The Futures Trading of Social Benefit Bonds

[The intro of a text co-authored with Dick Bryan (forthcoming)]

Social benefit bonds, otherwise referred to as social impact bonds, are a very recent innovation in the fields of social policy and finance. They involve the private funding of programs that are embedded within the provision of state services. Depicted as an instrument that creatively breaks the impasse of restricted public policy funding, the bonds are presented as investment devices that allocate the risk of policy programs while creating a measure which will enable investors to diversity portfolios and trade on the risks of social volatility.

As financial contracts, and as with all contracts, social benefit bonds (SBBs) are future-oriented; concerned less with what is happening in the present than with what will and might happen tomorrow. In this respect, the world of SBBs is not the present time of transfers and programs that seek, for instance, to alleviate poverty in the here and now; it is the future time of inter-generationality. This formal aspect of social benefit bonds makes them theoretically applicable to all manner of social policy questions, but the link between a politics of the household and futurity is emphasised by the conjunctural choice of schemes to which the bonds have been applied to date, namely: recidivism and foster care. In both instances, the pertinent question is not the present but the future—not, that is to say, rates of imprisonment but the probability that prisoners will re-offend; and concerned less with whether children should be removed from unsafe households than with the future probability that they will need removal, and hence whether those households might be reconstituted as foundations of human capital in the future. For the investor, then, SBBs permit bets on these probabilities. In their formal operations, SBBs generate a metric which will allow investors to diversify their risk portfolio by trading on the anticipated but convertible risks of social volatility. This risk is situated alongside the risks of equities and securities as part of an asset portfolio.