In this week's must reads, we have this report from Sonen Capital and KL Felicitas "detailing the financial performance of an impact investing portfolio." A team of authors including Cynthia Gibson, discuss the need for the social sector to apply multi-dimensional approaches to "wicked problems" such as poverty. This U.S. Trust report looks at the views of high-net-worth Americans on issues ranging from investment priorities to tax law. In the American Prospect, Monica Potts looks at the reasons behind the decreasing life expectancy of poor, white females. (The Boston Review also has a roundup.) Lastly, the American Enterprise Institute's Henry Olsen discusses the North-South, white working class divide and the political options of conservatives post-shutdown.
Not only do we create them, we elect them—just consider this 46 percent of folks serving in Congress are millionaires, according to U.S. News. These two editorial cartoons from Dave Granlund and John Darkow are a couple years old but worth revisiting as we contemplate the aftermath of the latest fiscal upheaval:
Cross-national comparisons suggest that inequality can literally undermine democratic institutions, perhaps because the very rich find them inconvenient. The political scientist Christian Houle finds that inequality is associated with an increased “probability of backsliding from democracy to dictatorship.”
Nobel winning economist Joseph Stiglitz in the New York Times discusses the larger consequences of growing inequality:
American inequality began its upswing 30 years ago, along with tax decreases for the rich and the easing of regulations on the financial sector. That’s no coincidence. It has worsened as we have under-invested in our infrastructure, education and health care systems, and social safety nets. Rising inequality reinforces itself by corroding our political system and our democratic governance… Some countries will be successful in creating shared prosperity — the only kind of prosperity that I believe is truly sustainable. Others will let inequality run amok. In these divided societies, the rich will hunker in gated communities, almost completely separated from the poor, whose lives will be almost unfathomable to them, and vice versa. I’ve visited societies that seem to have chosen this path. They are not places in which most of us would want to live, whether in their cloistered enclaves or their desperate shantytowns.
Meanwhile, in the Chronicle of Philanthropy, the MacArthur Foundation's Robert Gallucci argues philanthropy should do more to help fix our democracy:
Foundations, which often provide a lead for the nonprofit world, should be doing more. We should begin by strengthening the organizations that are already active, coordinating our efforts to have a greater collective impact, and speaking out clearly in defense of democratic values and norms. Beyond that, we can choose from an array of possibilities, such as voter education or research into the consequences of interest-driven public policy. We also call on our colleagues, both in foundations and at other nonprofit organizations, to look closely at how money in the political system is limiting progress in their important work on the environment, housing, education, and justice, to name just a few.
But a potential counter argument comes from The Nation's Amy Schiller as she discusses a recent Arnold Foundation gift to prop up Head Start during the emergency:
[P]hilanthropy is an under-recognized player in the trends that led to the shutdown in the first place: erosion of legitimacy and trust in public institutions, just as mega philanthropy became an ascendant political force. Though philanthropy is generally associated with symphonies, elite colleges, and hospital wings, the trend in recent years has moved away from more ornamental causes to ones that interfere more aggressively with core public institutions. The most visible example is the widely-criticized efforts by the Broad, Walton and Gates foundations in relentlessly pursuing disruptive, top-down corporate education reform. In a disappointing twist, the Arnold Foundation is among those megafoundations whose larger charitable ambitions fall squarely within the plutocratic agenda. Armed with a staff that includes a former chief of staff to Dick Armey and a Tea Party challenger to Utah Senator Orrin Hatch, John Arnold is a key player in the aggressive anti-government edge of mega-philanthropy. Along with the funding of education reform measures like charter schools, he has made one of his major causes reforming public pensions, including slashing benefits and moving funds under private management. The Arnold Foundation’s report on pensions suggested that states should “stop promising a defined benefit” to pensioners.
The NYT's Paul Krugman argues, so what if the shutdown's over, "we’re still on the road to nowhere" and these revolving fiscal fights are killing the economic recovery. A cartoon from Bob Olman seems to put it best:
The Economic Policy Institute's Josh Bivens, uses this chart to show that the so-called resolution has left an "extraordinary degree of spending-side austerity" measures in place:
A recent Gallup index of job creation shows the shutdown had a negative effect on hiring:
By comparison, Gallup's Job Creation Index suffered during the 2011 negotiations to increase the federal debt limit, dropping from +15 in June to +12 in September. But it regained most of those losses quickly, with the index back up to +14 by October. It took longer, nearly five months, for economic confidence to recover at that time. If the current situation follows a similar timeline, Americans' economic attitudes may not improve before Congress must act to avoid another government shutdown.
What's on the upswing? Low-wage jobs according to the New Geography blog, middle wage jobs not so much—check out this chart:
In a new addition to the technology kills jobs debate, Rick Wartzman in the American Prospect wonders whether the long held fears about automation have finally come to fruition:
In the future, “it is a safe bet that the human labor market will center on three kinds of work,” Massachusetts Institute of Technology’s Frank Levy and Harvard’s Richard Murnane write in “Dancing with Robots,” a report issued in June by the Washington-based think tank Third Way. The first is solving unstructured problems. The second is acquiring, making sense of, and communicating new information. Computers aren’t good at either of these tasks. The third is non-routine manual labor (like schlepping furniture), which also can’t be tackled by a computer. The first two will undoubtedly pay well. The third will not.
Meanwhile, Quartz looks at robo-baristas as a potential competitor to Starbucks. Boston College's Juliet Schor discusses the sharing economy, in which "people have begun to carve out new ways to gain access to income, goods and services" as jobs have begun to disappear. You also may be interested in Amazon's nearly impossible corporate ladder by BusinessWeek's Brad Stone. I would also like to include this comment on last week's Janet Yellen infographic on the economy from our new Facebook page (join the discussion). Aaron Matthew Subich writes:
My contention is that current fed policy is going to be disastrous for America because it's going to complete obliterate the middle class. Right now, it's nearly impossible to save your way into anything (as it should be with realistic interest rates at 7-8%). Meanwhile, banks lend money at 18-20% (credit cards) and make fortunes for those wealthy enough to own their stock. Same type of thing is happening in many, many other areas of economy. Meanwhile, wages are NOT increasing, and cost of living will continue to rise. Sadly, my observation is that the Fed is serving only the wealthiest of Americans, while providing "illusionary" incentives to the poor and middle class to acquire more debt, which will only serve to hamstring their efforts to improve their lives long term.
Over at Pioneer Post, Liam Black is back with another tongue and cheek letter to the young social entrepreneur. Here's what he has to say on the bravado in the social investing space:
My aim has been to bring new money and – perhaps as importantly – new players into the field. I want us to become the go to places for ambitious, socially enterprising innovators for investment, mentoring, supply chain access, impact assessment support and much more. The cash is the easy bit. The UK social investment space is messy, emergent, contested and contradictory. There has been too much social investment sizzle and nowhere near enough social enterprise sausage. And there have been too many eejits from the City sniffing around in their pinstripes displaying an arrogant stupidity, which makes me ache to slap their smug chops. We haven’t wanted to add to the hype so have been quietly building a pipeline of investments.
INSEAD's Ian Potter, meanwhile, discusses impact investing's scale:
Near term, we are entering a period that may well mark the end of the beginning. The industry is moving to focus on practical scale and execution issues. Second funds, established track records, exits with market returns, dialogue with institutional investors to understand their constraints, and the evolution of social metrics all give comfort that the sector is growing up. Looking ahead, an awkward adolescence can be expected: a period characterized by growth spurts, sensitivity and setbacks before moving into a more mature, settled state. On the other hand, it is not yet too late to dismiss the possibility that we will still be debating definitions in five years while stuck in a modest niche.
Global Impact has a new report out on corporate giving that might be of interest.
Over at RealClearPolitics, the Manhattan Institute's Diana Furchtgott-Roth takes exception to last week's NYT op-ed by psychologist Daniel Goleman, saying he "has presented no persuasive evidence that rich people care less than poor people." One big loser of the shutdown was the government's data effort, according to MarketPlace. Is Congress approaching CEO pay the wrong way? Michael Dorff in the LA Times says yes, because "enhancing disclosure is unlikely to have much lasting impact."