What the Changing Government Means for Social Innovation

What does the historic election of Barack Obama yesterday mean for the social sector?  It may be too early to tell, but we can get a sense from his policy platforms and interviews.  Both McCain and Obama spoke about social entrepreneurship during the campaign and supported new ideas like a social innovation fund and national service.  It was exciting to see these new ideas taking hold in mainstream politics and the mainstream media.

So, on the day after such an historic election, let’s speculate on what this changing of the guard might mean for social innovation.

First, Obama is a big proponent of national service. He wants to get every citizen involved in serving their country and has said, “As President, I will ask for the active citizenship of Americans of all ages and walks of life.”  His ideas for expanding national service, include:

• Growth of current national service programs like AmeriCorps and the Peace Corps.
• $4,000 tax credits to college students in exchange for 100 hours of community service.
• Expanded programs for engaging retirees in community service.
• 50 hours of required community service from middle and high school students each year.
• Expansion of YouthBuild, which helps at-risk kids complete high school while building affordable housing in their communities.
• Allocation of 25% of college work study funds to community service projects.

He is also interested in creating incentives for social innovation.  As he said in Time Magazine , “We need to invest in grass-roots ideas, because the ‘next great innovation’ usually doesn’t come from government.”  He wants to:

• Create a Social Investment Fund Network to use federal seed money coupled with private investor capital to spur ideas that solve social problems.
• Create a new agency within the Corporation for National and Community Service to increase the capacity and effectiveness of the nonprofit sector.

Indeed, McCain and Obama were already working on some of these ideas when they co-sponsored the Serve America Act this past September.  The bill would create more AmeriCorps-like volunteer bodies to focus on the country’s most pressing problems (education, environment, etc.).  It would also create a commission to explore how government, nonprofits and the private sector can work more closely and effectively together.  And most interesting, it would create venture capital funds for the nonprofit sector to stimulate social innovation.  The bill is in committee right now and who knows where it will go from there, but since it mirrors much of Obama’s platform on service and the social sector, when he becomes president perhaps it will have a better chance of passing.

The service aspects of his platform are interesting and exciting, to be sure.  But what really excites me is the idea of a Social Innovation Fund that couples government and private money to seed solutions in the social sector.  I don’t know that we have ever lacked ideas for solving our social problems, but the real hurdle has been capital.  The social sector is sorely undercapitalized.  There are amazing programs out there nationally and here locally in Austin and the Southwest region.  But they are only able to grow incrementally because they lack the growth capital that is available in the for-profit side.  Any entrepreneur will tell you that it takes money to make money.  The same is true in the social sector:  it takes money to create real, lasting, sustainable change.  But nonprofits cannot create that change through incremental donations.  We need social venture funds with significant capital that can be smartly invested in programs that work.  Those investments ($100K+ over 3-5 years) will allow these programs to grow to scale, have broad and deep impact and really start to solve some of the toughest problems facing our country today.

Can you imagine the impact if an Austin nonprofit that is changing outcomes could scale their program?  Take a program like College Forward.  They could apply for and receive significant growth capital from such a fund.  They could take their program, which keeps students from dropping out of high school and moves them on to college, and expand it throughout Texas, throughout the country.  Instead of providing opportunities and futures to just 900 kids, as they do now, they could reach 9,000 or 90,000 kids.  They could transform a state, a region, a country, a generation.  That’s powerful.  And growth capital is how they would do it.

It will be interesting to see what a change at the top means and whether it will trickle down to the social sector nationally and here in the Southwest.  I’ll be watching closely.

Tags: Barack Obama, College Forward, Funding, innovation, John McCain, Nonprofits, Serve America Act