Natural Capitalism by Amory Lovins

Capital – It’s the accumulated wealth in the form of investments, factories, and equipment. An economy requires four types of capitalism to function:

1. Human capital – labour & intelligence, culture and organization

2. Financial capital – cash investments, and monetary instruments

3. Manufactured capital – infrastructure, machines, tools and factories

4. Natural capital – resources, living systems & ecosystem services

The first 3 forms of capital are used to transform natural capital into the stuff of our daily lives: cars, highways, cities, bridges, houses, food, medicine, hospitals and schools.

Capitalism is a financially profitable, non-sustainable aberration in human development and does not conform to its own accounting principles. It liquidates capital and calls it income and 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.

This deficiency in business operation can’t be corrected by simply assigning monetary values to natural capital for 3 reasons:

1. Many of the services we receive from living systems have no known substitutes at any price. Ex; oxygen production by green plants.

2. Valuating natural capital is a difficult and imprecise exercise. -Biological services flowing directly into society from the stock of natural capital are estimated at $36 trillion vs the annual gross world product estimated at $39 trillion.

3. Machines are unable to provide a substitute for human intelligence, knowledge, wisdom, organizational abilities and culture. The sum value of human capital is 3x greater than all the financial & manufactured capital reflected on global balance sheets.

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Conventional Capitalism: In order to bring about any comprehensive economic and ecological change we must understand the basis of present economic thinking. The Industrial Revolution brought about this primary economic ideology summarized below:

  • Economic progress can best occur in free-market systems of production and distribution where reinvested profits make labour and capital increasingly productive. Competitive advantage is gained when bigger, more efficient plants manufacture more products for sale to expanding markets.
  • Growth in total output (GDP) maximizes human well-being.
  • Any resource shortages that do occur will elicit the development of substitutes.
  • Concerns for a healthy environment are important but must be balanced against the requirements of economic growth, if a high standard of living is to be maintained.
  • Free enterprise and market forces will allocate people and resources to their highest and best uses.

Natural Capitalism: Four central strategies of Natural Capitalism are: 1. Radical Resource Productivity: It’s the cornerstone of natural capitalism because using resources more effectively has three significant benefits:

  • Slows resource depletion at one end of the value chain.
  • Lowers pollution at the other end
  • Provides a basis to increase world-wide employment with meaningful jobs. The result is lower costs for business and society.

Radical resource productivity strategies can nearly halt the degradation of the biosphere, make it more profitable to employ people and thus safeguard against the loss of vital living system and social cohesion.

1 Biomimicry: It’s reducing the wasteful throughput of materials (eliminating the very idea of waste) by redesigning industrial systems on biological lines that change the nature of industrial processes and materials. Materials are constantly reused in a continuous closed cycle thereby eliminating any waste product or toxicity.

2. Service and Flow Economy: It’s an economy that is based on a FLOW of economic SERVICES that can better protect the ecosystem services upon which it depends. It’s a fundamental change in the relationship between producer and consumer, a shift from and economy of goods and purchases to one of service and flow. This concept entails a new perception of value, a shift from the acquisition of goods as a measure of affluence to an economy where the continuous receipt of quality, utility, and performance promotes well-being.

This concept offers incentive to put into practice the first two innovation of natural capitalism:

1. Restructuring the economy to focus on relationships that better meet customers’ changing value needs

2. Offer rewards automatically for both resource productivity and closed-loop cycles of material usage.

3. Investing in Natural Capital: It’s the re-investment in sustaining, restoring, and expanding stocks of natural capital, so that the biosphere can produce more abundant ecosystem services and natural resources.

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Natural Capitalism by Amory Lovins. (2018, Jan 09). Retrieved from https://paperap.com/natural-capitalism-by-amory-lovins/

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