As an investment banker with “another life” built over fifteen years around my passion for the economics of Nature, and now made even more serious with my leadership of “TEEB” ( see www.teebweb.org ), I am often asked how I reconcile my capitalist background with my commitments to Nature and our environment ?
I give my stock reply “I don’t reconcile them – I am a Total Capitalist”. And usually, the conversation ends there.
Sometimes however, a rare, curious mind will go on to ask the next question, usually some version of “You mean… you see Nature as a form of Capital ?” Now, that does deserve an answer, not a brush-off !
Some years ago at an environmental conference in Aspen, Colorado, I heard Prof. Richard Norgaard speak about what he called “Economism”, the unstated but underlying ideology of Economics. Perhaps that unstated ideology of Economics can be summed up as “Money Matters Most”. But must we so confuse money with capital that we fixate solely on one dimension of capital, i.e. Financial or Man-made capital, and ignore Human Capital and Natural Capital ?
Markets help us to value goods and services that are traded in markets, such as ad-space, club memberships, cars, and houses. We value these things, we conserve them, & we would not voluntarily destroy them – whether they belong to us, or to someone else. These are private goods. But what about public goods & services which belong to everybody and nobody ?
Where are the “markets” to buy and sell clean air, fresh water, law and order, communal harmony, species diversity ? And are we not collectively guilty of assuming “no price = no value = no need to conserve” public wealth ?
For Capitalism to work, it must be recognized in all its dimensions – Physical capital (financial assets, other man-made assets), Human capital ( education, health, social fabric, etc) and Natural capital ( freshwater, forests, biodiversity,etc). This actually is not a new thought. It goes right back to Adam Smith’s concepts of “land, labour and capital”. But in his days, land and labour were plentiful, and if not, then colonization expanded supply. Energy was not even a major factor of production. The scarce input was financial capital, and the entrepreneur-businessman was feted by society because he created financial capital.
How times have changed !
We now need three-dimensional capitalism, we need more sophisticated economics. However, as it was then, business must lead the way and seek new rules and behaviours, which will be regulated by governments, and will be observed, analysed, and summarized by some new-age Adam Smith – and perhaps written up as “An inquiry into the nature and causes of the three dimensional wealth of nations” ?
A version of this article was initially published in the Guardian Sustainable Business blog on 04 July 2011.