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Luke's Reviews > The Beautiful Bailout

The Beautiful Bailout
by Shaun Loney
Luke's review May 20, 2019

Shaun Loney’s book The Beautiful Bailout, sheds light on problematic thinking by governments. He argues governments need to think more like businesses. This doesn’t mean their job should be to make money. It means they need to think about what they’re getting in return for the money they spend. It’s unfortunate that there is so much focus today simply on how much governments spend. Loney points out there’s a big difference between reactive spending to manage problems (spending on prisons, policing, the justice system, health care for preventable conditions, social services, welfare, energy for non-retrofitted buildings, climate change adaptation, subsidies for the distribution of processed food in isolated regions, etc.) and proactive spending meant to solve problems (healthy food initiatives, affordable housing, recreation, culture, clean energy & retrofits, family reunification, electric buses, etc.). Loney points out that spending in this latter category can significantly reduce the high costs of problem management mentioned above. Loney also points out the contrast between the fact that, while work in “problem management” sectors is performed by government employees and managed by expensive bureaucracies, work in “problem solving” fields is often initiated by smaller, non-profit community-based social enterprises who can employ vulnerable populations such as those without high school education or with a criminal record, thereby further reducing the economic burden these people’s problems represent to taxpayers. The focus of much of his book is also on the realization that initial funding for the work of non-profits need not come directly from governments, but could rather originate from investors such as community foundations and pension funds, the only caveat being that some government savings resulting from the work of non-profits be transferred back to these institutions.

I am fascinated to imagine the difference in morale and motivation between the two categories of workers. On the one hand are those who manage problems that could have been solved but weren’t (prison guards, police officers, doctors & nurses, social services bureaucracy, social workers, and natural disaster emergency managers). On the other hand are those whose job it is to prevent most of the population from having to access services from this first group of employees in the first place (builders of affordable housing, artists, recreation & cultural programmers, small-scale farmers, green energy retrofitters, family reunification workers). We often talk about “job creation” but shouldn’t we favour the creation of those types of employment whose workers can feel good because they’re contributing to solutions and lowering governments’ costs?

This leads me to another issue that arises from this discussion: how did governments start spending so much on problem management in the first place? I believe part of the problem is our belief in the exports of natural resources to “drive” our economy. Indeed, economic boom due to prosperity in the oil sands, for example, makes governments think they have all the necessary money to fund the most expensive services. (How often are we told we have our oil economy to thank for our social programs?) Yet many of these “services” are actually reactive problem management programs. Since we have money for hospitals, prisons, policing, social services, and climate change adaptation, we don’t need to promote healthy eating, solve homelessness, focus on family reunification, provide jobs for people with barriers to employment, or transition to green energy. On the other hand, during times of economic recession, the danger, as governments cut spending across the board, is that any existing programs meant to solve problems and reduce costs are downsized along with the rest. This only exacerbate society’s problems, of course, making them harder (and more expensive) to manage in the future.

Since economic boom is shown to be a double-edged sword, maybe our focus shouldn’t be so much on supporting sectors that increase our GDP, but rather on the economic pay-offs of problem solving, self-sufficiency and community control. Loney points out that a child in care costs governments $80,000 per year, and that the cost of putting someone in prison similarly averages out to $80,000 per year (p. 47). A homeless person ends up costing $50,000 per year, and health care for someone with diabetes costs $20,000 (p. 48). On the other hand, Manitoba Housing has determined that “for every dollar of supports added to their social procurement strategy, that government received $2.23 back.” Such figures remind me of the times I hear that investing in the arts has a great economic multiplier effect (for example, https://www.thestar.com/business/2011...) or that spending on transit yields better economic returns than spending on car infrastructure (https://www.theglobeandmail.com/repor...).

So could a focus on community-based problem solving substitute for the traditional emphasis on support for “wealth-creation” sectors? Even if the overall economic “impact” were inferior, having fewer social ills would mean less need for economic “prosperity” to manage them in the first place. It could also mean less concentrated pockets of have- and have-not regions across the country, and a more even distribution of wealth. In his book, Loney points out that many foundations are keen to move their investments “away from areas such as the oil sands or questionable resource extraction projects” (p. 45). Is this not a sign that all of society could “profit” from a change in economic paradigm?