"A child's learning is the function more of the characteristics of his classmates than those of the teacher." James Coleman, 1972

Sunday, September 04, 2016

Social Impact Bonds: The Titans of Finance as the Altruistic Merchants of Schooling and the Common Good

“For its impoverished profit generating subjects, the SIB is the latest violent instrument of a mayor who is a darling of the financial elite, in a city that has long been a laboratory for austerity, and thus has been an epicenter for the most racially violent and draconian education reform policies” - On Chicago Mayor Rahm Emanuel’s Pre-K Social Impact Bond

On the Rockefeller Foundation website, president Judith Rodin asks, “How can innovative finance shift charity to opportunity?” Her answer: By unlocking “greater amounts of private capital to do public good” through impact investing. Rodin goes on to describe “two distinct new opportunities” that will facilitate this financial innovation: Social and Development Impact Bonds (SIBs/DIBs). SIBs and DIBs are characterized by financing where private sector investors provide up-front financing - via an intermediary - to nonprofit or public sector social service providers. These agreements are conditioned on governments (in the case of SIBs) or venture philanthropists (with DIBs) paying back the investor(s) - with interest - if or when the predetermined outcomes are achieved. If the desired outcomes are not achieved, the private investor will not recover their losses. DIBs are implemented in so called “developing” countries, largely in Africa. SIBs are the current impact investment instrument of choice in austerity plagued western nations. It is important to remember that bonds are debt instruments, while recognizing how SIB’s as so called “bonds” are, in essence, derivatives (otherwise known as swaps or bets).

In the era of neoliberal austerity, SIB investors exploit skepticism about the effectiveness of public programs and the narrative of “saving taxpayer dollars” to further the rationale to transfer public sector funds to the financial sector. Within this scheme, titans of finance are exalted as saviors (of those they dispossess) and the altruistic merchants of the common good. This allows SIBs to be offered up as a win-win intervention to resolve inefficiencies in social welfare programs and the deficiencies of populations who rely on them.

The ideology of white supremacy in the age of neoliberalism constructs a narrative of deficiency aligned with the ideological foundations of eugenics, in that Black, Brown and Indigenous people are biologically inferior and/or culturally deprived and thus entangled in a pathological “culture of poverty” of their own making; due to inherent laziness, poor judgment and bad choices. The narrative of deficiency suggests that Black, Brown and Indigenous people are in need of saving by superior and well meaning affluent white people, who attach racially coded deficit labels that identify entire groups of people as being “poor” or “disadvantaged” and “at risk.”

In the U.S., old and new social control instruments that work in tandem - education, social services, policing and incarceration - are rigidly imposed on those who carry the deficit label. These instruments operationalize disciplinary sorting mechanisms based on differentiated expectations of compliance and discriminatory standards of being in terms of schooling, employment, housing, social environments, etc.. These sorting strategies serve to determine who can be properly assimilated and effectively regulated from those who are deemed as disposable and thereby justifiably impoverished, segregated, criminalized, imprisoned, exploited and exterminated. The ideology of deficiency conveniently conceals the structural dynamics that have systematically subjugated and impoverished Black, Brown and Indigenous people over lifetimes and generations through the synergistic power structures of white supremacy, capitalism and settler colonialism.

Poverty and social inequity are conceptualized within this narrative of deficiency and further entrenches it within the hegemonic and material hardships of unfettered capitalism; and increasingly within the social control interventions being imposed by the state at the behest of the financial industry. Social and educational programs that are not steeped in the deficiency script are considered to be illegitimate and undeserving of funding and in turn feed the profit motive attached to social impact investing. More specifically, impact investing thrives on inequity and inequality, while more explicitly uniting the powerful beneficiaries and agents of government, financial investors and venture philanthropists - under the implausible premise that they can serve as benevolent brokers of equity and emancipation. This understanding is not meant to imply that government strategies in the U.S. have, or would, address these structural inequities in a meaningful way.

Established as performance and outcomes-based financing models (the benchmark of neoliberal interventions), social impact bonds (SIBs) are “pay for performance” contracts (or bets) fueled by financial incentives and rewards for service providers and private investors when predetermined and quantifiable outcomes (impacts) are achieved in “prevention” related projects. An SIB originates when a governmental body seeks to achieve specific social outcomes attached to a specific population within a given time period, prompting them to contract with a private-sector intermediary who will oversee the project to make sure the outcomes will be met. This intermediary proceeds to line up one or more venture philanthropies and financial institutions to cover costs upfront and then contracts with service providers who will implement the interventions. The intermediary - at times partnering with an additional project manager - also retains an evaluation advisor to monitor progress as well as an “independent” researcher who will determine if the outcomes have been met. If the intended outcomes are met, immediately and over time, the government repays investors the principal plus interest. If not, government does not pay investors back. A primary justification for SIBs from the government perspective is that the positive “social impact” will save taxpayers money in the long run by not having to pay for services down the road due to a “social problem” being prevented by the SIB. So far, SIBs have relied on a “collaborative financing” model to reduce risk, so that public, philanthropic, and private capital can share financial risks during this critical developmental stage of the SIB project. In their vital role of seeding infrastructural power of financial markets, venture philanthropy has a crucial role in nurturing the development of the global impact bond ecosystem.

Even before they were field tested, social impact investors have heralded SIBs as a winning strategy to address a range of inequity related “social problems.” Sir Ronald Cohen, otherwise known as the “high priest of money-making” and the “founding father of European venture capitalism” claims that the advent of the SIB in 2010 marked a turning point for investors in that:
Up until then, what you had was a world of socially responsible investing where everybody paid lip service to the fact that we shouldn’t do bad things. But we didn’t really have the ability to deliver positive social returns. With the advent of the social impact bond, the thinking began to reverse, I think in a really fundamental way; so fundamental that if Adam Smith were around today, he’d be talking not just about the invisible hand of markets but the invisible heart of markets.”
Originating in the UK in 2010, the first SIB program focused on reducing recidivism rates of adult prisoners in the Peterborough Prison, a private prison operated by the multinational corporation, Sodexo. By 2014, the SIB did not meet its marks and investors did not get a return on their investment. In 2015, the UK government cancelled the SIB for a more robust national program where the government contracted out recidivism prevention and probation services to public, private, charity and nonprofit service providers, who would be paid based on a ‘payment by results’ model. Writing in Outlook magazine, Silver and Clare report the SIB was “used to argue the case for the government’s ‘transforming rehabilitation’ agenda: payment by results contracting for the lion’s share of criminal justice service delivery.” Numerous SIBs have since been launched in dozens of post-industrialized nations.

The first social impact bond in the United States was launched at Rikers Island in New York City in 2012 with the goal of reducing recidivism among incarcerated youth. When it failed to meet its intended outcomes, its private investor, Goldman Sachs, exercised a convenient contract clause that allowed the bank to prematurely cancel the SIB, with Bloomberg Philanthropies insuring most of Goldman’s losses. During the same period of time as the Rikers SIB, a federal investigation of Rikers Island reported that the jail had a long-standing “Culture of Violence” against teenage inmates, over 90% of whom are Black and Latino. According to the New York Times, “the New York Department of Correction had systematically violated the civil rights of male teenagers held at Rikers Island by failing to protect them from the rampant use of unnecessary and excessive force by correction officers.” The outcomes of the SIB were tied to a treatment program known as Adolescent Behavioral Learning Experience (ABLE), which according to the Vera Institute of Justice, “aimed to break the cycle of reincarceration for adolescents in the prison by using Moral Reconation Therapy (MRT).” According to the MRT model, despite the structural violence inherent in the cultural political economy that persistently targets Black and Brown youth, or any existing mental health or addiction challenges, these teens only have themselves to blame for their life circumstances and incarceration. MRT tells them that it is their moral deficiencies that are to blame, and they therefore need to “learn there is wisdom in following rules,” being “loyal” and changing their core values by changing “how they think and act,” with a focus on “what is good for the community and the world.” Apparently the sadistic law enforcement and correctional systems that targets them and the investment banks that seek to profit from their suffering serve as the enlightened moral role models they need.

In October 2015, a Salt Lake City Utah preschool SIB was heralded by its investors to be the first successful SIB in the U.S. Through a $7 million investment from Goldman Sachs, J.B. & M.K. Pritzker Family Foundation and the United Way of Salt Lake City, the SIB financed the expansion of an existing and highly regarded preschool program. The SIB was aligned with the program's goal of reducing the number of “at-risk” children identified to be on a path to special education services in subsequent grades. According to the Philanthropy News Digest, Goldman claimed, “that of the one hundred and ten four-year-olds who attended preschools in the program during the 2013-14 school year that were identified as likely to need special education, only one required special education services in kindergarten.” This outcome also guaranteed the first of many large payouts for the notorious investment bank. “It was, in the vernacular of corporate America, a win-win: a bond that paid for preschool for underprivileged children in Utah while also making money for investors.”
A month later, several early childhood experts interviewed for a New York Times article reported that they saw a number of substantial irregularities in how the program's success was measured, leading them to believe that Goldman Sachs and the state of Utah were able to exaggerate the outcome of the SIB:
...even well-funded preschool programs — which the Utah program was not — typically have been found to reduce the number of students needing special education later by 10 percent or 20 percent, and rarely by more than 50 percent… For example, the program screened low-income three- and four-year-olds using a picture-and-vocabulary test known as the PPVT and labeled all those who scored below 70, a very low score, as being likely to require special education. According to nine early childhood education experts who reviewed the results for the Times, however, the PPVT isn't typically used to screen for special education, especially on its own, and there was little evidence for assuming that all children who scored poorly on the test — 30 percent to 40 percent of the children in the program, many of whom did not speak English at the time of testing — would require special education after preschool.
The NY Times article went on to report how “Early-childhood education experts said that the results from Utah should have been viewed skeptically from the start, just based on the amount of money being spent on the program… the preschool that the bank had paid for cost $1,700 a year for every student, or barely enough to cover the cost of part-time day care. Some of the children Goldman paid for were sent not to preschool but to a local daycare center or Y.M.C.A.

In the Times article, W. Steven Barnett, director of the National Institute for Early Education Research at Rutgers University claimed, “There are hundreds of studies of programs like this, and none of them find a large positive impact…”you have to spend real money to get results.” Ellen Peisner-Feinberg, a senior scientist at the Frank Porter Graham Child Development Institute reported, "to just assume that all these children would have gone to special education is kind of ridiculous." Peisner-Feinberg went on to claim, “you have to be sure you have very rigorous ways of measuring the impact to make sure that it’s legitimate in terms of the outcome you get… that didn’t happen here.” According to Clive Belfield, from Queens College in New York, “here they seem to have either performed a miracle, or these kids weren’t in line for special education in the first place.”

Prior to making the investment, Goldman Sachs could see that the methodology was leading significant numbers of children to be labeled as at-risk; and therefore increasing the number of children that could later be identified as avoiding special education. Ultimately, according to the Times,
When Goldman negotiated its investment, it adopted the school district’s methodology as the basis for its payments. It also gave itself a generous leeway to be paid pack. As long as 50 percent of the children in the program avoid special education, Goldman will earn back its money and 5 percent interest — more than Utah would have paid if it had borrowed the money through the bond market. If the current rate of success continues, it will easily make more than that.
With a series of SIBs under its belt, a Goldman Sachs representative declared in 2015, that SIBs “work best when you are working with evidence-based programs that have a track record that you can scale… [t]hey work better for scaling than for experimenting with new programs.”

In a December 2015 editorial in U.S. News & World Reports, Katharine B. Stevens of the American Enterprise Institute, defended Goldman Sachs against wrongdoing and instead pointed a finger at the field of education research by claiming, “The metrics questioned by the education experts weren’t rigged by the bank. They weren’t designed by the bank. They were designed and vetted by other education experts.” Stevens went on to point out, “In the $650 billion K-12 sector, experts rarely ask questions about the research base for education practices, much less resolve them. Indeed, the research base used for the Utah project’s payment metrics is as good as what’s used for most education projects.” Apparently, what Stevens avoids to point out is that within education reform markets, as with the emerging SIB markets (and efforts to intersect the two), the political and economic power interests of the various actors within them are one in the same and complementary. As has been proven time and time again in the world of capitalism and neoliberal education reform, the game is rigged.

Underlying the market-based narratives of SIBs is the notion that government wins, since it only pays for narrow programs and outcomes that more effectively reinforce systems of domination over groups of people believed to be inherently deficient and therefore exploitable. Philanthropic and financial sector investors win since they get a return on their investment while developing larger markets and while perverting the very notion of public goods. Drawing on the tenets of social efficiency ideology, SIBs serve as a data-driven method of eliminating waste in the development of innovative financial markets. SIBs are also said to make some investors feel better about themselves for making a “social impact” while others recognize their utility in generating some badly needed PR.

Since 2010, social impact investors have primarily focused their winning strategy on interventions attached to education, housing (homelessness), infant and prenatal health care, vocational training and recidivism. Despite having no track record of success - according to their own narrow and nefarious standards - proponents of SIBs continue to celebrate the existing failures, such as the Peterborough Prison and Rikers Island SIBs as successes stories to promote their ideological social mission. Even the Utah SIB, despite its “success” being exposed as fraudulent, continues to be promoted and replicated wide and far. As Rick Cohen of Nonprofit Quarterly puts it, “SIBs radiate the glow of a public/private panacea that might cure the dysfunction of government—even without evidence that they can do so.” When writing about SIBs sketchy track record in Nonprofit Quarterly in December 15, 2015, Pratt and McCambridge claimed: “The promotion stage assumed it would be successful and had a broad and influential group of supporters...plus a gaggle of professional consultants smelling a ripe financial opportunity. Still, the experimentation goes on, with advocates suggesting that detractors are merely sour social progress spoilers of a sort.” The myth that SIBs save governments money is also quickly being dispelled, most notably by one if its biggest advocates, the financial powerhouse McKinsey & Company, which has concluded that “this tool is a more expensive way to scale programs than if government simply contracted directly with a service provider.” In 2014, Kyle McKay, an analyst with the Texas Legislative Budget Board testified before the U.S. Senate Committee on the Budget about SIBs. In his final remarks McKay concluding that, “social impact bonds are expensive and risky” are likely to “distract governments from a more comprehensive, sustainable approach to improving public policy.” McKay goes on to claim, “Across a variety of policy areas, we have learned that measuring outcomes and using monetary payments to incentivize behavior change is difficult and often produces mixed results” and “there is no evidence to suggest that simply throwing investors into the fray will resolve the ongoing limitations and problems. Instead, they may very well exacerbate the challenges.”

Doing their due diligence as the purveyors of U.S. hegemony, the U.S. media are largely staying on script by exalting the virtues of SIBs according to longstanding mythological narratives. In referencing the Peterborough Prison SIB as a means to attach the spirit of SIBs to the ideology of American Exceptionalism, Jay Ambrose of the McClatchy-Tribune New Service, wrote in 2014:
...there’s ample room for optimism. While the methodology did not originate here [in the U.S.], it fits splendidly in with what we are as a people, our high-energy, imaginative, entrepreneurial, can-do spirit and charitable impulses that evince themselves in a multitude of ways. The possibilities for ultimately large achievement will surely tug on us. The most exciting of these possibilities? It’s that we will help people out of desperate circumstances, that we will become a society with less disadvantage, less crime, less unemployment.
The blatant construction and perpetuation of the myths attached to SIBs correspond with the duplicitous narratives attached corporate education reform policies. The fact that SIBs are unilaterally imposed at the behest of profit seeking elite on historically and systematically disenfranchised groups of people - without their input whatsoever - simply reveals the true intent of SIBs. As the New York Times put it in 2015, “Ultimately, the biggest promise of these social impact bonds... might lie more in their ability to impose discipline on government programs than in their promise to draw private money.”

A 2014 publication put out by the G8 (Group of Eight of the most powerful capitalist economies) titled Impact Investing: The Invisible Heart of Markets, Harnessing the Power of Entrepreneurship, Innovation and Capital for Public Good declared:
There is also huge potential in every country for government, as a ‘commissioner’ of social services and impact, to help scale social sector start-ups into organisations that deliver significant impact. The recent innovation of social impact bonds (SIB), initially in the UK and now in many other countries, could drive the development of a market in which government, philanthropic foundations and, perhaps, others can agree in advance to ‘buy’ specific social outcomes delivered by impact driven organisations. We set out proposals to accelerate the development of this market.
The most salient point made here is that through SIBs, governments and investors purchase outcomes. Of course these commodified outcomes, which are exuberantly being marketized and attached to the profit motive, rely on human suffering. With this in mind, understanding the fundamental market principles of supply and demand is critically important in understanding the true nature of SIBs. Similar to what is already occurring in the realm of predatory lending - debt and securitization - within the domain of SIBs, subjugated groups become assets to be pooled and assigned value based on being a "risk-free" or "risky” investment.

When one considers the initial SIB failures, why would powerful and savvy investors - who are allowed to play by their own rules everywhere else - not begin to hedge their bets or game this game? If they do not, the incentive to play the game is reduced, that is unless SIB markets are part of a larger strategy to operate like existing derivative markets, where layers of bets and counter bets are made. Or more so, based on the self-serving nature of financial investors and their established practices; why would SIB markets not operate like other derivative markets, especially when they offer faster and more profitable returns when compared to the longer-term and less profitable interest rate returns that are attached to SIB contracts? It is easy to deduce that this is already happening, where financial investors are making layers of side bets for or against SIB outcomes, similar to “interest rate swaps and “credit default swaps.” Additionally, since the success of SIBs are being determined by outcome percentages or the positive impact on a certain number of subjects, they are ripe for employing the derivative strategy of spread betting. A version of this appears to have happened with the Goldman Sachs exit clause (or parachute) with the Rikers Island SIB. SIBs are also well positioned for side betting when a “successful” outcome is overblown or deemed risky; or for the casino style gambling strategy where investors have a “house edge” that entails influencing outcomes or “stacking the deck” in their favor. This is what appears to have happened in Utah.

In the U.S, as with all neoliberal/financialized instruments, SIBs have overwhelming bipartisan support from state and federal Republican and Democratic lawmakers. In step with the nation’s governing design, lawmakers naturally continue to prioritize the interests of financial investors in their policy decisions, even when such decisions contradict the baseless rationales behind them. Similar to the proliferation of education reform policies, despite the continuous exposure of the fraudulent claims that are fueling SIBs, they are being propelled by all levels of government and throughout “civil society.” This is happening despite evidence based reasoning and calls for caution, like the McKay testimony before the U.S. Senate, where the Texas analyst referenced a Maryland study that claimed:
For governments facing revenue constraints for political or economic reasons, social impact bonds may appear to be the silver bullet for social services. However, the benefits may be based largely on wishful thinking. Yet the risks and costs to governments from engaging in this type of model are real, which is why an in-depth study conducted at the Maryland Department of Legislative Services led to the recommendation that the state not pursue social impact bonds.
In 2009 the Obama administration launched a neoliberal initiative called the Social Innovation Fund, which was a precursor to the federal SIB initiatives that were to follow. The fund’s “grantees create a learning network of organizations working to implement innovative and effective evidence-based solutions to local and national challenges in three priority areas: economic opportunity, healthy futures, and youth development.” In 2012, the Obama administration announced the federal government’s SIB initiative called Pay for Success, following a script that could have been written by Goldman Sachs or the Rockefeller Foundation:
As part of this Administration’s commitment to using taxpayer dollars effectively, we are employing innovative new strategies to help ensure that the essential services of government produce their intended outcomes. Now more than ever, federal programs must be measurably effective and designed to do more with fewer resources. Pay for Success is an innovative way of partnering with philanthropic and private sector investors to create incentives for service providers to deliver better outcomes at lower cost—producing the highest return on taxpayer investments.
The administration’s announcement went on to report that $100 million has been budgeted for Pay for Success to be distributed in seven program areas that include workforce development, education, juvenile justice and care of children with disabilities; through the Department of Education, the Social Security Administration, the Department of Justice, the Department of Labor and the Corporation for National and Community Service.

According to Elizabeth Lower-Basch from the Center for Law and Social Policy, “the Obama Administration has already carved out funding...in the 2014 and 2015 budgets” proposing “a $300 million fund at the Treasury to support state SIB initiatives as well as specific pay-for-success activities in the areas of job training, education, criminal justice, and housing.”

In 2016, the Obama administration took steps to attach Pay for Success to a funding competition, by embedding SIBs within the administration’s Social Innovation Fund. Together, these federal programs serve as a structural adjustment strategy, similar to Obama’s Race to the Top fund:
The 2016 Social Innovation Fund (SIF) Pay for Success (PFS) Grants Competition will provide up to $10.6 million in grants to eligible nonprofit organizations, including public or non-profit universities, faith-based organizations, and state and local governments (and other political subdivisions) seeking to advance and evaluate emerging models that align payment for social services with verified social outcomes. Consistent with the broader mission of the SIF, the PFS Competition intends to encourage the implementation of PFS projects in order to enhance the reach and impact of innovative community-based solutions in low-income communities.
The intention of this competition is to provide monetary incentives for “the right kind” of non-profit organizations to function as SIB intermediaries and logistical agents in the ongoing project of building financialized infrastructural power.

In late 2015, Republican Congressman Todd Young of Indiana and Democratic Congressman John Delaney of Maryland reintroduced the Social Impact Partnerships Act in Congress, while Republican Senator Orrin Hatch of Utah and Democratic Senator Michael Bennet of Colorado introduced companion legislation in the U.S. Senate. This promising bill will allow the Federal government to provide $300 million in support for social impact bond proposals for state and municipal governments nationwide. Reporting on these bills for The Hill, Greg Keesling declared, “Addressing societal issues is both a moral and fiscal imperative for our country. High recidivism rates, low educational attainment, and high incidents of preventable diseases are just a few of the harmful and costly issues communities face nationwide. Though governments bear the brunt of these problems by having to allocate an ever-increasing share of taxpayer funds for remediation, businesses increasingly feel the effects.”

Since 2012 a partnership between the Harvard Kennedy School’s Social Impact Bond Technical Assistance Lab (or SIB Lab), Mission Investors Exchange and the Rockefeller Foundation have also been holding a national competition for states to win logistical and funding assistance in designing and implementing SIBs. The assistance includes having a full-time Harvard SIB Lab Fellow, “to be based for one year at each lead government agency.” Mission Investors Exchange is a national network of 230 social impact philanthropies, financial institutions and intermediaries “share ideas, tools and experiences to increase the impact of their capital.” So far, the competition’s “winners” include, Colorado/Denver, Connecticut, Illinois, Michigan, New York, Ohio, South Carolina and Massachusetts.

The true character of SIBs is revealed with Chicago’s Pre-K Social Impact Bond program, which focuses on increasing enrollment for preschool students in the Chicago Public Schools (CPS) Child-Parent Centers (CPC). According to the Human Capital Research Collaborative, this venture is being portrayed as a “watershed for social impact bond (SIB) financing” in that it is the largest private investment ($17 million over 4 years) “in public preschool through social impact bonds yet.”

Established in 1967 through Title I funding attached to the Elementary and Secondary Education Act of 1965, CPCs are the oldest extended early childhood intervention program in the country and is the second oldest (behind Head Start) federally funded preschool program. According to CPS, CPC “is an early childhood preschool model that emphasizes aligned education and services in high needs communities, for children from pre-kindergarten through the primary grades. The CPCs are a family centered program, focused on the needs of the students and their families to ensure their success in school and beyond.”

Chicago’s SIB program is being funded upfront by loans from Goldman Sachs, Northern Trust Corporation and the J.B. & M.K. Pritzker Family Foundation. The Chicago Public Schools and the City will have to repay the loans - with substantial interest - only if predetermined outcomes are met, namely if the child subjects avoid special education, are “kindergarten ready” and reading at “grade level” by third-grade.

The loan will be distributed between six sites and fund 374 half-day slots in the first year; 782 half-day slots in both the second and third years; and 680 half-day slots in the fourth (final year). In 2014, Catalyst Chicago reported that based on the city’s evaluation plan, “students in the ‘treatment group’ will be compared to students from similar low-income neighborhoods who did not attend preschool at any CPS site or at any Head Start site that’s overseen by the city. City officials did not explain how the control group of children would be identified.” The yearly “success” payments will be $2,900 for each child who is kindergarten ready based on on standards already being used in CPS preschools (Common Core aligned); $750 for each child who is literacy-proficient in 3rd grade based on Common Core Standards as assessed by PARCC; and $9,100 for each year a child participant avoids special education placement, which will be tracked into high school. It is expected that the city will end up paying investors (Goldman Sachs, Northern Trust, Pritzker) roughly double its $17 million cost, providing a rate of return of about 6.3% to investors; translating to $34.5 million in repayments over the next 18 years.

The Chicago pre-k SIB is situated within the education reform discourse of eliminating an “achievement gap” (or “opportunity gap”) that is attached to standardized tests, and designed to reinforce the deficit model of schooling that reproduces the ideology of white supremacy. Still, many who oppose this “social mission” adopt the discourse of the achievement gap, under the belief that public schools can be shaped to become sanctuaries of equity and fairness, despite them being logistical appendages of a ruthless infrastructure. As with all impact investing and education reform ventures, which share the very same mission and are synergistically combined in the Chicago SIB program, this common sense discourse and its “ends justify the means” mission is constructed to appease skeptics.

According to current national discourse, access to pre-k is on the one hand held up as being practical for working parents, and on the other, it is advanced as the magic bullet for future academic achievement and life success; or at the very least to provide a leg up for children in subjugated groups. More recently, the latter arguments are largely tied to education reform propaganda and the application of its instruments to pre-k classrooms that are aligned with the surveillance and sorting mechanisms of Competency-Based Education/Personalized Learning and Common Core Standards. With the exception of working parents needing access to a developmentally enriching daycare or preschool, all of the other rationales are either unsupported or are being disrupted by recent studies that question pre-k’s equalizing effects; remind us that not all models are created equally based on funding, curriculum and teacher training; or make the case that full-day preschool with low child/staff ratios and “wrap-around” services are required to buffer against structural social inequities.

Additionally, growing numbers of child development experts are alarmed by how anxiety inducing performance-based standardized curriculum and testing regimes attached to education reform policies are harming young children's social, emotional, cognitive and physical development.

Despite all of these concerns and questions – while ultimately dodging publicly funded universal pre-k – a poorly funded half-day SIB program that would reap private investors substantial profits was still imposed on children by the autocratic Chicago Mayor, Rahm Emanuel. For the impacted groups who are being exploited in this financial venture, the stakes are high, while the risks are low for its investors. For its impoverished profit generating subjects, the SIB is the latest violent instrument of a mayor who is a darling of the financial elite, in a city that has long been a laboratory for austerity, and thus has been an epicenter for the most racially violent and draconian education reform policies. Rahm Emanuel is a former financial advisor to President Clinton (where he was referred to as “Rahmbo”) and then became an investment banker before he joined Obama administration. As Mayor of Chicago, Emanuel has packed his administration with financial sector appointees. This includes the unelected Chicago Public Schools Board of Education, over which Emanuel has mayoral control, allowing him to unilaterally stack with financial and corporate heavyweights, which include charter school chain leaders.

Emanuel officially announced the SIB in an October 7th, 2014 press release. In it, Emanuel parroted a populist, yet implicitly deficit-based and parent blaming education reform maxim by stating, “There is nothing that’s more important than our kids. Giving them a quality education from day one and helping provide their parents with the tools to be consistent and active partners in their children’s education is the best investment any of us can make.” Employing a fiscally prudent closing the achievement gap script, the Chicago Public Schools “CEO” Barbara Byrd-Bennett went on to exclaim, "Early childhood education helps create a strong foundation that benefits students throughout their entire education… investing in the expansion of pre-kindergarten programs, we will set more students on the right educational path and eliminate the need and cost for additional educational supports." Within months Byrd-Bennett was charged by federal prosecutors with 20 counts of fraud and pled guilty to receiving lucrative personal kickbacks for arranging a $23 million no-bid contract to her former employer, the notorious education reform firm SUPES Academy.

The public-private partnerships behind the Chicago’s Pre-K Social Impact Bond program are revealing. The SIB intermediary is Metropolitan Family Services, a large nonprofit human service organization with a board of directors and “donors” who are a who’s who of major banks (both include Goldman Sachs and Northern Trust), corporations, venture philanthropists and individuals from the Chicago elite. According to Metropolitan Family Services tax returns, many of their insurance investments are managed by offshore (Cayman Island) firms.

The SIB project coordinator is the Chicago-based IFF, a non-profit community development lender and real estate advisor. IFF primarily funds charter school growth in Chicago and is a proud member of the national Charter School Lenders’ Coalition (IFF Schools, 2016). IFF receives funding from Goldman Sachs and Northern Trust as well as the Walton Family Foundation, a leading financier of education reform.

The Finnegan Family Foundation, which largely funds education reform organizations and projects, is financing the SIB program evaluation. The foundation is run by Paul Finnegan, who is currently the CEO of a leading private equities firm (i.e. corporation flipper) and was a long-time Teach for America board member, of which his foundation is a major funder. The Finnegan Family Foundation also funds Metropolitan Family Services and IFF.

SRI International is contracted to be the “independent” evaluator to determine if the SIB project succeeds or fails by tracking its child subjects kindergarten readiness, third-grade literacy, and special education placement over six years. The president of SRI Education and a vice president of SRI International, Denise Glyn Borders, has a long history of employment within state, federal and private sector education reform projects. In addition to its work on the SIB, SRI has dozens of contracts with public and private sector agencies that have a focus on supporting a multitude of education reform related research and development projects, many of which focus on STEM, standardized curriculum and teacher effectiveness. In line with education reform’s social control functions and public education’s original role in buttressing industrial capitalism, SRI is well positioned within all that enables global financial structures. SRI is a global research and development non-profit, which contracts with U.S. government agencies (military and intelligence), international government agencies (central banks, dictatorships); state, regional, local governments and schools; commercial and nonprofit businesses (major banks and corporations); venture capitalists, industry trade associations, foundations and public/private partnerships (including Gates Foundation); industry consortia, and multilateral and bilateral organizations. Sixty-three percent of SRI contracts are with the U.S. Department of Defense. SRI’s current CEO worked for U.S. Homeland Security in the Bush administration and its current president is a former venture capitalist who has served on numerous corporate boards. Its board of directors is comprised of retired and active financial sector leaders and high level U.S. military officers.

The J.B. and M.K. Pritzker Family Foundation is the venture philanthropy investor of the Chicago SIB. The foundation was started and is controlled by Jay Robert (J.B.) Pritzker, a co-founder of the Pritzker Group, which is a private equity and venture capital firm. He also served as the national co-chairman of Hillary Clinton’s presidential 2008 campaign. J.B. Pritzker is a member of the seventh richest family in the country (Pritzker family), which according to Forbes magazine, is considered to be the “powerful Chicago family...best known for creating Hyatt Hotels.”

In addition to being notorious for union busting, the Pritzker family is known to have accumulated their wealth through intricate tax evasion schemes (including offshore accounts) and winning favored treatment through their political connections. The Pritzker family was a long-time owner of transnational company TransUnion, which is the third largest credit reporting corporation in the U.S., of which J.B. was its principal owner. Goldman Sachs became a principal owner of the TransUnion when the Pritzker’s sold it in 2012. When the Pritzker’s owned TransUnion, it controlled the credit histories of over 500 million consumers. In 2011, a coalition of 27 consumer advocacy, civil rights, community groups and labor unions demanded that TransUnion end its practice of selling the credit reports of job applicants to potential employers. These reports were being used to discern if job applicants would be “responsible” and “desirable” employees. This coalition claimed that credit checks by employers discriminate against poor Black, Latino and unemployed job applicants. TransUnion denied these demands and proceeded to lobby against state laws that restricted the use of such data for hiring decisions.

The Pritzker family, particularly J.B.’s sister, Penny Pritzker, is an exemplar of those whose wealth and prestige is derived from the landscape of austerity that Social Impact Bonds exploit. A closer examination of her life’s work is instructive of this appraisal. In addition to being the board chair of TransUnion during its most “scandalous” years, from 1991 to 1994 Penny was the chairperson of Superior Bank, which is said to have been bought for her by her uncle Jay Pritzker. During this time, Penny Pritzker is known to have led the bank in “a business strategy marked by rapid and aggressive growth into subprime home mortgages and automobile loans.” In 2001, while Penny was still very active in the bank operations as a board member, the bank failed and was taken over by the FDIC. As reported in In These Times, “Superior’s exploitation of securitization of subprime loans, coupled with federal regulators’ lax treatment of the Pritzkers [who in the end profited from its demise], inspired other lenders, helping to spawn the huge subprime loan market in exotic derivatives that precipitated the 2008 Great Recession.” While testifying before the Senate Banking Committee in 2001, financial expert Bert Ely claimed, "it appears that Superior [Bank] became a dumping ground for low-quality, and possibly predacious, mortgages." According to U.S. News and World Reports, Ely also “contended that Superior aggressively sought deposits beyond the insured limits – even when it was on the verge of failure – and that it filed ‘flawed and clearly erroneous’ reports on its financial condition with federal regulators.”

In 2008 Penny Pritzker served as the National Finance Chair of the Barack Obama for President campaign. In 2009, Penny was appointed to president Obama’s Economic Recovery Advisory Board which formulated and evaluated economic policy in the wake of the financial crisis she helped to create. She then became the co-chair of Obama’s 2009 Presidential Inaugural Committee.

Also in 2009, Penny Pritzker co-founded Artemis Real Estate Partners which, according to Bloomberg Business, is a real estate investment firm specializing in “distressed properties...opportunistic debt and equity deals, value-added and enhanced core in property types such as apartments, office, industrial, retail, hotel, and senior housing.” Distressed properties are real estate assets that are sold off because of their impending foreclosure or repossession. In 2011, Penny was the founder and CEO of the private-equity firm PSP Capital Partners which “invests in real estate, private businesses and funds/partnership opportunities.”

In 2010, during the period when Penny Pritzker was pillaging urban housing markets, she was appointed as the “chairman” of Obama’s neoliberal initiative Skills for America's Future, “an effort to improve industry partnerships with community colleges to ensure that America’s community college students are gaining the skills and knowledge they need to be successful in the workforce.”

In 2011, Penny Pritzker was appointed to the Chicago Public Schools Board of Education by Mayor Rahm Emanuel. Consistent with her philanthropic and business record, Pritzker’s CPS position allowed her to double her impact as a champion of neighborhood public school closures and punitive “no excuses” charter schools for the city’s most impoverished Black and Brown children. As sociologist Stephanie Farmer puts it, as a CPS board member Pritzker “consistently voted to turn Chicago’s public education system into a for-profit system by charter school operators and their investors who are not accountable or transparent to the public, but dependent upon public tax dollars for their operations.”

In a 2011 radio interview with Pritzker, the host asked her to compare her own children's educational experiences to what the average Chicago Public School student was receiving. In response, Pritzker parroted the social reproduction narrative of her super wealthy peers who are driving education reform policies, claiming those children’s education should be restricted to “skills in math, in reading, and in science so that they can be productive members of today’s workforce.” It should not come as a surprise that along with Rahm Emanuel, Arne Duncan (former Secretary of Education and devout education reformer) and President Obama, Pritzker sent her children to the private University of Chicago Lab School. Founded by John Dewey, the Lab School maintains a holistic, rich curriculum that is infused with the arts, imaginative play, physical education and standardized assessments that are not high stakes in nature. While one hundred sixty public schools in Chicago do without libraries, the Lab School has a beautiful library that is partially funded by Pritzker.

Finally, in 2013 Penny Pritzker was again rewarded for her long-time commitment to the racialized social order that neoliberal financialization, Social Impact Bonds and education reform policies reinforce, when she was appointed to serve as President Obama’s Secretary of Commerce. As Commerce Secretary, Penny Pritzker is currently championing global financialization and its tentacle – the Trans-Pacific Partnership – as J.B. Pritzker throws his money and influence behind the Hillary Clinton presidential campaign. It would be hard to find another family that better illustrates the despotic nature of the financialized world of the 21st century.

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