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.
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, 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.
A full version of this paper may be read at www.CapitalInstitute.org/Regenerative-Capitalism