Emerging possibilities -- A new type of industrialism -- The loss of living systems

-- Valuing natural capital -- The industrial mind-set -- The emerging pattern of

scarcity -- Four strategies of natural capitalism -- Radical resource productivity
-- Putting the couch potato of industrialism on a diet -- An economy of steady
service and flow -- Restoring the basis of life and commerce

Imagine for a moment a world where cities have become peaceful and serene because
cars and buses are whisper quiet, vehicles exhaust only water vapor, and parks and
greenways have replaced unneeded urban freeways. OPEC has ceased to function
because the price of oil has fallen to five dollars a barrel, but there are few
buyers for it because cheaper and better ways now exist to get the services people
once turned to oil to provide. Living standards for all people have dramatically
improved, particularly for the poor and those in developing countries. Involuntary
unemployment no longer exists, and income taxes have largely been eliminated.
Houses, even low-income housing units, can pay part of their mortgage costs by the
energy they produce; there are few if any active landfills; worldwide forest cover
is increasing; dams are being dismantled; atmospheric C02 levels are decreasing for
the first time in two hundred years; and effluent water leaving factories is
cleaner than the water coming into them. Industrialized countries have reduced
resource use by 80 percent while improving the quality of life. Among these
technological changes, there are important social changes. The frayed social nets
of Western countries have been repaired. With the explosion of family-wage jobs,
welfare demand has fallen. A progressive and active union movement has taken the
lead to work with business, environmentalists, and government to create "just
transitions" for workers as society phases out coal, nuclear energy, and oil. In
communities and towns, churches, corporations, and labor groups promote a new
living-wage social contract as the least expensive way to ensure the growth and
preservation of valuable social capital. Is this the vision of a utopia? In fact,
the changes described here could come about in the decades to come as the result of
economic and technological trends already in place.

This book is about these and many other possibilities.

It is about the possibilities that will arise from the birth of a new type of
industrialism, one that differs in its philosophy, goals, and fundamental processes
from the industrial system that is the standard today. In the next century, as
human population doubles and the resources available per person drop by one-half to
three-fourths, a remarkable transformation of industry and commerce can occur.
Through this transformation, society will be able to create a vital economy that
uses radically less material and energy. This economy can free up resources, reduce
taxes on personal income, increase per-capita spending on social ills (while
simultaneously reducing those ills), and begin to restore the damaged environment
of the earth. These necessary changes done properly can promote economic
efficiency, ecological conservation, and social equity.

The industrial revolution that gave rise to modern capitalism greatly expanded the
possibilities for the material development of humankind. It continues to do so
today, but at a severe price. Since the mid-eighteenth century, more of nature has
been destroyed than in all prior history. While industrial systems have reached
pinnacles of success, able to muster and accumulate human-made capital on vast
levels, natural capital, on which civilization depends to create economic
prosperity, is rapidly declining, and the rate of loss is increasing proportionate
to gains in material well-being. Natural capital includes all the familiar
resources used by humankind: water, minerals, oil, trees, fish, soil, air, et
cetera. But it also encompasses living systems, which include grasslands, savannas,
wetlands, estuaries, oceans, coral reefs, riparian corridors, tundras, and
rainforests. These are deteriorating worldwide at an unprecedented rate. Within
these ecological communities are the fungi, ponds, mammals, humus, amphibians,
bacteria, trees, flagellates, insects, songbirds, ferns, starfish, and flowers that
make life possible and worth living on this planet.

As more people and businesses place greater strain on living systems, limits to
prosperity are coming to be determined by natural capital rather than industrial
prowess. This is not to say that the world is running out of commodities in the
near future. The prices for most raw materials are at a twenty-eight-year low and
are still falling. Supplies are cheap and appear to be abundant, due to a number of
reasons: the collapse of the Asian economies, globalization of trade, cheaper
transport costs, imbalances in market power that enable commodity traders and
middlemen to squeeze producers, and in large measure the success of powerful new
extractive technologies, whose correspondingly extensive damage to ecosystems is
seldom given a monetary value. After richer ores are exhausted, skilled mining
companies can now level and grind up whole mountains of poorer-quality ores to
extract the metals desired. But while technology keeps ahead of depletion,
providing what appear to be ever-cheaper metals, they only appear cheap, because
the stripped rainforest and the mountain of toxic tailings spilling into rivers,
the impoverished villages and eroded indigenous cultures--all the consequences they
leave in their wake--are not factored into the cost of production.

It is not the supplies of oil or copper that are beginning to limit our development
but life itself. Today, our continuing progress is restricted not by the number of
fishing boats but by the decreasing numbers of fish; not by the power of pumps but
by the depletion of aquifers; not by the number of chainsaws but by the
disappearance of primary forests. While living systems are the source of such
desired materials as wood, fish, or food, of utmost importance are the services
that they offer, services that are far more critical to human prosperity than are
nonrenewable resources. A forest provides not only the resource of wood but also
the services of water storage and flood management. A healthy environment
automatically supplies not only clean air and water, rainfall, ocean productivity,
fertile soil, and watershed resilience but also such less-appreciated functions as
waste processing (both natural and industrial), buffering against the extremes of
weather, and regeneration of the atmosphere.

Humankind has inherited a 3.8-billion-year store of natural capital. At present

rates of use and degradation, there will be little left by the end of the next
century. This is not only a matter of aesthetics and morality, it is of the utmost
practical concern to society and all people. Despite reams of press about the state
of the environment and rafts of laws attempting to prevent further loss, the stock
of natural capital is plummeting and the vital life-giving services that flow from
it are critical to our prosperity.

Natural capitalism recognizes the critical interdependency between the production

and use of human-made capital and the maintenance and supply of natural capital.
The traditional definition of capital is accumulated wealth in the form of
investments, factories, and equipment. Actually, an economy needs four types of
capital to function properly:

human capital, in the form of labor and intelligence, culture, and organization
financial capital, consisting of cash, investments, and monetary instruments
manufactured capital, including infrastructure, machines, tools, and factories
natural capital, made up of resources, living systems, and ecosystem services

The industrial system uses the first three forms of capital to transform natural
capital into the stuff of our daily lives: cars, highways, cities, bridges, houses,
food, medicine, hospitals, and schools.

The climate debate is a public issue in which the assets at risk are not specific
resources, like oil, fish, or timber, but a life-supporting system. One of nature's
most critical cycles is the continual exchange of carbon dioxide and oxygen among
plants and animals. This "recycling service" is provided by nature free of charge.
But today carbon dioxide is building up in the atmosphere, due in part to
combustion of fossil fuels. In effect, the capacity of the natural system to
recycle carbon dioxide has been exceeded, just as overfishing can exceed the
capacity of a fishery to replenish stocks. But what is especially important to
realize is that there is no known alternative to nature's carbon cycle service.

Besides climate, the changes in the biosphere are widespread. In the past half
century, the world has a lost a fourth of its topsoil and a third of its forest
cover. At present rates of destruction, we will lose 70 percent of the world's
coral reefs in our lifetime, host to 25 percent of marine life. In the past three
decades, one-third of the planet's resources, its "natural wealth," has been
consumed. We are losing freshwater ecosystems at the rate of 6 percent a year,
marine ecosystems by 4 percent a year. There is no longer any serious scientific
dispute that the decline in every living system in the world is reaching such
levels that an increasing number of them are starting to lose, often at a pace
accelerated by the interactions of their decline, their assured ability to sustain
the continuity of the life process. We have reached an extraordinary threshold.

Recognition of this shadow side of the success of industrial production has

triggered the second of the two great intellectual shifts of the late twentieth
century. The end of the Cold War and the fall of communism was the first such
shift; the second, now quietly emerging, is the end of the war against life on
earth, and the eventual ascendance of what we call natural capitalism.

Capitalism, as practiced, is a financially profitable, nonsustainable aberration in

human development. 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.

But this deficiency in business operations cannot be corrected simply by assigning

monetary values to natural capital, for three reasons. First, many of the services
we receive from living systems have no known substitutes at any price; for example,
oxygen production by green plants. This was demonstrated memorably in 1991�93
when the scientists operating the $200 million Biosphere 2 experiment in Arizona
discovered that it was unable to maintain life-supporting oxygen levels for the
eight people living inside. Biosphere 1, a.k.a. Planet Earth, performs this task
daily at no charge for 6 billion people.

Second, valuing natural capital is a difficult and imprecise exercise at best.

Nonetheless, several recent assessments have estimated that biological services
flowing directly into society from the stock of natural capital are worth at least
$36 trillion annually. That figure is close to the annual gross world product 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 yielded "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. That is undoubtedly a conservative figure
given the fact that anything we can't live without and can't replace at any price
could be said to have an infinite value.

Additionally, just as technology cannot replace the planet's life-support systems,

so, too, are machines unable to provide a substitute for human intelligence,
knowledge, wisdom, organizational abilities, and culture. The World Bank's 1995
Wealth Index found the sum value of human capital to be three times greater than
all the financial and manufactured capital reflected on global balance sheets.
This, too, appears to be a conservative estimate, since it counts only the market
value of human employment, not uncompensated effort or cultural resources.

It is not the aim of this book to assess how to determine value for such
unaccounted-for forms of capital. It is clear, however, that behaving as though
they are valueless has brought us to the verge of disaster. But if it is in
practice difficult to tabulate the value of natural and human capital on balance
sheets, how can governments and conscientious businesspersons make decisions about
the responsible use of earth's living systems?