TINA – Part 4

Q&A
Following are concerns and questions that have been raised by readers in previous postings about public investment as alternatives to capital.

Democratic Accountability
It’s been asked whether public investment system would be democratically accountable. The CDC’s and the CDFI’s would be accountable to the local and community level along with the state in some cases. The national social investment system would be established by democratic mandate through Congressional action. I would expect that the social investment banks would operate independently much like the Federal Reserve. Currently Congressional oversight is to, “clearly establish a viable objective for the Federal Reserve and to ensure the Central Bank is fully accountable for achieving this goal.” http://www.house.gov/jec/fed/fed/fed-impt.htm Democratic accountability of the social investment system would be similar.

Should Social Investment be Profitable?
Another question that was asked was whether the public investment system would be required to make the best possible use of the tax money. Without a doubt the social investment system would be expected to meet the requirements of its mandate, which would be to insure universal employment through the ongoing creation of profitable cooperative and family-owned enterprises.

At one point that questioner used the P-Word: profitable and whether it would need to “show evidence of actual growth.” In answer to profitability the social investment system would not operate to make a profit in the same fashion as business. Instead, the success of the public investment system would be in whether it’s meeting its mandate. If it wasn’t then the leadership would be replaced with those who would insure that the mandate was met.

Risk of Bureaucratic Control
It was also asked whether public investment would leave control in the hands of the politicians. The concern being that the system might cause the only way to get investment would be through backdoor politics. This concern is another reason why the social investment banks would need to operate independently plus the reason for the existence on the CDC’s and CDFI’s.

Availability of Investment
Another questioner pointed out that capitalism is a good way to make money available to companies. I would point out that actually most of the money in the system moves through the Secondary Market, which means it moves between the shareholders without actually reaching the companies. It’s the Primary Market, which involves direct investments with the businesses, that provides money to businesses. Take venture capital, for example, which is important for the creation of new enterprises. In 2007, according to a report by PricewaterhouseCoopers and the National Venture Capital Association, there was $29.4 billion invested into business ventures by venture capitalists. The social investment system along with the CDC/CDFI would be more than sufficient.