Keohane, Capital And The Common Good by Brenda Jubin Capital and the Common Good: How Innovative Finance Is Tackling the World’s Most Urgent Problems (
Sometimes, even when there is agreement that a project is pressing and that money should be allocated to it, traditional public and philanthropic funding is insufficient. In addressing major challenges, “our aspirations” may be “deeper than our pockets.”
We have witnessed a horrendous example of how financial engineering, by creating deceptive financial products, can encourage people to let their aspirations outstrip their means. But if financial innovation can get the world into serious trouble, innovative finance can help solve its problems. With “a kind of creative and ‘visible hand’ … that corrects for market failure and provides for the public good,” innovative finance can be a powerful social force. What is new here is “not the engineering, but the application.”
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In Capital and the Common Good: How Innovative Finance Is Tackling the World’s Most Urgent Problems (Columbia University Press, 2016) Georgia Levenson Keohane looks at climate change, healthcare, financial inclusion and access to capital, disaster finance, and U.S. community and economic development.
Innovative finance is definitely not charity. Firms that engage in innovative finance expect a return on their investment. For instance, LeapFrog, a private equity firm, has invested in “companies providing insurance, savings, pensions, and payment services to customers earning less than $10 a day. According to the company, the current portfolio showed a 40 percent increase in operating revenue and a 39 percent rise in profitability in 2013.” Admittedly, these figures aren’t especially meaningful in isolation, but I assume that LeapFrog is, as they say, doing well by doing good.
Keohane gives example after example of how finance can be applied creatively for the public good. For instance, “an expert in securitization who translates future development aid pledges into vaccines today; an entrepreneur who turns a mobile phone into pay-as-you-go solar electricity; the conversion of pay-for-success contracts from bridges and roads to affordable housing, early childhood education, and maternal health.”
This book may not be an antidote to the constant barrage of attacks on the financial industry, but it shows that finance can be, and often is, allied with the interests of the public good.
Capital and the Common Good – Description
Capital and the Common Good: How Innovative Finance Is Tackling the World’s Most Urgent Problems by Georgia Levenson Keohane
Despite social and economic advances around the world, poverty and disease persist, exacerbated by the mounting challenges of climate change, natural disasters, political conflict, mass migration, and economic inequality. While governments commit to addressing these challenges, traditional public and philanthropic dollars are not enough. Here, innovative finance has shown a way forward: by borrowing techniques from the world of finance, we can raise capital for social investments today. Innovative finance has provided polio vaccines to children in the DRC, crop insurance to farmers in India, pay-as-you-go solar electricity to Kenyans, and affordable housing and transportation to New Yorkers. It has helped governmental, commercial, and philanthropic resources meet the needs of the poor and underserved and build a more sustainable and inclusive prosperity.
Capital and the Common Good shows how market failure in one context can be solved with market solutions from another: an expert in securitization bundles future development aid into bonds to pay for vaccines today; an entrepreneur turns a mobile phone into an array of financial services for the unbanked; and policy makers adapt pay-for-success models from the world of infrastructure to human services like early childhood education, maternal health, and job training. Revisiting the successes and missteps of these efforts, Georgia Levenson Keohane argues that innovative finance is as much about incentives and sound decision-making as it is about money. When it works, innovative finance gives us the tools, motivation, and security to invest in our shared future.
Capital and the Common Good – Review
Capital and the Common Good shows we are living in a time where financial tools can expand to solve some of the world’s most vexing problems. This book is packed with information and inspiration. Robert J. Shiller, Nobel Laureate in Economics)
Georgia Levenson Keohane weaves together case studies from around the globe that illustrate the immense potential of market mechanisms to more effectively use public, philanthropic, and private sector funds to address the world’s seismic challenges. Capital and the Common Good should be read by policy makers, philanthropic funders, and private investors alike?anyone looking for practical approaches to improve outcomes on the pressing issues of our day, from climate change to public health to economic inequality to urban revitalization. (Robert E. Rubin, cochairman of the Council on Foreign Relations and former U.S. Treasury Secretary)
Development assistance and philanthropy are vital resources in the campaign to solve the world’s big developmental and social issues. But they are not enough. There has never been a greater need for innovative finance to meet the scale of economic and social disparities. In this exceptional work, Keohane shows us how we can make capitalism work better for all. (Philippe Douste-Blazy, under-secretary-general and special adviser on innovative financing for development, United Nations)
Keohane shows how market-based solutions can be applied to some of our most pressing global challenges through public-private partnerships. She does an excellent job of bridging the world of academia, finance, philanthropy, and policy, providing examples of some of the most impactful partnerships. (Sonal Shah, executive director, Beeck Center for Social Impact & Innovation)
With the wave of some visible hands, innovative financiers are turning their skills and tools to poverty, global health, and climate change. Keohane dives into this work with relish, detail, and insight?guiding us deftly through the complex world of impact investing. (Sheryl WuDunn, Pulitzer Prize–winning journalist, author of A Path Appears and Half the Sky)
Keohane is an engaging writer, a strong storyteller, an incisive and expansive thinker, and has, in this book, provided an unprecedented collection of innovative finance approaches for social impact. (Ben Mangan, executive director, Center for Social Sector Leadership, Haas School of Business, Berkeley)