Winston Churchill said it best when he concluded, "democracy is the worst form of government ....except all those other forms that have been tried from time to time."

The same can also be said about capitalism. In the past several decades, international markets have pulled millions out of poverty, unlocked life-changing technological and scientific innovation, and raised our global standard of living to unprecedented levels. But, distressingly, far too many people are being left out. This is true everywhere, including in the United States, where the wealthiest one percent now own 43 percent of the country's wealth compared to just 25 percent in 1950. Globally, the numbers are equally concerning since the 1.2 billion poorest people account for only one percent of world consumption, while the billion richest consume 72 percent. Clearly, this disproportion warrants urgent attention...

...In fact, we know firsthand that market-based solutions can be a powerful way to create jobs and deliver services to those who need them - at the scale required in a world of seven billion people. And we are especially heartened to see a new movement afoot called "social" impact investing, which explicitly seeks to apply the power of the market to help solve stubborn economic and social challenges.

Simply put, "impact investments" are those that generate social or environmental value, as well as financial return. The enthusiasm surrounding this concept represents a paradigm shift: an understanding that market-based tools, imperfect as they are, can be leveraged to help even those who have been left behind by global capitalism...

...In the U.S., we have launched a social impact bond project at Riker's Island Correctional Facility in Queens, New York. The aim of the initiative is to cut re-offending through intensive education, training and counseling to young inmates. Goldman Sachs is providing the initial funding and Bloomberg Philanthropies is offering a loan guarantee, with MDRC, a leading non-profit organization, overseeing the project.

The City of New York will act as broker. If recidivism drops significantly, it will pay out on the contract. If it does not - and there are no savings from the reduction in re-incarceration - the taxpayers won't have to pay a thing...

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