Next-generation businesses are built, instead, on human, social, natural, and cultural capital.

An excerpt from an important editorial.

Umair Haque:

“The value equation of industrial-era capitalism was toxically imbalanced. Why is industrial era business so destructive – why does it slash and burn rainforests, endanger entire species, vaporize culture and community, marginalize the poor and disadvantaged, and erode our health and vitality?

Because none of those have value in an industrial economy: none are capitalized. So the beancounters of the world are free to plunder and ruin them – because, economically, they actually don’t exist. 20th century capitalism, in other words, marginally valued pure financial capital too highly, while marginally valuing human, natural, social, and cultural capital at zero – or, at the limit, negatively. How messed up is that? Astroundingly. So here’s how we’re going to fix it.

21st century economics demand a rethinking of what capital isn’t – and what capital really is.

Regulators and analysts alike have only got half the picture. Largely imaginary financial capital has been destroyed – like a house of cards finally falling. Today, in the twilight of the first decade of the 21st century, we must renew a failing global capital base with entirely new kinds of capital. The time is now to pump newer, more valuable kinds of capital into the veins of global economy. Why?

Reigniting global growth depends on deepening the global capital base. How will the macro crisis end? Why aren’t ultra-heavy doses of financial capital not only not fixing it – but seemingly worsening it? Because doing so only ultimately conserves the toxic imbalance built into 20th century value equation.

Economists refer to growth in capital intensity as capital deepening. Solving the macro crisis is dependent, in large part, on deepening the global capital base – reinvigorating it with new resources and assets. When new resources and assets are created, then entirely new markets and industries burst into life – while old ones are allowed to sputter out, instead of being continually bailed out.

Capital deepening is the foundation of next-generation value creation. Why is capital deepening so important? The reason that capitalism can destroy the world is that most of the world doesn’t exist in an economic sense. And so when we capitalize rainforests, endangered species, community, the foregone opportunities of the poor, our own well-being – then they will finally have value: they can finally be priced, and so the fatcats of the world won’t be free to destroy them with impunity.”