.

The promise of ideas, however innovative, is empty without realistic possibility. This emptiness is evidenced by the failure of programs like Cash for Clunkers or the Fair Housing Act. Though admirably idealistic, Cash for Clunkers was not financially sustainable, and the Fair Housing Act contributed to the thousands of foreclosures that preempted the current U.S. recession. In the global sphere, the United Nations is far from reaching its Millennium Development Goals by 2015, and the United States still cannot trade with X, one of its cruciate enterprise partners. As social issues grow, government and other public institutions have not been able to keep up. Fortunately, there are players who can.

In 2012, New York State enlisted the private sector to tackle the state’s increasing risk of recidivism. Data from 2013 shows that over half of New York’s released prisoners returned to jail within their first five years of freedom, costing the state millions of dollars. Research points the blame at unemployment; when prisoners cannot obtain post-release jobs, they are more likely to contribute to recidivism’s rise. Even with their hands on such a clear problem and solution, New York State had no available funds with which to act. Here is where the private sector stepped in.

With the direction of New York Governor Cuomo, 40 private investors partnered with two non-profit organizations, one law firm, and one research institution. The investors financed the project with over $13 million, which the non-profits set into play; targeting high-risk, formerly incarcerated individuals and helping them gain and maintain employment. The project’s anticipated timeline is five and a half years, at the end of which New York State will pay investors back based on performance, meaning that the State is only financially liable if the project produces success.

The State of Utah employed a similar concept last year, using privately invested funds from Goldman Sachs to finance a primary education program designed to keep pre-K students out of special education. For every child that gains the skills to avoid special education, the state saves money. A portion of this money is paid out to Goldman Sachs. Essentially, the state has created a comprehensive, low risk, financing program for social programming otherwise out of financial reach.

In the global spectrum, these partnerships between public and private entities become more difficult, as governments have less hard incentives to invest in populations outside their own. Here again, the private sector is taking social needs into their own hands—this time through impact investing.

The Sorenson Global Impact Investing (SGII) Center prioritizes start-up enterprises that focus on social innovation, namely those with a global focus. The SGII Center does not abandon the general, for-profit investment objectives—it just places positive impact on an equal level of importance. Projects range from affordable healthcare in rural areas of India to the development of nuclear technology. Acting as a catalyst for social progress, groups like SGII are investing profitable solutions to some of the globe’s most pressing problems.

For the SGII center and other investors, government needs to support social impact investing. These entities have the drive and the financial means to fund change outside the bound of public aid. The United Kingdom has already acted upon similar recommendation, pushing incentives for investors to support social enterprises. Other states must follow such a model as social problems continue to grow larger than governments can match.

As local and global entities fall increasingly short of adequately combating our largest issues, public welfare or aid is not enough. Though private entities have more freedom and financial flexibility, government protocol often creates barriers rather than opportunity. Government processes are bogged down with protocol, and their budgets are not nearly a match for the volume of today’s social quandaries. The freedom and flexibility of the private sector is necessary for success. As the field of social innovation progresses, public entities need to embrace the growth, granting flexibility and support where needed.

Lisa Hawkins is a student at the University of Utah. Formerly, Lisa directed the political segment on the University’s cable broadcast, Newsbreak, and recently returned from an internship in New Delhi, India with the Maitri NGO.

Photo: BMW Guggenheim Lab (cc).

The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.

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Public-Private Partnerships and the Social Sector

September 3, 2014

The promise of ideas, however innovative, is empty without realistic possibility. This emptiness is evidenced by the failure of programs like Cash for Clunkers or the Fair Housing Act. Though admirably idealistic, Cash for Clunkers was not financially sustainable, and the Fair Housing Act contributed to the thousands of foreclosures that preempted the current U.S. recession. In the global sphere, the United Nations is far from reaching its Millennium Development Goals by 2015, and the United States still cannot trade with X, one of its cruciate enterprise partners. As social issues grow, government and other public institutions have not been able to keep up. Fortunately, there are players who can.

In 2012, New York State enlisted the private sector to tackle the state’s increasing risk of recidivism. Data from 2013 shows that over half of New York’s released prisoners returned to jail within their first five years of freedom, costing the state millions of dollars. Research points the blame at unemployment; when prisoners cannot obtain post-release jobs, they are more likely to contribute to recidivism’s rise. Even with their hands on such a clear problem and solution, New York State had no available funds with which to act. Here is where the private sector stepped in.

With the direction of New York Governor Cuomo, 40 private investors partnered with two non-profit organizations, one law firm, and one research institution. The investors financed the project with over $13 million, which the non-profits set into play; targeting high-risk, formerly incarcerated individuals and helping them gain and maintain employment. The project’s anticipated timeline is five and a half years, at the end of which New York State will pay investors back based on performance, meaning that the State is only financially liable if the project produces success.

The State of Utah employed a similar concept last year, using privately invested funds from Goldman Sachs to finance a primary education program designed to keep pre-K students out of special education. For every child that gains the skills to avoid special education, the state saves money. A portion of this money is paid out to Goldman Sachs. Essentially, the state has created a comprehensive, low risk, financing program for social programming otherwise out of financial reach.

In the global spectrum, these partnerships between public and private entities become more difficult, as governments have less hard incentives to invest in populations outside their own. Here again, the private sector is taking social needs into their own hands—this time through impact investing.

The Sorenson Global Impact Investing (SGII) Center prioritizes start-up enterprises that focus on social innovation, namely those with a global focus. The SGII Center does not abandon the general, for-profit investment objectives—it just places positive impact on an equal level of importance. Projects range from affordable healthcare in rural areas of India to the development of nuclear technology. Acting as a catalyst for social progress, groups like SGII are investing profitable solutions to some of the globe’s most pressing problems.

For the SGII center and other investors, government needs to support social impact investing. These entities have the drive and the financial means to fund change outside the bound of public aid. The United Kingdom has already acted upon similar recommendation, pushing incentives for investors to support social enterprises. Other states must follow such a model as social problems continue to grow larger than governments can match.

As local and global entities fall increasingly short of adequately combating our largest issues, public welfare or aid is not enough. Though private entities have more freedom and financial flexibility, government protocol often creates barriers rather than opportunity. Government processes are bogged down with protocol, and their budgets are not nearly a match for the volume of today’s social quandaries. The freedom and flexibility of the private sector is necessary for success. As the field of social innovation progresses, public entities need to embrace the growth, granting flexibility and support where needed.

Lisa Hawkins is a student at the University of Utah. Formerly, Lisa directed the political segment on the University’s cable broadcast, Newsbreak, and recently returned from an internship in New Delhi, India with the Maitri NGO.

Photo: BMW Guggenheim Lab (cc).

The views presented in this article are the author’s own and do not necessarily represent the views of any other organization.