Big business? Big government? To deliver social change, we need a third way
- Neither big government nor big business is capable of addressing the social fallout from neoliberalism – rising inequality, climate warming, populism and polarisation
- Social enterprises can deliver true change, but they need private-sector know-how to tap funding from stock markets – to create social equity markets
For too long, we have been told the choice is the state or the market. Former US president Ronald Reagan famously said: “Government is not the solution to our problem. Government is the problem.”
Together with former British prime minister Margaret Thatcher, he launched the global shift towards free-market fundamentalism. This was a right-wing reaction to the endless fiscal deficits and inflation generated by left-wing Keynesian economists’ preference for government intervention to solve market failures.
Neoliberal free-market ideas have, in effect, pushed for bigger governments in thrall to big businesses and huge vested interests. This sparked forces of polarisation since the 1 per cent benefited more than the 99 per cent. Guardian columnist George Monbiot argued that neoliberalism’s failures led to disenfranchisement and a feeling of wanting to go back to old times that opened the door to fascism.
So what is the alternative to big business or big government? Historically, we have had social institutions to deal with the excesses of the state or markets, highlighting the importance of charitable work.
When the social contract is broken, in the sense that the state is no longer delivering essential public goods and services, or failing to protect the masses from raw capitalist greed, then communities organised to help themselves.
Social enterprises are non-government or for-profit organisations that try to provide public goods not provided by the state or big business.
Driven by the young, social enterprises are beginning to make waves in climate action, gender, poverty and social injustices. But their impact has been limited because they lack know-how and talent, funding and trust/branding.
The hard reality is that the best talent for organisation, know-how and access to funding is with for-profit corporations. Their employees may be best positioned in their spare time to help micro, small and medium-sized enterprises (MSMEs) become more effective in delivering social projects that enable real change at the frontiers of climate action or social justice.
Social finance is defined as the network of processes, decisions and institutions that finance the production of public goods with private-sector participation. But that network does not exist because MSMEs are often too small and weak to access the talent, funding and branding/trust that donors (state, business or large charities) demand.
Similarly, private equity/venture capital (PE/VC) firms have the technology, know-how and funding to “coach” good companies to list or raise capital for profit. So why can’t there be PE/VC firms that use their portfolio of MSMEs to decide which have for-profit potential, and which can best be groomed in their not-for-profit social objectives?
A third way is technically feasible. All it takes is some courage to think and act out of the box.
Andrew Sheng writes on global issues from an Asian perspective