23 June 2020
23 June 2020
We may have done well on COVID cases, but going into the second half of 2020, close to the end of the current State Government’s four year term, we have now had a massive COVID economic impact; We’ve had climate impacts and fires; Destruction of cultural heritage and continued environmental degradation. All the while the economy has stagnated and is now going backwards with the highest rate of job losses in the country.
“For the first time since we started tracking ABS data (1978), the number of young people outside the labour market is over 40%. This is not normal fluctuations or seasonal adjustments – it is an absolute crisis” (source: Shirley Jackson, Senior Economist, Per Capita https://percapita.org.au/
As WA emerges largely unscathed by the health crisis, a much darker social and economic crisis is looming, wrought by a once in a century economic disruption that has caused the Federal Government to abandon their budgets and take taxpayers into over $1 Trillion in debt, with deficits adding to this for years to come. Through 2021-22 as stimulus waned, an abyss of job losses, foreclosures, and social upheaval awaits.
The problem: As mortgage stress skyrockets in the late stages of a housing bubble, consumer spending dives impacting tax revenues (and governments holy grail of GDP). At the same time, business stress and collapses will relegate staff to the dole queues or casual work, eating a large chunk of the government tax revenues from these sources just as demand for social services spending spikes.
The outdated solution (to date): The answer has so far been to perpetuate an economic stimulus and tax cuts model that was unsustainable and extractive long before COVID. The fiscal measures governments at all levels typically go to during economic crises have not served us well in the past and are proving increasingly ineffective in an economy that doesn’t serve all stakeholders. These include:
Companies in the old economy prioritise shareholder profit, so thinking that they might now do otherwise when public money is being thrown at them is an absurd distortion of reality by governments who are either out of original ideas, or beholden to donors, or both.
We are staring down an effective 15-20% unemployment rate in WA with myriad long-term social consequences for families and communities. These are challenges which traditional government, economic and business models are ill equipped to address.
The above from Griffith University’s recent report exemplifies the key elements of building a new economy post-COVID *Source: ‘Seven Domains of Action’ – Griffith University Yunus Centre, Roadmap to Recovery & Regeneration – Opportunities for a post-pandemic recovery that creates better futures for all.
As a new economic reality emerges from this COVID crisis, impact investment and social enterprise sectors stand ready with the capacity to address some of our most intractable social and economic challenges, through the power of impact-driven business models, eventually easing the burden on dwindling government coffers.
When a business has job creation that addresses social disadvantage as its primary reason for being, you get jobs and new industries as a concrete outcome, and government social spending upsides in the long term. This is what employment-based social enterprises are all about.
Creation of a State Impact Investment and Social Enterprise Strategy is an opportunity for the State Government to take a ‘best-practice’ policy leadership approach, already implemented in other Australian states, and countries like the UK and Canada a decade ago, and actively participate in the development of the social enterprise sector in our state.
We may have done well on COVID cases, but going into the second half of 2020, close to the end of the current State Government’s four year term, we have now had a massive COVID economic impact; We’ve had climate impacts and fires; Destruction of cultural heritage and continued environmental degradation. All the while the economy has stagnated and is now going backwards with the highest rate of job losses in the country. Trying to get back to business as usual without investing in the transition to a new, inclusive economic model creates a substantial risk to the WA economy.
The economic value and social impact of local manufacturing and jobs through employment based social enterprises in particular cannot be underestimated at this time, or at any time in the future. COVID19 is showing us that. These businesses create resilience in the system. The Government must move forward onto long term funding in this sector that builds capacity within our communities and industries for regeneration and economic diversification.
Social enterprise, social innovation and impact investment was made for our time.
We have had a WA Impact Fund, the WA Impact Investment Alliance, and the WA Social Enterprise Council comprising some of the greatest leaders across private, philanthropic, finance, business and social sectors in WA making the case to State Government for impact investment policy.
The time has run out for the State Government to talk about it. It must now act.
(*Source data and policy recommendations available here)
View The West article online here.
Impact Seed is a proud B-Corp and Western Australia’s peak market builder for impact investment, impact measurement & social enterprise. Since 2015 we have supported impact businesses, government, not-for-profits, foundations and family offices in building, articulating and investing in purpose driven businesses and projects, bridging investment and philanthropy.
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