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The Many Forms of Wealth

Wealth takes many forms. But for the sake of argument, let’s think in terms of different types of capital.

The traditional definition of capital is “accumulated wealth in the form of investments, factories, and equipment” (Hawken et al, 2000, p.4).

From a Green Economic perspective, however, four types of capital are necessary for a healthy and prosperous economy.

These are outlined by Paul Hawken, Amory Lovins and L.Hunter Lovins in their book, Natural Capital: Creating the next industrial revolution (2000):

Human capital: Beyond labour and intelligence, this includes the social capital of networks and organization, as well as the cultural capital of identity expression and the arts;

Financial capital: This is often confused as “real wealth” when wealth is viewed in monetary terms only. This type of capital consists of cash, investments, and various monetary instruments;

Manufactured capital: This is the human-made capital found in infrastructure, machines, tools, factories etc;

Natural capital: The bounty of the natural world, this includes the resources, livin systems and ecosystems services that make up life on Earth.

Promoted as the lynchpin of modern wealth, capitalism as we know it tends to focus on the financial and manufactured capital. It can therefore be thought of as two-fold:

1. Financially profitable; and
2. An unsustainable aberration in human development (Hawken et al, 2000).

“What might be called “industrial capitalism” does not fully conform to its own accounting principles. It liquidates its capital and calls it income. It neglects to assign any value to the largest stocks of capital it employs – the natural resources and living systems, as well as the social and cultural systems that are the basis of human capital” (Ibid, p.5).

So why don’t we assign a financial value to the resources and systems of the natural world? Why don’t we assign a monetary value to our social capital (beyond wages and on-costs)? Put simply, the valuation of capital that is non-financial or not made by humans is no small feat.

As highlighted by Hawken et al (2000), there are three reasons for this challenge:

Most of the eco-system services we receive from the living world have no known substitute (at any price!). Consider, for example, oxygen production by green plants. In short, unless an alien super-species beams down and invents superhuman globally transformational technology, no amount of ambition and industrial know-how can replace the planet’s life-support systems.

Despite efforts in recent years, valuing natural capital is difficult and imprecise. What financial value (no matter how high) can we assign to a child? An old-growth forest? The humble bee’s pollination of life-giving plants?

Technology cannot replace the planet’s life-support systems. Nor can machines provide a meaningful substitute for human intelligence, creativity, knowledge, wisdom, organisational abilities, or culture.

Despite these shortcomings, value assessments of natural and social capital have occurred in recent years. According to Hawken et al (2000):

“Recent assessments have estimated that biological services flowing directly into society from the stock of natural capital are worth at least $36 trillion annually [USD]. That figure is close to the annual gross world production of approximately $39 trillion – a striking measure of the value of natural capital to the economy. If natural capital stocks were given a monetary value, assuming the assets yield “interest” of $36 trillion annually, the world’s natural capital would be valued at somewhere between $400 and $500 trillion – tens of thousands of dollars for every person on the planet” (p.5).

Even as conservative figures, these stats highlight an important fact: Anything we cannot live without and cannot replace (at any price) can be viewed as priceless. They have infinite value.

Likewise, in the realm of social capital, efforts have been made to ascertain a financial value for human effort, energy and ingenuity.

“The World Bank’s 1995 Wealth Index found the sum value of human capital [labour only] to be three times greater than all the financial and manufactured capital reflected on global balance sheets” (Ibid, p.6).

So where does all this leave us? How can we transition to a Green Economy that values all forms of capital when all forms of capital cannot be financially valued?

Well, irrespective of the accounting shortfall, one thing is certain: We can no longer behave as though the natural world and the people of this world have no value. Treating them as “valueless has brought us to the verge of disaster” (Ibid, p.6).

The question we need to answer is one of decision-making.

How can we – consumers, governments, business – make responsible decisions in the interest of economic growth, environmental health, and social well-being? How can we do so if we have limited means to value the whole equation?

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