The social turn of finance and the financialisation of welfare

To frame my research on impact bonds, this chapter begins by discussing how international political economy (IPE) scholarship approaches ethical finance, including sustainable investing and microfinance, before turning to the ways in which financial tools have increasingly come to deliver formerly public goods and services under the prevailing zeitgeist of austerity. It argues that impact bonds represent a convergence of these two dynamics, as they integrate ethical finance into welfare arrangements—however, not through a withdrawal of public institutions, but through their financialised reconfiguration. In a second step, the chapter contends that the existing IPE literature either frames impact bonds as an extension of financial markets into the social sector—struggling to analytically engage with ethics—or focuses narrowly on how new valuation techniques gauge ethical purposes, overlooking how such schemes constitute new ways of understanding and governing. While sympathetically engaged with both strands, the chapter proposes a third approach, or framework, building upon governmentality studies, to investigate the wider rationalities through which actors ‘make sense’ of impact bonds and the political consequences this entails.