A “Soft” Financialization of Social Policy? Calculating the Value of Social Investments in the United States and Finland

A “Soft” Financialization of Social Policy? Calculating the Value of Social Investments in the United States and Finland

par Asa Maron, University of Haifa

Discutante : Anne-Laure Beaussier, CSO.

La séance du vendredi 26 avril se tient de 10h à 12h à la fois en présentiel à Sciences Po, en salle K.011 et en distanciel sur zoom. Si vous souhaitez y assister, merci de contacter Samia Ben.

Résumé : 

The process of financialization introduces financial ideas, logics and practices to non-financial and non-economic fields, yet little is known about the formation of expectations in non-financial contexts, and the factors that influence the variation of expectations. This study explores the formation of expectations in the context of the "social investment state" by studying new methods that enable policy actors to value social investments. The rise of the social investment policy paradigm represents a shift in the rationale and justification of social spending: from the neoliberal dictum that social spending for services and programs is undesirable, toward reframing specific forms of social spending as investments that are expected to yield future returns. Policymakers' ability to invest in new social programs requires a capacity to value such investments. The paper examines the development of such valuation capacities in the context of experimenting with the Social Impact Bond (SIB) model. SIBs are financial contracts in which private capital is invested in innovative social programs with governments providing a return depending on the degree of success. The production of SIBs requires policymakers’ intensive engagement, including many hours of studying financial rationales and techniques, and experimenting with them. As platforms of intense learning SIBs have broad policy implications.

According to the valuation approach, the work of valuation entrepreneurs and the methodology they develop and apply determine what is of value. We follow valuation entrepreneurs and their accomplishments in two very different states: the United States and Finland. We ask how a financialized mode of valuation becomes re-embedded in the context of social policymaking? And what are the outcomes of this process in the United States and Finland? To answer these questions, the study analyzes textual sources (e.g. official documents, grey literature) as well as semi-structured interviews with key protagonists. We argue that the valuation of social investment represents a “soft” process of financialization leading to hybrid outcomes. In the context of financial diffusion, policy actors adopted a "Return on Investment" approach. Demonstrating non-financial professionals’ capacity to advance financialization from below, remote from financial markets, is an important contribution. And yet, the financialization process remains partial. The selective adoption of financial conventions demonstrates the path-dependent role non-financial fiscal state logics continue to play in states' calculations of social investment.

The study shows and explains variation in the valuation of social investment in the US and Finland by showing how different valuation methodologies were constructed and legitimized in each institutional context. In the US, the valuation of social investment developed with an over emphasis on statistic rigor, failing to value plausible returns in the long-term future. Moreover, the calculation of return on social investment was limited, considering only cost-savings for the Federal government, and thus ignoring and devaluing potential gains to state and local governments. In Finland, valuation methods included (and thus gave value to) the long-term future, and paid greater attention to intangible outcomes for actors other than central government. Although the calculated value of social investment remained committed to the state’s fiscal interests, the financialization of valuation went further in Finland at the expanse of neoliberal commitment to unburden the fiscal state which was prominent in the US.