There are “wicked problems” confronting the Australian community, like homelessness, and domestic violence. Until now it has mostly been governments and community organisations that have taken the lead in tackling them. Can private corporations play a major role, not just in service delivery in these issues, but in actually solving them?
I had a cycling accident about a year ago and my partner came and picked me up from the side of the road and took me to the Emergency Department of the nearest hospital. This was on a Saturday morning and it was likely that most ED’s would not be too busy, but we still chose to go to the private hospital ED which charged us a fee. The reason? Because we knew that there would be little or no wait as I wouldn’t be competing with any car accidents or major trauma incidents (those go to the public hospital). We were right as I was being attended to within ten minutes of getting there. I was happy that the private company had seen a market for an ED service, had made a large financial investment, that I could turn up and get a service, and that I was paying a co-payment on top of what the hospital was billing to Medicare.
Does it matter who finds the solutions to wicked problems?
If you had just been made homeless would you want to be seeking a service in a “marketplace” where the organisation providing a service to you might be making a profit along the way. Would it matter as long as you got the help you needed?
What if that private company was now finding a way to find a lasting solution to homelessness because they had devised a way of attracting investment into affordable and social housing. Does it matter who finds the solutions to wicked problems?
These are not just hypothetical musings. Governments and Community Organisations are clearly indicating that they don’t have the resources to solve these issues, let alone provide sufficient resources to support people at risk. Is it time to more fully engage private corporations in solving wicked problems? What are the risks or benefits if we actively pursue this course?
the reality is that the private market has developed and built most of the housing stock in Australia
Now, the reality is that the private market has developed and built most of the housing stock in Australia. Until recent years it has been the “Great Australian Dream” to be in the process of owning your own home. It’s also been the dream of many private investors to make wealth from buying housing stock and placing it into the rental market. However, there has been increasing public debate as to how Negative Gearing and Capital Gains Tax are distorting the provision of rental housing stock, with financial support and encouragement by the Federal Government.
However, the current individuals or investment companies involved in the private rental market are all playing to their own financial advantage. There are no consistent price signals or drivers to ensure that rents are affordable or that the right mix of rental housing stock is being developed and brought to market. Those who support negative gearing will say that the tax incentive keep rents lower than they would otherwise be. However, there is also evidence that many of the investor mortgages are much higher than they need to be due to the investor competition at the time of purchase.
The Community Housing sector in Australia is obviously a growing not-for-profit alternative to the private market. Yet this is often taking up the space being vacated by the Government owned social housing providers. The Community Housing sector have plans to expand their role in the housing supply process, but it will be a long and risky process to be able to build up the collective financial power to be a lead actor in solving homelessness.
Across the developed economies there are financial incentive experiments occurring in the social service space in tools such as Social Impact Bonds, or performance based payments for achieving outcomes. Some examples have been occurring in Australia, such as those being run in NSW by UnitingCare Burnside and The Benevolent Society.
These trials have until now been relatively small and narrow in their design. However, it is likley that there will be more experimentation by governments in this type of approach as they increasingly restrict the funds being allocated to social issues. It appears that one of the advantages to government in these financial incentive experiments is that they can leverage private capital investment, lower their own risk exposures, and still have some control over what the program outcomes will be. In this way there are some clear signals by government to the private sector of what is valued by the community, and how much the government is prepared to pay for such outcomes. It could be that such mechanisms may provide the framework for innovative solutions to be explored and implemented – possibly in ways that have not been possible until now. Of course, governments could increase overall taxation rates – but that’s for another piece.
Are there any community organisations big enough and sophisticated enough to compete with a determined, well resourced private company
But if these trials get taken to a large scale it is quite possible that private corporations may want to be more involved in the solution finding and delivery part of the equation, not just in the financing arrangements. Is that ok? What if they have the right answers, and the right systems?
Are there any community organisations big enough and sophisticated enough to compete with a determined, well resourced private company that wanted to enter the social sector market? We have for decades now accepted the marketisation of the community sector. Is this what we will now reap? Are we about to hand over the innovation and control to governments and private companies?
I am being purposefully alarmist. This may be one possible future that gets played out across the developed economies in the next few decades. Of course, there are many other possible futures that we can help to create.
What’s your vision of the future and how we can solve wicked problems such as homelessness? What do we need to do now to build the future the way that we think it should be?