Sunday, June 24, 2012

Social Investments: Capitalism With A Conscience?

Given that the West faces a somewhat inevitable economic “lost-decade” in the foreseeable future with increasing unemployment and mass financial inequality and fiscally bankrupt governments, will social investments be the solution? 

By: Ringo Bones 

Maybe it was the dire warning put forth by Big Society Capital chair Sir Ronald Cohen during the BBC’s Hard Talk interview back in May 10, 2012 that got me worried about the prospects of Western capitalism in the foreseeable future. Especially given that Western capitalism, in general, usually don’t with the social consequence of its day-to-day activities in order to make a profit. Given a sobering outlook, will social investments offer a more ethical – and hopefully a more profitable – rework of “traditional” Western-style capitalism? 

At present, most tenured financial pundits see social investments as nothing more than mere charitable tax breaks that only boost a typical corporation’s public relation’s standing as opposed to genuinely adding tangible profits to its bottom line. But can it be tweaked to make traditional style Western capitalism economically viable again for the rest of the 21st Century? 

A lot of successful persons who recently made it big in venture capitalism and investment are quite hopeful that social investments can be made to work in today’s uncertain economic times. Sadly, excesses often made by Western capitalism that lead to the 2008 Global Credit Crunch have still haven’t been dealt with yet. Bank executives with ridiculous risk taking are still awarded exorbitant bonuses by their overlords whenever they make short-term profits. And taxation schemes in most Western countries are for from progressive. Economic gains by awarding tax breaks to the richest 1% can only take a typical sovereign country’s GDP so far. 

Sadly the measure of entrepreneurial risk of doing social investments / social good, at present, is more perceptional and hearsay – rather than a genuinely mathematical and scientific risk assessment. And an overwhelming number of elected governments in the West are yet to make a sense of obligation for social investments that would put a dent on the growing mass inequality between the richest 1% and the rest of the population. Social investments have the most potential to improve folks mired in poverty. 

And the time is nigh to improve Western economies because most of the world’s economic activity has been geared on the paradigm that the Western economy had been growing for 3% per annum for 15 years before the Subprime Mortgage Crisis of September 2008 almost threw everything into haywire. The Western economy’s prospects for a “best-case scenario” in the foreseeable future would be an annual growth of 1% assuming Western capitalism does its business in the same “business-as-usual” manner. Can social investments improve this growth outlook?


April Rain said...

Social investments - also known as social investing / Socially Responsible Investing (SRI) or sustainable, socially conscious, "green" or ethical investing is any investment strategy which seeks to consider both financial return and social good. Given the definition, is billionaire Wilbur Ross a "social investor" given that he used 1.8 billion US dollars of his own money to "bail-out" distressed banks since the 2008 subprime mortgage crisis?

Ringo said...

I'll check if "distressed asset savior" Wilbur Ross is currently offering socially responsible alternatives to investing our pension funds in socially irresponsible crude oil / petroleum companies.