The obsession with data, measurement, and testing has created perverse incentives for teachers and school administrators, resulting in an unprecedented epidemic of cheating on standardized tests.
We know Head Start saves government at least $7 for every dollar spent on it. If Goldman and Morgan Stanley have their way, we’ll soon have to pay them and their clients a portion of those savings for having replaced taxpayer funding for such programs with private capital investments.
Let’s call it what it is: private profit crowding out a public good.
Goldman Sachs and Morgan Stanley now see new profit centers. While they try to reduce or completely avoid the taxes which they and their clients might otherwise pay, they both have launched funds for investors to make a profit by replacing government funding for nonprofit programs.
This shouldn’t be a surprise.
A couple of decades ago, when the nonprofit sector approached 5 percent of GDP, it was clear that the market would eventually find ways to peel off the potentially more profitable areas of charitable activity. First it was nonprofit health care, with everything from medical insurance programs to hospitals and clinics being converted to for-profit status. Next came higher education — colleges, universities and vocational schools were acquired by, or started up by, for-profit corporations.
While these were by far the largest, most obvious and lucrative targets for profit-seeking investors, one had to wonder how long other program areas such as human services and anti-poverty efforts would be spared the seeming imperatives of capital. One need wonder no longer.
Goldman, with the blessing of Bloomberg Philanthropies, pioneered the Social Impact Bonds concept here in the United States and is already asserting, without any evidence, that it will achieve positive outcomes for the participants in a municipal prison-based nonprofit program designed to reduce recidivism among the city’s juvenile offenders — and save the government money.
There is some truth in their statement... they are pioneers in the creation of 'an innovative and emerging financial instrument'.
We must remember Alan Greenspan praising new financial instruments: "But recent regulatory reform, coupled with innovative technologies, has stimulated the development of financial products, such as asset-backed securities, collateral loan obligations, and credit default swaps, that facilitate the dispersion of risk.
Conceptual advances in pricing options and other complex financial products ... The new instruments of risk dispersal have enabled the largest and most sophisticated banks, in their credit-granting role, to divest themselves of much credit risk by passing it to institutions with far less leverage. Insurance companies, especially those in reinsurance, pension funds, and hedge funds continue to be willing, at a price, to supply credit protection.
These increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter-century ago..." Yes, all true, right up to the collapse...