If Cameron’s “Big Society” is a call to arms and modern capitalism the front-line in rebalancing social and financial agendas; then we are still mobilising ourselves no better than eager freedom fighters. Quixotic vengeance and impassioned goodwill without a coherent plan of action will not achieve the reforms we require. Our growing army of the willing needs strong leadership, a substantive increase in capital resource, to be better coordinated, the ability to harness dissent, the flexibility to deal with the unknown, and the best action plan we can conceive – the JenLi Manifesto is the arsenal for such a plan.

Thatcherite-Reaganomics and the Efficient Market Hypothesis have been satisfactorily debunked by the events of the 2007-09 financial crisis; there is now an emerged global consensus that we need system change – Mervyn King (Governor of the Bank of England) acknowledged this in no uncertain terms: “Of all the many ways of organising banking, the worst is the one we have today.”

What will the new order look like? Should we start from scratch or consult our dusty copies of Das Kapital? Forward thinking economists rightly argue for a strategic recalibration of capitalism towards a blended economy, one which rebalances social and financial agendas and where impact investing becomes the norm not the exception. We require a resurgence of philanthropic capital to an extent that has not been seen since Victorian times – whoever pays the piper calls the tune. This can be done, the capital can be attracted and it can be leveraged, the JenLi Manifesto describes a model for doing it.

Successful business models of the future will be flexible and adaptable within an economics paradigm of increased uncertainty and unpredictability, and the models won’t be as conveniently polarised as they were in the past. The blended economy will see the Third Sector take on many attributes of the Financial Sector, and the lines between the two sectors will begin to blur as the latter begins to embrace principles which have seemed hitherto counter-intuitive, such as:

• prioritising long-term value creation over short-term zero-sum gains;
• accepting that imperfect and asymmetric information exists within markets and that it has a bearing on real risk;
• acknowledging that investment decisions are often irrational;
• that the real worth of money is relative and subjective;
• and that the private sector, if left to its own devices, inhibits not encourages competition by seeking to cannibalise competitors through conglomeration and a “survival of the fittest” ideology.

Many will find this provocative, it is.

An Urban Context

80% of the UK population lives in urban areas and in many neighbourhoods this means living cheek-by-jowl with deprivation, poverty, inequality and its attendant problems. We know that these problems escalate into conflict if they are not tackled at source; fortunately, we also know what to do about this conundrum, so we do not need to wait for history to repeat itself.

There are three ingredients which are essential in turning declining neighbourhoods into vibrant and self-sufficient communities:

1. Economic stimulus and the promotion of local enterprise;
2. Strategic capital projects such as enabling infrastructure and public realm enhancements; and
3. Social programmes designed specifically to tackle local problems.

Success requires a holistic plan of action to be in place over many years, if not decades, to properly deal with the intergenerational and compounded problems of multiple-deprivation.

Government spending cuts are not helpful, but the Public Sector alone cannot be expected to provide the silver bullet to remedy the problem, nor can the Private Sector for that matter. Both Public and Private Sectors are constrained by fiscal short-termism, the former by electioneering cycles and the latter by quarterly or annual financial reporting.

A New Partnership

When you bolt public and private sector together, you bolt together two things that pull in different directions, whereas if you put the Third Sector in the middle, it can marry the two sides – it can prioritise social outcomes and deal with commercial returns as a cost of capital.

We need a new partnership between grass-roots needs and big ideas; success will not come exclusively from a bottom-up nor top-down approach. We need a financial and organisational scaling device which is able to connect the capital seeking investment products of hundreds of millions on the one hand with the local and small-scale entrepreneurs, organisations and businesses on the other – these organisations will be at the heart of the economic engine for the creation of prosperity within our communities. Getting the greatest “bang for our buck” with the scarcity of financial resources needs a good plan. We need now more than ever the frugal coordination of funding and peoples’ efforts, to expand capital resources through leverage, and to properly direct all towards the areas of greatest need.

How can this be achieved?

Firstly, we must accept that we find ourselves in a low tax environment (when measuring Government’s access to taxable sources, not our own payslips), manifest by organisations and individuals efficiently and legally organising their finances to avoid tax. The horse called tax avoidance has bolted and no amount of new or punitive legislation will magic the return of money which has already departed for off-shore tax havens instead of into the Treasury’s empty vaults. Increased taxation is not the answer; however this capital can be attracted back to the UK through appealing investment propositions, so that it can be harnessed to work for the blended economy.

Secondly, the Third Sector (Big Society) must take its seat at the top table alongside the Public and Private Sectors within a tripartite partnership. For this to work, the Third Sector needs to be better coordinated and be able to deploy substantially greater sums of capital. Not only can the Third Sector rightfully take on this role, but it has a duty to. It can provide the precious missing ingredient by being the only sector truly able to focus on achieving long-term social and financial value.

Thirdly, there is a subtle difference between private capital and private sector; the former is a much broader pool of money and includes amongst others philanthropic, individual and family wealth. Private capital must be attracted to work as part of a blended economy for both social and financial outcomes. We should look within and beyond the UK’s borders and entice this money of its own volition, to put it to work within the Third Sector. One of the next financial innovations will be to leverage philanthropic capital within the UK, to use it to open the door to private investment capital and debt in order to harness substantially greater sums of capital for the long-term benefit of civil society, as well as delivering sustainable financial returns.

The convenient truth is that we can do it, we should do it now – the Big Society can deliver the capital projects and social programmes essential for the proper functioning of civil society.

To be continued… in Part 2 of the JenLi Manifesto