The recent economic crisis and mounting budgetary constraints have put severe pressure on social spending, reducing fiscal space for investments in high-quality social services. Given these pressures and in response to a demand for a more ‘efficient’ use of both public and private resources, many studies have thus begun to focus on alternative sources of funding for welfare provision, including ‘impact finance’ tools (McHugh et al. 2013; Dowling, 2016).
In several European countries, some banks have launched social bonds to address social issues affecting targeted vulnerable groups or to finance non-profit organizations and social innovation projects. In the same vein, even more complex impact finance tools, such as social impact bonds (SIBs) have emerged. SIBs are pay-for-success schemes used to raise financial capital to be invested in social services or projects delivered through partnerships among investors, public administrations and private providers, both for-profit or not-for-profit (Bolton and Saville 2010; Cohen 2012; McHugh et al. 2013; Stoesz 2014; Dowling 2017; OECD 2015, 2016). The financial return of SIBs depends on social outcomes achieved, resulting in generating profits for the risk-taker, namely the investors.
In my article, I analysed these processes in the United Kingdom, France and Italy, three countries that have been differently subjected to austerity constraints and pressures to expand the range of private resources towards welfare provision. As a consequence of these changes, it is undeniable that there is a pressure towards increasing use of private capital and private investment to finance welfare services and social innovation projects. However, despite common pressures, there are essential differences in the national trajectories.
My argument is that these countries are moving towards different national trajectories of welfare financialisation. Two key issues of this emerging debate are mainly examined. Firstly, the convergence vs divergence issue, highlighting three distinctive trajectories, as the result of the interaction between the institutional constraints inherited from the past, the “generative” influence of the different budgetary constraints and the actor’s agency, namely the choices and the strategies pursued by the social actors, mainly the state. Secondly, the institutional mechanisms created in each country to solve the problem of finding alternative resources to public expenditure.
In my analysis, the UK trajectory refers to a social investment market in which pressures to reduce public spending are reinforced by a financial ecosystem able to provide easy capital to public authorities seeking new funding for social services otherwise unavailable because of the limits imposed by austerity measures. This neoliberal trajectory continues a financialisation trend routed in a macroeconomic regime whose main source of revenues is intermediated by the financial sector, as an autonomous industry detached from the real economy.
The French and Italian cases represent two further different trajectories. France is moving towards a social finance ecosystem regulated and intermediated from above by the central state through its own public financial institutions and mainly fuelled by private savings, which the state uses to channel additional long-term resources into the social economy. Italy is a different case. On the one hand, the great recession and the severe austerity measures have further undermined public spending, especially at sub-national levels, with local authorities being forced to do more with less resources. On the other hand, bottom-up financial initiatives, mainly funded by non-profit financial institutions (the bank-originated foundations), have emerged to mobilize private resources towards a wide range of welfare policies fields traditionally lacking in public intervention.
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