feasta;The Foundation for the Economics of Sustainablity
Cad a dheanfaimid feasta gan adhmid, Ta deireadh na gcoilte ar lar
‘What will we do in the future without wood? The end of the forests has come.’

Paul Hawken
Natural Capitalism
copyright Paul Hawken 1999

Somewhere along the way to free market capitalism the United States became the most wasteful society on the planet. Most of us know it. There is the waste we can see: traffic jams, irreparable VCRs, Styrofoam coffee cups, landfills; the waste we can’t see: Superfund sites, greenhouse gases, radioactive waste, and vagrant chemicals; and the social waste we don't want to think about: homelessness, crime, drug addiction, our forgotten infirm and elderly.

Nationally and globally, we perceive the problems of social and environmental decay as distinct and unconnected. In fact, the two link because of a humbling design flaw deeply imbedded in industrial logic. Pull back the curtain: embarrassingly, the efficient dynamo of industrialism is not there. Even by its own standards, industrialism is extraordinarily inefficient.

Modern industrialism came into being in a world very different from the one we live in today: fewer people, less material well-being, plentiful natural resources. Largely as a result of the successes of industry and capitalism, these conditions have essentially reversed. Today, more people are chasing fewer natural resources.

But industry is still operating by the same rules, using more resources to make fewer people more productive. The result is massive waste—overutilized resources (resulting in decaying living systems) and underutilized people.

Decades from now we may look back at the end of the 20th century and ponder why business and society ignored these inexorable trends for so long—how one species thought it could flourish while nature ebbed. Historians will show, perhaps, how politics, the media, economics, and commerce created an industrial regime that wasted our social and natural environment and called it growth. As author Bill McKibben put it, “The laws of Congress and the laws of physics have grown increasingly divergent, and the laws of physics are not likely to yield.”

The laws being ignored describe how life sustains itself and how our prosperity depends on living systems, our natural capital. Commerce requires living systems for its welfare—it is emblematic of the times we live in that this even needs to be said. Our industrial prowess tends to emphasize and draw attention to what people can do, but tends to ignore what nature does. Commercial institutions, proud of their achievements, do not see that the services provided by healthy living systems—clean air and water, healthy soil, stable climates— are integral to a functioning economy. As our living systems deteriorate, traditional forecasting and business economics become the equivalent of house rules on a sinking cruise ship.

One is tempted to say that there is nothing wrong with capitalism except it has never been attempted. Our current industrial system is based on accounting principles that would bankrupt any company. Conventional economic theories will not guide our future for a simple reason: they have never placed "natural capital" on the balance sheet. When it is, not as a free amenity or a putative infinite supply, but as an integral and valuable part of the production process, everything changes. Prices, costs, and what is and isn’t economically sound alter dramatically.

While there may be no "right" way to value a forest or a river, there is  a wrong way which is to give it no value at all.  If we have doubts about how to value a 700-year-old tree, we need only ask how much it would cost to make a new one.  Or a new river, or even a new atmosphere.

Industries destroy natural capital because they have historically benefited from doing so. As businesses successfully created more goods and jobs, consumer demand soared, compounding the destruction of natural capital. All that is about to change. The levels of waste we create may seem hopeless and disheartening, but they also describe a cornucopia of possibility and opportunity.

Natural Capital

Everyone is familiar with the traditional definition of capital as accumulated wealth in the form of investments, factories, and equipment. "Natural capital," on the other hand, comprises the resources we use, both nonrenewable (oil, coal, metal ore) and renewable (forests, fisheries, grasslands). Although we usually think of renewable resources in terms of desired materials such as wood or fish, their most important value is the services they provide.  Living systems feed us, protect us, heal us, clean the nest, let us breathe. These services are related to, but distinct from, resources. They are not pulpwood but forest cover, not food but topsoil. They are the "income" derived from a healthy environment: clean air and water, climate stabilization, rainfall, ocean productivity, fertile soil, watersheds, and the lesser appreciated functions of the environment such as processing waste, both natural and industrial. A recent book edited by Gretchen C. Daily, Nature's Services, identifies trillions of dollars of critical ecosystem services received annually by commerce.

If there is any doubt as to the innate value of ecosystem services, then the $200 million Biosphere II experiment stands as a reality check. In yrtk, eight people were sealed into a glass-enclosed, three-acre living system, where they expected to remain alive and healthy for two years. Instead, air quality plummeted, carbon dioxide levels rose, and oxygen had to  be pumped in from the outside to keep the inhabitants alive. Nitrous oxide rose to levels that inhibited brain function. Cockroaches flourished while insect pollinators died, vines choked out crops and trees, and nutrients polluted the water so that it had to be hand filtered to be drinkable. Of the original 25 small animal species in Biosphere II, 19 became extinct. At the end of eighteen months, the oxygen-starved humans were hypoxic from living at the equivalent altitude of 17,500 ft.  Of course, design flaws are inherent in any prototype, but the fact remains that $200 million could not maintain a functioning ecosystem for eight people for 18 months. We add eight people to the planet every three seconds.

The lesson of Biosphere II is that there are no man-made substitutes for essential natural services. We have not come up with an economical way to manufacture watersheds, gene pools, topsoil, wetlands, river systems, pollinators, fisheries, or tropospheres. Technological fixes can not solve problems of soil fertility, clean air, biological diversity, pure water, climatic stability, and importantly, the capacity of the environment to absorb 30 billion tons of waste created annually in America alone.

Natural capital as a limiting factor

Until the 1970s, the concept of natural capital was largely irrelevant to business planning, and it still is in most companies. Throughout the industrial revolution, manufactured capital—money, factories, etc.—was the principal factor in industrial production, and natural capital was perceived as a marginal contributor. The exclusion of natural capital from balance sheets was an understandable omission. There was so much of it, it didn't seem worth counting. Not any longer.

Historically, economic development has faced a number of limiting factors, including labor, energy resources, machinery, and financial capital. A limiting factor is one that  prevents a system from surviving or growing if it is lacking.  If marooned in a snowstorm, you need water, food, and warmth to survive. Having more of one factor cannot compensate for the lack of the other. Drinking more water will not make up for lack of clothing if you are freezing.

In the past, by increasing the limiting factor, society was able to continue to develop economically. It wasn't always pretty. Labor shortages were “satisfied” by slaves, immigration, and high birth rates. Increased energy demands were met by coal, oil, and gas. The need for labor-saving devices provoked the invention of steam engines, spinning jennies, cotton gins, and telegraphy. Financial capital became universally accessible through central banks, credit, stock exchanges, and currency exchange mechanisms. Like the person in the snow, the economy needs all factors to prosper.

Because economies grow and change, new limiting factors occasionally emerge. When they do, the rules of the economy change and massive restructuring occurs. Nothing works as before. Behavior that used to be economically sound becomes unsound, even destructive.

As we approach the 21st century, economist Herman Daly cautions that we are facing a historic juncture in which, for the first time, the limits to increased prosperity are not man-made capital but natural capital. The limits to increased harvests of fish are not boats but productive fisheries; the limits to irrigation are not pumps or electricity, but viable aquifers; the limits to pulp and lumber production in many tropical areas are not sawmills but forests.

Like all previous limiting factors, the emergence of natural capital will pose a problem for reactionary institutions and organizations. For those willing to embrace the challenges of a new economic era, however, it represents an enormous opportunity.

Bad information

The main reason that the value of natural capital is not more apparent is that it is masked by a financial system that gives us improper information. It's a classic case of “garbage in, garbage out.” Money and prices and markets are not giving us accurate information about how much our suburbs, freeways, and spandex cost. Instead, everything else is giving us accurate information: our beleaguered air and watersheds, our overworked soils, our decimated inner cities—all of these are providing the information that our prices should be giving us but do not.

Let's begin with a startling possibility: the United States economy may not be growing at all, and it may have ceased growing nearly 25 years ago.  Obviously, we are not talking about the Gross Domestic Product measured in dollars, which has limped along at TKgrowth per year since 1973. We are talking about improved lives, better infrastructure, higher real wages, more leisure and family time, and greater economic security.

The logic here is simple, although unorthodox. We don't know if America is growing because the indices we rely upon, such as the GDP, don't measure growth. The GDP measures money transactions on the assumption that every time a dollar changes hands, economic growth occurs. But there is a world of difference between financial exchanges and growth. Compare an addition to your home to a two month stay in the hospital for the brain injuries you got when you were mugged. Say both cost the same. Which is growth? The GDP makes no distinction. Or the president announces that he will authorize $10 billion for new prisons to help stem the tide of crime. Is the $10 billion growth? Or a train overturns next to the Sacramento River and spills 10,000 gallons of atrazine, poisoning all the fish for 30 miles downstream. Money pours into clean-ups, hatchery releases, announcements warning people about tainted fish, and lawsuits against the railroad and the chemical company. Growth? Or loss?

By current economic definitions, most industrial, environmental, and social waste is counted as GDP right along with bananas, cars, and Barbie Dolls. Growth includes all expenditures, regardless of whether society benefits or loses. This includes emergency rooms, prisons, toxic clean-ups, homeless shelters, lawsuits, cancer treatments, divorces, and every piece of litter along the side of every highway. Instead of counting decay as economic growth, we need to subtract decline from revenue to see if we are getting ahead or falling behind.  Unfortunately, where the GDP is concerned, the government uses a calculator with no minus signs.

The United States, which prides itself on being the richest country in the world, cannot balance its budgets, pay for education, or take care of the aged and infirm. Where is our wealth? How is it that we have a growing economy and a growing underclass?

In politics, they say follow the money. What you find is that the waste in resources and people shows up in our overall gross domestic product. Of the $8 trillion spent every year in the United States, we waste at least $2 trillion annually. What is meant by waste? Money spent where the buyer gets no value. To wit: Sitting in a traffic jam on a congested freeway is waste.
Get your calculator:

• Highway congestion costs $100 billion per year in lost productivity not including gasoline, accidents, and maintenance costs. Highway accidents cost $358 billion per year including pain and suffering of $228 billion and property damage of $40 billion. We spend another $85 billion parking our cars at places we could walk to if we had suitable land-use policies. Other hidden social costs of driving including disease, air pollution crop and forest damage, not paid by the motorist, are $300 billion.

• We spend $50 billion a year to guard sea lanes and to protect oil sources we would not need if President Reagan had not gutted emissions standards. We spend nearly $200 billion a year in energy costs because we do not employ the same efficiency standards as Japan in our businesses and homes.

• In health, we spend $130 billion on non-essential or fraudulent tests and another $140 billion on inflated medical overhead generated by the current insurance system. We spend $80 billion on obesity, $117.4 billion on heart disease, and another $50 billion to $100 billion on costs related to polluted air. Substance abuse costs $77 billion.

• Legal, accounting, audit, bookkeeping and record keeping costs for complying with an unnecessarily complex and unenforceable tax code cost citizens at least $250 billion a year; failure to comply with and an overly complex tax code—intentional or unintentional—costs another $150 billion.

• Crime costs $450 billion a year; lawsuits, $300 billion.

These figures don’t include costs for Superfund sites, cleanup of nuclear weapons facilities (estimated as high as $500 billion), the annual cost of 31.5 billion tons of material waste, subsidies to environmentally damaging industries, topsoil loss, loss of fisheries, damage from overgrazing, water pollution, government waste, gambling, or the social costs of unemployment. It is entirely conceivable that one-half of the entire GDP is waste.

If we could shift a portion of the wasted expenditures to more productive uses, we would have the money to balance our budgets, take care of those who cannot care for themselves, raise wonderfully educated and responsible children, restore degraded environments, and help the less fortunate abroad. If, for example, we had simply adopted stricter energy standards in 1974—standards in use by Japan—and applied the savings to the national debt, we would not have a national deficit today.

With an accurate chart of accounts, an avoided flaw becomes apparent: depleting the environment to produce more output per worker to reduce labor costs exhausts the environment and society, creating in its wake a plethora of expensive, intractable, wasting symptoms.  In a world where one billion willing workers cannot find a family-wage job or any employment at all, it is time to state the obvious: we cannot by any means— monetarily, governmentally, or charitably—create a sense of value and dignity in people's lives when we are simultaneously creating a society that doesn't need them. If people do not feel valuable, they will act out society's verdict in ways that are manifest and sometimes shocking. Treating the symptoms is paying for denial. Robert Strickland, a pioneer in working with inner city children, once said that "you can't teach algebra to someone who doesn't want to be here."  He meant that his kids don't want to be here at all, alive, anywhere on earth. That is how bad they feel. They try to tell us but we can't hear them. They continuously raise the level of risk in their behavior—unprotected sex, drugs, violence—until we notice. By then it is usually a crime and we build more jails, blame the victims and lump it under economic growth.

Fresh Kills, on Staten Island, New York is the world’s largest landfill, providing a repository for the garbage of New York City. It covers 4 square miles and is over 100 feet deep. It contains 2.9 billion cubic feet of trash, 100 million tons of newspaper, paint cans, potato peels, cigarette butts, chicken bones, dryer lint, and an occasional murder victim. When it is closed in 2005, Fresh Kills will rise 505 feet above sea level, making it the tallest mountain on the eastern coastal plain. But as massive as Fresh Kills is, it takes in just .002 percent of the waste generated in the United States. Every day, Americans dispose an additional 45,000 times as much waste elsewhere.

Americans, who have the largest material requirements in the world, directly or indirectly use on average 123 pounds of material every day, or about 22 tons per year. This consumption consists of fuels in the form of gas, coal, and oil; quarried materials such as stone, gravel and sand; industrial minerals such as phosphate, cement, and gypsum; industrial metals such as copper and aluminum; forestry products, such as sawn timber, pulpwood for paper, and firewood, and agricultural products: milk, meat, eggs, grain, hay, and produce.

The attendant waste of our cumulative shopping spree results in 3.5 billion pounds (920 million square yards) of carpet land-filled every year, two-and-a-half trillion pounds of carbon dioxide, and 19 billion pounds of polystyrene peanuts.  We waste 28 billion pounds of food at home, 360 billion pounds of organic and inorganic chemicals used for manufacturing and processing, 710 billion pounds of hazardous waste generated by chemical production, and 3.7 trillion pounds of construction debris. The figure does not count wastes developed in extracting gas, coal, oil, and minerals that would add another 16.8 billion tons per year. Furthermore, domestic figures for material flows do not account for wastes generated overseas on our behalf. For example, the Freeport-McMoran gold mine in Irian Jaya annually generates 400 pounds of tailings and toxic waste for every man, woman and child in the United States. Only a tiny fraction of the 130,000 tons of daily waste material flow comes to the United States as gold. The rest remains there.

Total industrial wastes, excluding waste water, exceed 63 trillion pounds a year in the United States. (A trillion is a big number. To count to 63 trillion at the rate of one per second would require the cumulative and total lifetimes of 30,000 people). If you add waste water, the total flow of waste in the American industrial system is 250 trillion pounds. Less than 2 percent of the total waste stream is actually recycled, primarily paper, glass, plastic, aluminum, and steel. In an American decade, 630 trillion pounds of molecules will have been transformed into nonproductive solids and gases. What this means is for every 100 pounds of product manufactured in the United States, 3,200 pounds of waste is created. We are far better at making waste than at making products.

Wasting resources means wasting people

The main impetus of industrialism has always been to increase the productivity of workers, not resources. And for good reason. Resource prices have plummeted for two hundred years—due in no small part to the extraordinary increases in our ability to extract, harvest, ship, mine, and exploit resources. If the competitive advantage in business goes to the low-cost provider, and resources are cheap, then business will naturally seek to use more and more resources in order to maximize worker productivity.

Such a strategy was eminently sensible when the population was relatively small and resources were plentiful. But with respect to meeting the needs of the future, contemporary business economics is pre-Copernican. We cannot salve the social wounds or "save" the environment as long as we cling to an outdated industrial assumption that the summum bonum of commercial enterprise is to use more stuff and fewer people. At some point, we will realize that using more of what we have less of (natural capital) to use less of what we have more of (people) is backwards. While high levels of labor productivity are critical to income and economic well-being and should be maintained, labor productivity that corrodes society is tantamount to burning furniture to heat the house.

The irony is that our pursuit of greater labor productivity at all costs is not only depleting the environment, it is also depleting people. Just as overproduction can exhaust topsoil, overproductivity can exhaust a work force.

When the galleons of the conquistadores first appeared on coastal horizons in the early 16th century, native populations could not comprehend their import because the size of the ships was outside their frame of reference. Likewise, we do not perceive the nature, or the threat, in present employment patterns. According to the International Labor Organization in Geneva, 1 billion people, about 30 percent of the world’s labor force, cannot work or have work that is so marginal and menial that they cannot support themselves or their families. The United States is proud of its 4.8 percent unemployment rate and should be—European unemployment hovers at twice this rate. Official figures mask a more complex picture. Of the 127 million people working, 38 million are part-time, and another 35 million have full-time work that doesn’t pay enough to support a family. Then there is the actual unemployed, 7.4 million and another 7 million who are discouraged, forcibly retired, or work as temps.  An additional 19 million people work in retail and earn less than $10,000 per year, usually without any type of health of retirement benefits. For the majority of workers, wages are no higher today than they were in 1973.

Employment percentages also mask the lives of inner city residents. In When Work Disappears, William Julius Wilson cites 15 predominantly black communities in Chicago where only 37 percent of the adults are employed. Between in 1967 and 1987 Chicago lost 360,000 manufacturing jobs, New York over 500,000. The irony of urban America is that 50 years after World War II, Detroit, Philadelphia, and Newark look like they were bombed, while Dresden, London, and Berlin are livable and bustling.

The United States has quietly surpassed the erstwhile Soviet Union and its Gulag as being the world’s largest penal colony. Nearly 5 million men are in prison, sentenced, waiting for trial, on probation or parole. We have become so inured to criminality that rural counties seek prison construction under the rubric “economic development.” Indeed, between 1990 and 1994, the prison industry grew at an annual rate of 34 percent; crime and crime-related expenses are now estimated to constitute 7 percent of the U.S. economy.

Is there not something terribly wrong in a society that, at astounding costs, stores so many people in concrete bunkers where they learn the finer arts of crime? (There is no cost difference between incarceration and an Ivy League education; the main difference is curriculum.) While we can reasonably place individual blame on each drug user, felon, and mugger, or anyone who violates civil and criminal law, assigning individual responsibility should not mean being blind to a systems view of cause and effect.

The underlying assumption that greater productivity would lead to greater leisure and well-being, while true for many decades, has become a bad joke. In the United States, those who are employed, and presumably becoming more productive, find they are working 100 to 200 hours more per year than 20 years ago. Yet real incomes in the United States do not exceed 1973 levels.

In 1994, I asked a room full of senior executives from Fortune 500 companies the following questions: Do you want to work harder in five years than you are today? Do you know anyone in your office who is a slacker? Do you know any parents in your company who are spending too much time with their kids? There was no response except a few embarrassed laughs.

Then it was quiet—perhaps numb is a better word.

Meanwhile, those whose jobs have been downsized, re-engineered, or restructured out of existence are being told—as are millions of youth around the world—that we have created an economic system so ingenious and clever that they are not needed, except possibly to perform menial service jobs.  Globally, unemployment and disemployment have been rising faster than employment for more than 25 years. Nearly one-third of the world’s work force—one billion willing workers—sense they have no value in the present economic scheme.

The theologian Matthew Fox has pointed out that we are the only species without full employment. Yet we are doggedly pursuing technologies that will make that ever more so, technologies that depend on more stuff and fewer people.

Today we are firing people, perfectly capable people, to wring out one more wave of profits. Some of the restructuring is necessary and overdue. But as physicists Amory Lovins and Ernst von Wiesäcker have repeatedly advised, what we should be doing is firing the unproductive kilowatts, barrels of oil, tons of material, and pulp from old-growth forests—and hiring more people to do so.

Thankfully, there is another possibility: radical reductions in resource use that require, on the whole, more employed persons and reduce the impact we have on the environment and natural capital on which our lives and wealth depend. We can grow, use fewer resources, make more resources available to those who need them in the developing world, lower taxes, increase per capita spending on the needy, end federal deficits, reduce the size of government, and begin to restore damaged environments, both natural and social.

At this point, the reader should feel skeptical.  The last summary is too hopeful and promises too much. If economic alternatives are this attractive, why aren't we doing them now? A good question. I will try to answer that question. Lest it be said that these proposals are Pollyannish, know that my optimism arises from the magnitude of the problem, not from the ease of the solutions.

Waste is too expensive; it's cheaper to do the right thing.

Resource Productivity

Economists argue that rational markets make this the most efficient of all possible economies right now. That theory works as long as you use financial efficiency as the sole metric and ignore physics, biology, and commonsense. The physics of energy and mass conservation, along with the laws of entropy, are the arbiters of efficiency, not Forbes or the Dow Jones or the Federal Reserve. The economic issue is how much work (value) does society get from its materials and energy? This is a very different question than asking how much return can I get out of money. If molecules (matter) or energy were already deployed efficiently, it would be prima facie evidence that radical increases in resource productivity are unrealistic. The molecular trail leads to the opposite conclusion. Cars are barely 1 percent efficient thermodynamically meaning that for every one hundred gallons of gasoline, only one gallon of actual work is done moving the passengers. That looks great when compared to pesticides that are about 0.0003% efficient (only 1/30,000th of pesticides kill the insect in question; the remainder can kill things that were not in question).  Approximately 92 percent of the energy used in an incandescent light bulb heats up the filament so that it can convert 8 percent of the energy into light. (It has been described as a space heater disguised as a light bulb.) Modern carpeting remains on the floor for 8 to 12 years, after which it remains in landfills for twenty thousand years or more—less than 0.06% efficient. According to Robert Ayres, a leader in studying industrial metabolism, about 94% of the materials extracted for use in manufacturing durable products become waste before the product is manufactured. More waste is generated in production, and most of that is lost unless the product is reused and recycled. Overall, America's material and energy efficiency is no more than one or two percent. In other words, American industry uses as much as 10 to 100 times more material and energy than required to deliver the services we presently buy and receive.

The idea of increasing resource productivity started in 1976, when Amory Lovins published his now famous essay “Energy Strategy: The Road Not Taken?” Lovins’s argument was simple: instead of pursuing a “hard path” of constantly increasing energy supply, he proposed that the real issue was how best to provide the energy's “end-use” at the least cost. Consumers are not interested in gigajoules, watts, or BTUs, he argued. They want well-illuminated workspaces, hot showers, comfortable homes, effective transport. People want the service energy provides and an intelligent energy system would provide the service at the lowest cost. Building more nuclear power plants to send more heat into the night air through uninsulated homes was the “supply-at-any-cost” doctrine that existed then and still lingers today. Lovins contended that there was more money to made by saving energy than wasting it, that there is more energy to be found in the attics of American homes than all the oil buried in Alaska. His predictions proved correct although his proposals were largely unheeded by government. Today, the nuclear power industry has become moribund, not because of protests but because of its inefficiency.

In 1976, it was argued whether we could achieve 30 percent energy savings in the United States. Twenty-one years later, having already achieved savings of $180 billion a year—more than 30% over 1976 levels—experts now wonder whether an additional 50 or 90 percent in energy savings can be achieved. Lovins thinks the possible savings might be as high as 99 percent. That may sound more ridiculous, but certainly no more so than the claim that textile workers could use gears and motors to increase their efficiency a hundredfold would have sounded at the beginning of the Industrial Revolution. The resource productivity revolution is at a similar threshold. State-of-the-shelf technologies—fans, lights, pumps, super-efficient windows, motors, etc. which are already in place, ready-to-buy with proven track record—exist today that combined with intelligent mechanical and building design could reduce American energy consumption by 90 percent. State-of-the-art technologies, which are just being introduced, could reduce consumption still further. In some cases—windpower, for example—the technologies are not only more efficient, and far less polluting, but more labor-intensive. Wind energy requires more labor than coal-generated electricity, but is now competitive with it on a real cost basis.

The resource revolution is starting to show up in all areas of industry. In the area of forest products, clearinghouses are identifying hundreds of techniques, substitutes, and processes that can reduce the use of timber and pulpwood 75 to 90 percent without diminishing the quality of housing, the services provided by books and paper, or the convenience of a tissue. In housing, there are dozens of new local or composite materials that can replace studs, plywood, and concrete, including materials made from rice and wheat straw, waste paper, and earth. Herman Miller is designing furniture that can be reused and remanufactured a number of times. Steelcase is selling fabrics that can be easily composted.

While fuel-cell powered hybrid-electric cars will soon roll off production lines, “new urbanist” architects such as Peter Calthorpe, Andres Duany, Elizabeth Plater-Zyberk, et al. are designing communities that could eliminate 50 percent to 80 percent of driving needs. (In one Minneapolis study, it was estimated that corner grocery stores alone would reduce gasoline usage by 10 percent.) Internet-based transactions may render many shopping malls obsolete. Down the road there will be quantum semiconductors that store vast amounts of information on chips no bigger than a dot; diodes that emit light for 20 years without bulbs; ultrasound washing machines that use no water, heat, or soap; hyperlight materials stronger than steel; deprintable and reprintable paper; design-with-nature biological technologies that reduce or eliminate the need for insecticides and fertilizers; plastics that are both reusable and compostable; piezoelectric polymers that can generate electricity from the heel of your shoe or the force of a wave; and roofs and roads that do double-duty as solar energy collectors. Some of these technologies, of course, may turn out to be impractical or to have unwanted side effects. Nevertheless, these and thousands more are lining up like salmon to swim upstream toward greater resource productivity.

Resource Politics

How can government help speed these entrepreneurial "salmon" along? The most fundamental policy implication is simple to envision, but difficult to execute: We have to revise the tax system to stop subsidizing behaviors that we do not want—depletion and pollution— and taxing behaviors that we do want—income and work. We need, incrementally but firmly, to transform the sticks and carrots that guide business.

Taxes and subsidies are information. Everybody in the world, whether rich or poor, acts on that information every day. Taxes make something more expensive to buy; subsidies artificially lower prices. In the United States, we generally like to subsidize environmental exploitation, cars, big corporations, and technological boondoggles. (We don’t like to subsidize clean technologies that will lead to more jobs and innovation because that is supposed to be left to the “market.”) Specifically, we subsidize carbon-based energy production, particularly oil and coal; we massively subsidize a transport system that has led to suburban sprawl and urban decay; we subsidize risky technologies like nuclear fission and pie-in-the-sky weapons systems like Star Wars. (Between 1946 and 1961 the Atomic Energy Commission spent $1.5 billion to develop a nuclear-powered airplane that was so laden with lead shielding, it could not get off the ground.)

We subsidize the disposal of waste in all its myriad forms—from landfills, to Superfund clean-ups, to deep well injection, to storage of nuclear waste—encouraging in the process an economy where 80 percent of what we make is thrown away within six months of production.

In farming the U.S. government covers all the bases. We subsidize agricultural production, agricultural nonproduction, agricultural destruction and agricultural restoration. We provide price supports to sugar cane growers and we subsidize the restoration of the Everglades (which are being destroyed by sugar growers). We subsidize cattle grazing on public lands, and we pay for soil conservation. We subsidize energy costs so that farmers can deplete aquifers to grow alfalfa to make milk that we store in warehouses as surplus cheese that does not get to the hungry.

Then there is the money we donate to dying industries, federal insurance provided to flood plain developers, cheap land leases to ski resorts, deposit insurance given to felons controlling savings and loans, roads into wilderness areas so that privately held forest products companies can buy wood at a fraction of replacement cost, and money given to defense suppliers who have provided the Pentagon $36 billion of inventory and parts that are not needed.

Those are some of the activities we encourage. What we discourage, apparently, is work and social welfare. Our main source of tax revenue is taxes on labor and income, thereby discouraging both. In 1994, the federal government raised $1.25 trillion in taxes. Over 80 percent of that revenue came from taxes on labor—income taxes and social security taxes. Another 10 percent came from corporate income tax. By taxing labor heavily in the US (though less heavily than Europe), we encourage business to not employ people.

To move towards radical increases in resource productivity will require a tax shift away from the social “good” of labor, towards the social “bads” of resource exploitation, pollution, fossil fuels, and waste.  Revenue neutral means for every dollar of taxation that is added to resources or waste, one dollar is removed from taxes on labor and capital formation.  A tax shift does not shift who pays the taxes but on what is taxed. Work is freed from taxation; higher taxes on waste and wasted resources make up the difference. As the cost of waste and resources increase, business saves money by hiring the now less expensive labor to save more expensive resources. As business saves by increasing resource productivity, higher taxes will result because there will be a smaller base of resources and waste to tax. That in turn, will spur further use of labor. The shift in cost from work to waste becomes ever more pranced. A positive feedback loop develops which incrementally generates more demand for labor while reducing demand for resources.

A tax shift should be steadily implemented over time so that business has a clear horizon in which to make strategic investments. Further, the time span, fifteen to twenty years, is long enough so that current capital investments can continue to be depreciated over their useful life. The goal is to achieve zero taxation on employees, either on income or on employer contribution. No revenue neutral tax shift is uniform, and by itself, without adjustments for lower incomes, it could be regressive, punishing those least able to pay. A tax shift should leave the tax burden on different income groups where it is now, using any of numerous means available to accomplish this. The important element to change is the purpose of the system because other than corporate welfare; the Internal Revenue Code, with over nine thousand sections, has no mission or goal. The only incentive in the existing tax system is to cheat or hire tax lawyers.

Of course, a tax shift alone will not change the way business operates; it must be accompanied by a broad array of policy choices that include changes in global trade, education, economic development, econometrics (including measures of growth and well-being), and scientific research. Also critical to success will be reversing the wrenching breakdown of our democracy, which means addressing campaign finance reform and media concentration.

It is easier, as the saying goes, to ride a horse in the direction it is going. The inevitable increases in the costs of natural capital should motivate us to get ahead of the curve. By shifting taxes to resources, we create powerful incentives to use fewer resources. Using less resources is not—as some in industry will doubtless claim— a question of diminishing standards of living. It means an explosion of innovation, techniques, and processes that are more effective than what they replace.

Some economists will say that we should let the markets dictate costs and that using taxation to promote particular outcomes is interventionist. But all tax systems are interventionist; the question is not whether to intervene but how to intervene. The current system is dissociative. We know the price of everything but the cost of nothing. Price is what the buyer pays. Cost is what society pays, here or elsewhere, now or into the future. A tax system should integrate cost to price. It is estimated that gasoline costs Americans $6 to $7 a gallon when all costs are considered. (Kuwaiti oil, for example, costs nearly $100 a barrel: $25 to the Kuwaitis and $75 to the Pentagon to keep the Straits of Hormuz open to tanker traffic.) Similarly, a pesticide may be priced at $35 per gallon, but what does it cost society as it makes it way into wells, rivers, and bloodstreams?

The Future

Just as the outcome of industrialization was inconceivable to virtually everyone in 1750, the prospect of a resource productivity revolution in the next century is similarly unimaginable: an economy that uses progressively less material and energy year after year, in which the quality of services received by citizens continues to improve and increase; an economy where environmental deterioration is arrested and reversed as we invest in increasing our natural capital; and finally, a society where there is more useful and worthy work than people available to do it.

These ideas will be attacked as utopian but this is not the case. The human condition will remain. We will still be improvident and wise, just and foolish. Natural capitalism is not about making sudden changes, uprooting institutions, or fomenting social upheaval for a new social order. In fact, these consequences are more likely if we do not credibly address fundamental problems. Natural capitalism is about small, critical details and choices that can start to tip economic and social outcomes in positive ways. It is about redesigning our world from the bottom up, piece-by-piece, process-by-process, step-by-step, something that is already occurring. No economic system is a panacea or can make a better person, but as the 20th century has painfully taught us, a bad system can certainly destroy good people.

Natural capitalism may not guarantee particular outcomes, but it will ensure that economic systems more closely mimic the biological systems that have successfully adapted to dynamic changes over millennia. After all, this is at the heart of capitalism, the idea that markets have a power that mimics life and evolution. There should be an expansion of this logic, not a retraction of it.

For business, the opportunities are clear, and enormous. With population doubling sometime in the next century, and per capita resource availability dropping by one-half to three-fourths over that period, which factor in production will go up in value and which will go down?  This basic shift in capital availability is inexorable.

As the century ends, it is ironic that organizations like Earth First, Rainforest Action Network and Greenpeace have become the real capitalists. By addressing fisheries, wildlife corridors, primary forests, greenhouse gases, and chemical contamination, they are doing more to preserve a viable business future than are all the chambers of commerce put together. While business hotly contests the idea of resource shortages, there is not one credible scientist or corporation who argues that we are not losing the living systems that provide us with trillions of dollars of natural capital. We are losing our soils, forest cover, aquifers, grasslands, oceans, rivers, and climate at increasing rates. Moreover, these services are diminishing at a time when global population is in the process of doubling and demands for services will quadruple.

 Looking ahead, if the developing world were to share the same standard of living as we do, and if living standards and population double over the next 50 years as is widely predicted, we would have to increase our resource use (and attendant waste) by a factor of 16 in four decades.  Publicly, governments, the United Nations, and commerce all work towards this end. Privately, no one believes that we can increase industrial throughput by a factor of 16. It is not physically possible on a non-growing earth whose life support systems are starting to fray.

It is difficult for economists, whose important theories originated during a time of resource abundance, to understand that modern industrialism is laying the groundwork for the next stage in economic evolution. This next level, whatever it may be called, is being brought about by powerful and much-delayed feedback from living systems. The industrialized world no longer automatically provides workers with the amenities and the "better life" promised. As we surrender our living systems, social stability,  fiscal soundness, and personal health to outmoded economic assumptions, we are hoping that conventional economic growth will save us. If economic "growth" does save us, it will be anything but conventional.

So why be hopeful? Because the solution is profitable, creative, and eminently possible. Societies act stupidly for periods of time, but eventually they move to the path of least economic resistance. The loss of natural capital services, lamentable as it has been and is, affects costs. So far, we have created convoluted economic theories and accounting systems to work around the problem. You can win a Nobel Prize in Economics and travel to the Royal Palace in Stockholm in a gilded, horse-driven brougham believing that ancient forests are more valuable in liquidation as fruit crates and yellow pages than as a going and growing concern. It is a matter of time, I would estimate a few decades, before we realize collectively what we have always known individually, that it is less expensive to take care of something—a roof, a car, or the earth—than to let it decay and try to fix it later.

Away from the shrill divisiveness of media and politics, American people are remarkably consistent in what kind of country they envision for their children and grandchildren. The benefits of resource productivity align almost perfectly with what American voters say that they want: better schools, a better environment, safer communities, more economic security, stronger families and family support, freer markets, less regulation, less taxes, smaller government, and more local control.

The future belongs to those who understand that doing more with less is compassionate, prosperous, and enduring, and thus more intelligent, even competitive.

copyright Paul Hawken. 1999