Today, I saw another mention by people who advocate for impact investment in social enterprise in praise of the development of stock exchanges for social enterprise.
Do we really want to financialize social enterprise?
Stock exchanges were invented in the 19th Century to aggregate investment in small increments from individual investors to form large pools of capital to fund large-scale industrial enterprise. They work remarkably well. They provide individuals access to investment, a means for exiting the investment when the time comes, and a mechanism for realizing returns on investment.
The problem is, they do all three through the same, single point of value: the share price.
The enterprise is turned into a financial asset. The asset is broken up into bite-sized shares. Individuals can buy and sell shares among themselves, without involving the enterprise in each sale.
It's hard to see why this system isn't great, isn't? Except that it is built upon an assumption/expectation that of perpetual growth at the enterprise/industry level. When this belief in perpetual growth collides with the reality of the organic growth curve, we get what is euphemistically called "the business cycle:, but what is more authentically described as a recurring pattern of booms that always, eventually, go bust, as investment is made to manufacture growth in productive capacity that is not supported by customer demand.
Do we really want to extend boom-and-bust into social enterprise? Can't we find a better way?