Turning the Key on social innovation

Geoff Mulgan worked on Tony Blair’s “third way” for seven years. He thinks that in the changed world that comes out of today’s big mess there will be a bigger place for social innovation. He will bring that message here next week.

Mulgan is one of a growing number of heavyweights who think the world — at least, the rich world — will not, upon economic recovery, revert to how it was before debt got big and trust vanished and the financial system popped.

London Times columnist Anatole Kaletsky in Prospect magazine has castigated a belief in rationality and efficient markets and reverence for mathematics as economics’ core. He says economics must “die or undergo a paradigm shift”.

Mulgan, also in Prospect, mused on “what capitalism might become on the other side of the slump”. Some in this country, including at least one big business boss, are musing similarly.

Why? Crises — economic slumps, wars, revolutions (failed or successful) — open room for new thinking and lead to new ways of doing things.

Enter McKinsey alumna Justine Munro. She examined social innovation for the New Zealand Institute, which decided to stick to economics. She now heads the independently-funded Centre for Social Innovation. The centre is hosting Mulgan at sessions in Auckland and Wellington.

Social innovation is akin to economic innovation: it is the remaking of ways of defining and addressing social issues to improve opportunity and cohesion — from outside as well as inside the government. Munro’s definition is “the design and implementation of better ways of meeting social need”.

Forty years ago social democrats thought they had settled that question. But today’s (rich) societies are more complex, disparate and globally interconnected than those of 40 years ago.

The 1980s-90s economic reforms left greater social inequality and a demoralised stratum. The response in Britain was the “third way”, an attempt to marry market economics and “fairness”. Mulgan, who co-founded the influential British thinktank, Demos, before becoming Blair’s director of policy in 1997, was a key figure in that.

Labour’s Social Development Minister, Steve Maharey tapped into this thinking. Over time he and his department CEO, Peter Hughes, got the Treasury to accept that some social “spending” is actually an investment that produces a measurable return. He set up a government-funded social entrepreneurs scheme — but Helen Clark killed it after one entrepreneur used public money to study hip-hop.

The embarrassed government had learned the hard way that entrepreneurs take risks. Some do new things and make money. Some make mistakes, go bust and lose money.

Mulgan knows how to manage such entrepreneurs. He now heads the Young Foundation which does research, develops enterprises and new models of social service delivery, mostly in health and education, advises governments and helps local groups with organisational design, finance and growth. It has 60 staff and operates “from the very local to the global”. It is finalising a “social impact bond” which would enable investment in a project and then measure the return — for example, in savings to the government.

Mulgan’s parallel is science and medicine, which have well-established ways of getting to market from an experimental idea, through multiple testing, evaluation and scaling up. “Innovation methods are much more random in the social sphere,” he said in an interview. Governments’ ways of piloting new schemes to full implementation need refining.

He notes that some in business see big opportunities in education, health and the environment, which will play a bigger part in the economy of the future. He says in some countries (for example, Korea, China, some European countries) part of the response to the recession is to spend stimulus money where it will count in the future — for example, ageing and climate change.

And some countries are institutionalising social innovation. Britain is one. Mulgan advised President Barack Obama on setting up a social innovation office.

It’s the sort of idea that interests restless John Key. His instinct is to do things in non-traditional ways. Last year he mused briefly on a social venture capital fund.

Marry that to conservative Bill English’s belief (also Maharey’s belief) that the government needs to draw on a wide range of sources of ideas and initiatives, including from departments’ lower and local levels. English has taken an interest in Munro’s centre.

Then throw in the possibility of a “paradigm shift” after this crisis. Munro looks to have arrived at a time when companies, not-for-profits and the public are readier for new ways of doing social business.

And politicians? Lay your bets.

* In last week’s column I said Ramesh Thakur was the highest placed New Zealander in the United Nations before Helen Clark. I am told Jan Beagle, deputy director-general of the United Nations’ Geneva office, has a higher pecking order place than did Thakur.