Want to solve inequity? Support social business creation.

Social innovation to bridge the wealth divide lies at the heart of smart government policy. This by no means is a panacea for solving the rising inequality mentioned by Thomas Piketty in "Capital in the 21st Century"(Greenblatt et al 2014). In fact, it is quite difficult to find a balance between government involvement and the free market. As referenced in my last posting, a method for doing so can be through Social Impact Bonds. This provides part risk mitigation and part incentive structure for social entrepreneurs. Funding social ventures is an alternative for directing tax revenue and will be explored more in the post. 

How should investment be made in social ventures? One way is to start in generation of new ideas and people into the sector. According to the Center for American progress, creating a "pipeline of future entrepreneurial efforts in the critical non-profit sector" should be the goal of the current administration (Jolin 2007). This idea was undertaken by the Obama administration and the creation of the Office of Social Innovation and Civic Participation. This office created sources of revenue and support for social entrepreneurs that sought to address the challenges faced by America. One of the ways that this was accomplished was the creation of the Social Innovation Fund which, "makes grants to social sector intermediaries"(Greenblatt 2014). This represents a means of directing funding toward problem solvers instead of relying on the government as the soul problem-solver.

What are other places we could direct government funding? Social support programs such as a basic universal income could be an alternative instead of funding the social innovation fund. By giving all persons who fall under a certain income level a basic income we could ensure they are able to live until they find work. This does not solve the problem of how do we empower small business, which is the best way to bridge the gap between the poor and the 1%. Yes, giving people a basic income is a sufficient means of ensuring they can survive that month; however, it doesn’t provide them a way out of poverty. Rather it makes them dependent on the basic income. Creating systems that enable more people from the bottom of the income ladder to open small businesses would serves as a strong means for empowering them out of poverty. 

In summation, the goal of government should be to encourage business especially those that are socially minded. This can be accomplished by designating grants for businesses that address social inequity and focus on ventures that serve the end stakeholders. As mentioned in an earlier posting by Bob, the impact is just as important as the bottom line. The role of the government should be in rewarding enterprises that focus on this mission as well as the sustainability aspect. In doing so inequality between the income ladder can be addressed and social businesses can be started by those at the lower end of the pyramid. 

References:

Greenblatt, Jonathan. Tyson, Laura. "Opportunity for All and Social Innovation: Obama's Policy Agenda", New York Times. 2014.

Jolin, Michele. "Investing in Social Entrepreneurship and Fostering Social Innovation". Center for American Progress. 2007.