“Ethical capitalism” in the city: Embedded economy or marketization? The case of social impact bonds

Abstract

ABSTRACT This paper offers a cultural political economy approach to efforts to advance the “social investment market” as a specific crisis management strategy in response to the economic crisis of 2008. Analyzing social impact bonds (SIBs), it looks at efforts to combine market mechanisms with new notions of public responsibility, and structures of accountability often described as “ethical capitalism” today. Three central claims are interrogated, both as forms of framing and resolving the crisis. First, the paper is concerned with SIBs’ approach to socio-economic polarization through the development of preventative services focused on creating “social impact.” Second, it focuses on their efforts to avoid exacerbating the state’s fiscal crisis by allowing for private investment in public services. Third, the analysis shows how SIBs intend to counter the economic problem of slow and uneven growth with its idea of creating “shared value” between society and investors. The text is based on empirical case research into two of the world’s first two SIBs, seeking to reduce prisoner re-incarceration in New York City and Peterborough, UK. It analyzes policy papers and 30 interviews conducted with policy actors, to reconstruct the SIB as an asymmetrical, contradictory, and provisional compromise between actors holding divergent policy agendas. Drawing on Nancy Fraser’s concept of “progressive neoliberalism,” it shows how SIBs combine notions of public responsibility with market-based structures of a profit-oriented economy, thereby limiting the effort to re-embed the economy in society. Connecting empirical research to theory, it describes a complex process of negotiation on the conflicted terrain of city politics, between efforts to extend market governance on the one hand, and those initiatives seeking to overcome it, on the other.