Federal Reserve Bank of San Francisco
In Karl Polanyi’s seminal work, The Great Transformation, he argues that it was a radical
departure for Western society in the early modern period to divorce land, labor, and
capital from their traditional values, turning them into commodities that could be
bought and sold.
The crucial point is this: labor, land, and money are essential elements
of industry; they also must be organized in markets; in fact these markets
form an absolutely vital part of the economic system. But labor, land, and
money are obviously not commodities….Labor is only a another name for
human activity which goes with life itself, which in its turn is not produced
for sale for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized; land is only another name for nature, which is not produced by man; actual money, finally, is merely a token of purchasing power which, as a rule, is not produced at all, but comes into being through the mechanism of banking or state finance. None of them is produced for sale. The commodity description of labor, land, and money is entirely fictitious.
Not long ago in Europe, and still in many places in the world today, traditional and
community values reigned. In those circumstances, laborers did not measure their time
by the hour and sell it to an employer, there were no real estate sales offices in the village center, and capital had yet to accumulate. (If Marx was right and capital was frozen labor, then the world still needed the nation-state and a modern financial system to play the role of the freezer.)
We may be on the edge of another period when we reintroduce community values to
the commodities of land, labor, and capital. In this issue of the Review, we explore how
both business enterprises and investment decisions can be infused with community goals—providing for those who are less capable of providing for themselves, promoting better health and stronger community fabric, and respecting the environment. Community development finance is already playing a supporting role in this evolution.
Kathy Brozek kicks off this issue and gives an overview of social enterprise, providing a
context and tools for understanding the entire spectrum of business enterprises—from purely profit-motivated on one end, to purely charity on the other. Kevin Jones also explores social enterprises, particularly in terms of how their social missions can survive all stages of growth, even an initial public offering.
Antony Bugg-Levine and John Goldstein provide an overview for what they term “impact
investing,” with an eye to how public policy, CRA-motivated banks, and individuals might
promote this category of investment. Lisa Hagerman and Janneke Ratcliffe explore how
we might better measure progress on community values in a given investment; sophisticated financial tools help measure profit, but these authors explore how to measure, in a meaningful and standardized way, the social and environmental good that comes from the investment. Saurabh Narain is also interested in measuring social and environmental outcomes and specifically shows how intermediaries—community banks and community development financial institutions—can provide the bridge from the world of global capital to the neighborhoods of need. Bruce Cahan also explores how a mission-oriented bank can be a useful intermediary between socially motivated savers and consumers and the larger economy.
Finally, our commentary section features a lively debate among leading thinkers in the
field of social enterprise and impact investing, including Jed Emerson, Dan Pallota, Michael Shuman, Don Schaffer, Penelope Douglas, and Carla Javitz.
After the near collapse of the world financial system, it is time to reflect on whether
social enterprise and investing might not offer some lessons for creating a more sustainable economy.
Mission Insurance: How to Structure a Social Enterprise So Its Social And Environmental Goals Survive Into the Future
Kevin Jones, Good Capital
(PDF - 112KB)
Exploring the Continuum of Social and Financial Returns: When Does a Nonprofit Become a Social Enterprise?
(PDF - 294KB)
Using High-Transparency Banks to Reconnect Money and Meaning
(PDF - 182KB)
Impact Investing: Harnessing Capital Markets to Solve Problems at Scale
Antony Bugg-Levine, Rockefeller Foundation, and John Goldstein, Imprint Capital Advisors
(PDF - 215KB)
Increasing Access to Capital: Could Better Measurement of Social and Environmental Outcomes Entice More Institutional Investment Capital into Underserved Communities?
Lisa A. Hagerman, College Institute for Responsible Investment, Oxford University Centre for the Environment, and Janneke Ratcliffe, UNC, Center for Community Capital
(PDF - 290KB)
NCIF Social Performance Metrics: Increasing Flow of Investments in Distressed Neighborhoods through Community Development Banking Institutions
Saurabh Narain and Joe Schmidt, National Community Investment Fund
(PDF - 303KB)
Reject the Reset!
Jed Emerson, Uhuru Capital Management
(PDF - 130KB)
Dan Pallotta, Pallota TeamWorks
(PDF - 60KB)
Local Stock Exchanges and National Stimulus
Michael Shuman, Business Alliance for Local Living Economies
(PDF - 74KB)
At the Crossroads Where Economic Development, Job Creation and Workforce Development Intersect Carla I. Javits, REDF
(PDF - 147KB)
Penelope Douglas, Pacific Community Ventures
(PDF - 89KB)
Could “Small Is Beautiful” Replace “Too Big to Fail?”
Don Shaffer, RSF Social Finance
(PDF - 178KB)
Download Full Review
(PDF - 1.26MB)
Community Development Investment
|The views expressed are not necessarily
those of the Federal Reserve Bank of San Francisco or of
the Federal Reserve System. Material herein may be reprinted
or abstracted as long as the Community Development
Investment Review is credited.