a bounded) set of rules they must follow. The article implies that non-profit entities will administer these programs, inferring that there is some sort of mission-driven character or moral superiority to these organizations that will distinguish them from run-of-the-mill profit making enterprises. There is no guarantee; many non-profits have ripped off the public. The better descriptor for these kinds of enterprises is “not-for-profit,” which allows that the intention implied in the name may sometimes be lost.
The UK program, according the the Globe article, arose out of an inability to initiate and operate needed social program from tradition government tax revenues and long-term bond.
> “We can no longer fund everything,’’ said Hugo Biggs, a press officer for the British Ministry of Justice. “So going forward, we are going to pay for what works.’’
That’s the same reason being used in the US to justify turning to the private sector for programs that have been traditionally government responsibilities, based on an understanding (and agreement) that the public and private sectors have distinct moral and functional bases. But stop for a moment and ask why this has become the case. The answer is long and complicated, but here are a few parts. The large deficit we face is being used to argue that we cannot afford to invest any more in our social structure, both institutional and concrete. The drivers of the economy are put in peril as a consequence. The deficit is arguably the unintended result of the high costs of running multiple simultaneous wars, unwarranted tax cuts and Wall Street greed and duplicity, and perhaps a few others.
Tax revenues have fallen in part because the tax structure favors the very wealthy who have gotten more wealthy, increasing inequality. They no longer pay their “fair share.” Inequality breeds the social conditions that put people in prison. The wealthy get richer by being able to invest in these new “social programs,” which carry no financial risk other than the opportunity cost of investing in other schemes. I do not see the appreciation of this mesh of interrelated links expressed in the material I read. Given the superficiality and ideological tone of political talk these days, I would bet it has not. We are on the wrong path here. The right one would be to restore the role and competence of government and its agencies and not allow further erosion all in the name of the improved efficiency (cost-savings) the private sector claims. The private sector, with bounded rules, has always had great difficulty dealing with the properties of wicked problems. And as governments tries to assume the same reductionist, limited frame as the private sector, they risk more and more outcomes that worsen the situation or create new sets of problems.
Roger Cohen, [writing](http://www.nytimes.com/2011/06/28/opinion/28iht-edcohen28.html?hp) in today”s NYTimes, provides a fact that drives home the point even more. Referring to a different arena than curing recidivism, he spoke of two other current critical problem areas:
> I was struck by two underlying themes: the need for an energy policy and for an industrial policy.
> Here’s why: It’s absurd that “climate change” has become an unpronounceable phrase under Obama and that green technology initiatives have been stymied by sterile ideological dispute. Intelligent use of resources makes strategic sense for America whatever your hang-up on global warming. It’s equally absurd that private U.S. corporations, having made $1.68 trillion in profits in the last quarter of 2010 and sitting on piles of cash, are doing fine while job numbers languish and more Americans struggle. . . None of this makes moral or any other sense.
Think of what governments, acting wisely and prudently, could do with those funds.