Regenerative Capitalism

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= concept, approach, and report

For an intro, read:The eight principles of regenerative capitalism


Report

* Report: REGENERATIVE CAPITALISM. How Universal Principles And Patterns Will Shape Our New Economy. By John Fullerton, 2015

URL = http://capitalinstitute.org/wp-content/uploads/2015/04/2015-Regenerative-Capitalism-4-20-15-final.pdf

Contents

=CHAPTER 1: INTRODUCTION

  • What Comes Next? ............................................................................................................. 17
  • The Regenerative Hypothesis............................................................................................ 21
  • Today’s Copernican Shift ..................................................................................................... 24


CHAPTER 2: FROM A MECHANISTIC TO A HOLISTIC WORLDVIEW

  • Separate Parts versus Dynamic Wholes.......................................................................... 28
  • Beyond Mere Metaphor: The Empirical Science of Flow.............................................. 32
  • Creating Regenerative Economies Using the Laws of a Holistic Universe ..............34


CHAPTER 3: EIGHT KEY PRINCIPLES OF REGENERATIVE CAPITALISM

  • What is a Regenerative Economy?.................................................................................... 40
  • How Do You Build Regenerative Vitality? – 8 Key Principles...................................... 43
  • Rethinking Capitalism........................................................................................................... 79


CHAPTER 4: REGENERATIVE CAPITALISM EMERGING IN THE REAL WORLD

  • Regenerative Movements in Action ................................................................................. 82
  • Creative Regenerative Projects and Enterprises of the Field Guide......................... 86
  • Implications for Politics and Public Policy........................................................................ 91
  • Implications for Finance....................................................................................................... 95
  • Measuring and Managing Systemic Health in Complex Webs..................................... 99


CHAPTER 5: CREATING A REGENERATIVE CIVILIZATION

  • Changing the Dream ..........................................................................................................109


=Executive Summary

"Global threats – from climate change and accelerating inequality, to the financial crisis of 2008 – have led an increasing number of thought leaders and policymakers to question the long-term viability of today’s dominant form of capitalism. Even the rise of terrorism is fueled, at least in part, by the repression and exploitation of the economically and politically disempowered.

At the same time, a multitude of innovators and entrepreneurs around the world are experimenting with practical ways to reimagine capitalism so that it works for all levels of society, as well as for the planet. In our terms, their common goal is to create a self-organizing, naturally self-maintaining, highly adaptive Regenerative form of capitalism that produces lasting social and economic vitality for global civilization as a whole.

Over the last two years, Capital Institute has been working with many of these thought leaders and entrepreneurs in a quest to understand what a theoretical framework for regenerative economies would look like, and what conditions and processes contribute to their long-term systemic health. We also explored how a Regenerative Economy would differ from today’s flawed theory of capitalism, and how it would compare to other New Economy ideas such as natural capitalism, sustainable capitalism, conscious capitalism, doughnut economics, circular economies, sharing economies, steady-state economies, etc.

Where today’s mainstream economic debates are usually couched in liberal versus conservative ideology, we felt a much deeper inquiry was required, one that examined the unquestioned assumptions of both the left and the right. For instance, does exponential, undifferentiated economic growth — the still largely unquestioned objective of liberal and conservative economists alike — really define the path to long-term prosperity? Is such constantly expanding growth even possible given the already massive scale of today’s global economy and our planet’s finite resources? And, what role does modern finance play with its single-minded pursuit of optimizing returns, in driving the systemic outcomes that are unsustainable?

Let me say up front very clearly: Regenerative economics is not about the well-worn debate of capitalism versus socialism. Both systems, even if flawlessly executed, are unsustainable. Nor is it a proposal for incremental change to a system that is fundamentally sound but for a few glitches.

What I am saying is that the history of economic theory is not over with Keynes and Hayek (or Minsky and Friedman), leaving their disciples to squabble on the public square indefinitely into the future. In fact, recent events including the 2008 financial collapse, the (under) statement by pre-eminent economist Sir Nicholas Stern that climate change represents the largest market failure in the history of capitalism, and the phenomenon surrounding the release of Thomas Piketty’s Wealth in the Twenty First Century, collectively signal the end of the beginning. Regenerative Capitalism aims to contribute to the vital shift in thinking that is a precondition for us to embark on what follows the beginning.

What is Regenerative Capitalism? We began our quest for deeper explanations with biomimicry in mind. That is, since living systems are both sustainable and regenerative over long periods of time, we began exploring whether following nature’s rules of health and development might lead to sustainably vibrant economies as well. But, the more we explored this thesis, the bigger and more diverse the picture became. We discovered that what we call “systemic” or “holistic” approaches could be seen in work ranging from Jane Jacobs’ on-theground urban observations in Death and Life of the Great American Cities, to Herman Daly’s theories of steady-state economics. Indeed, close examination showed holistic concepts emerging in almost every field imaginable, from agriculture and healthcare to monetary systems, urban planning, and network-centric technology.

This broad form of holism grew out of the observation that everything in the universe is organized into “systems” whose interlinked parts work together in some larger process or pattern. The incredible range of holistic work we were encountering reflected a common quest to understand the reasons for such “systemic behavior,” a pursuit that stretched from the sacred geometries of the ancient Greeks to the study of ecosystems and social media today.

This quest’s most important discovery was that universal principles and patterns of systemic health and development actually do exist, and are known to guide behavior in: living systems from bacteria to human beings; nonliving systems from hurricanes to transportation systems and the Internet; and societal systems including monetary systems and yes, economies.

Furthermore, though such holistic thinking is sometimes viewed as the province of mystics or hippies, we soon discovered that new fields of science were turning this core holistic discovery into rigorous explanations of how universal dynamics – such as energy and pressure – shape health and development in real-world systems of all kinds. The resulting science of “flow systems” not only provides the empirical theory and precise measures of systemic health we need to guide our steps, it also grounds long-standing observations about the importance of circulation, balance, and even of ideals such as justice and fair play.

In short, the study of systemic behavior is now producing a very practical, rigorous, and even commonsense new picture of how the world works. We believe the combination of practical experience gleaned from investing in and observing regenerative New Economy experiments rising up worldwide, anchored in today’s rigorous form of holism, can show us how to turn today’s lopsided (and unsustainable) form of capitalism into an integrated network of balanced, vibrant, and regenerative economies, all serving systemic health within their own unique contexts. Our goal here is to illuminate this new synthesis and to craft a coherent narrative around it so that it may be applied to defuse today’s global threats, particularly those arising from outdated and at-times-misguided beliefs in business, finance, and economics.

The implications for how we think about organizing and managing our capitalist system are profound. Some will reject this framework as idealistic; others will say it does not go far enough with reform. Our belief is that this framework can bridge between the current world and the one that is in the process of emerging in a way that is both realistic and necessarily fundamental. This paper aims to make a contribution to the learning journey that lies ahead for policymakers, as well as progressive leaders in business and finance." (http://capitalinstitute.org/wp-content/uploads/2015/04/2015-Regenerative-Capitalism-4-20-15-final.pdf)

Discussion

Jo Cofino:

"John Fullerton, says that society’s economic worldview has relied on breaking complex systems down into simpler parts in order to understand and manage them.

For example, this traditional economic view might view automobile manufacturing separately from the mineral mining, petroleum production and workers on which it relies. Moreover, this view might also not acknowledge the impact that automobile manufacturing has on the environment, politics and economics of an area. Holism, on the other hand, would view the entire chain of cause and effect that leads to – and away from – automobile manufacturing.

The Capital Institute report, titled Regenerative Capitalism, emphasizes that the world economic system is closely related to, and dependent upon, the environment. “The failure of modern economic theory to acknowledge this reality has had profound consequences, not the least of which is global climate change,” it says.

According to the Capital Institute, the consequences of this economic worldview are vast and far reaching, encompassing a host of challenges that range from climate change to political instability.


For example, the current capitalist system has created extreme levels of inequality, the report says. This, in turn, has led to a host of ills, including worker abuse, sexism, economic stagnation and more. It could even be considered partly responsible for the rise of terrorism around the world, the report claims. In other words, this inequality has become a threat to the very system that is creating it. Without radical change, the report warns, “the current mainstream capitalist system is under existential threat”.

What is needed now, the Capital Institute argues, is a new systems-based mindset built around the idea of a regenerative economy, “which recognizes that the proper functioning of complex wholes, like an economy, cannot be understood without the ongoing, dynamic relationships among parts that give rise to greater wholes”.

In practice, this might lead to close analysis of supply chains, investigations of the effects of water use, circular economy initiatives, community economic development work or a host of other sustainability efforts.

While some people associate holistic thinking with mystics or hippies, the worldview is borne out in ways that are measurable, precise and empirical. “Universal principles and patterns of systemic health and development actually do exist, and are known to guide behavior in living systems from bacteria to human beings,” the report says.

Holism also can be used to study “nonliving systems from hurricanes to transportation systems and the internet; and societal systems including monetary systems”. Not surprisingly, the theory underlies other scientific and social tools, such as system theory and chaos theory.

This holistic approach flies in the face of a great deal of long-held beliefs. For example, while decision makers usually focus on finding a single ‘right’ answer, holism focuses on finding balanced answers that address seemingly contradictory goals like efficiency and resilience, collaboration and competition, and diversity and coherence. Taken from this perspective, holism wouldn’t approach global economics from a capitalism-or-socialism perspective, but rather from a capitalism-and-socialism perspective.

The report emphasizes the importance of innovation and adaptability over rigid structures and belief systems. It also embraces diversity, suggesting that, instead of trying to find a globalized one-size-fits-all approach to change, it is vital to recognize that each community consists of a “mosaic of peoples, traditions, beliefs, and institutions uniquely shaped by long term pressures of geology, human history, culture, local environment, and changing human needs”.

Ultimately, the report argues, a holistic perspective emphasizes that we are all connected to one another and to the planet, and therefore need to recognize that damaging any part of that web could end up harming every other part.

In business terms, what would this sort of revolutionary shift in business look like? The Capital Institute, which presented a white paper at Yale University’s Center for Business and the Environment on Tuesday, says innovators and entrepreneurs around the world are already responsible for thousands of sustainability initiatives and movements that are helping to re-imagine capitalism, such as social enterprises, B Corps, impact investing, slow food and localism.

The report says that, while some critics view these as “disconnected feel-good activities outside the mainstream capitalist system”, they are, in fact, “in alignment with the regenerative economy framework”. Collectively, it claims, “these forces provide living proof that a new regenerative economy is emergent”.

Beyond movements of change, the institute points to a number of individual initiatives that show how the world could change for the better. For example, Mexico’s Grupo Ecologico has worked to fund impoverished small farmers and ranchers, giving them the economic freedom to preserve and regenerate their own land.

Similarly, Australia’s Bendigo Community Bank splits its net income with local community enterprises. It directs a portion of community branch earnings toward grant making, giving local leaders the opportunity to become active players in their communities.

Community development is also a primary concern for Chicago’s Manufacturing Renaissance, which is forging unusual partnerships among government, labour unions, educators, the private sector, and civil society to create programs that support the region’s advanced manufacturing sectors.

Fullerton says there is great potential ahead if society can change its collective mindset: “This is a monumental challenge that holds the promise of uniting our generation in a shared purpose. We now have a more rigorous understanding of what makes human networks healthy – this alone constitutes an amazing opportunity. It is time to act. Our actions, now, will most certainly define the nobility of our lives and our legacy. This is the great work of our time.” (http://www.theguardian.com/sustainable-business/2015/apr/21/regenerative-economy-holism-economy-climate-change-inequality)