Natural Capitalism and Why it is THE solution

I have been asked to perform a Herculean task: Articulate a vision for India. I call it a Herculean task not because my vision lacks in depth, viability or its non-resemblance to plan of action, but, because I have to do what far more qualified minds have been unable to do for fifty odd years! I intend to tackle the task in ways–which at first sight may sound utopian albeit outrageous—but are ultimately are more grounded in reality (because they do not depend on man’s altruistic nature) than any other. India has two problems— a regressive economy and an oppressed ecology.

There is one environmental vision, and only one, that is compatible with all other human values. Only a vision that recognizes and responds to universal human traits will be successful in the long run. Only a vision that accounts for the reality of individual self- interest can be applied in the real world. Only a vision that sees value in human diversity as well as ecological diversity can capture the entrepreneurial potential of the human race. That vision is free-market environmentalism. India needs to recognise this and vigorously adopt and assimilate the virtues of natural capitalism.

India has long been known as a nation where private homes and backyards are beautiful but politically managed parks and streets are a mess. For some the answer is to raise taxes to better support the “cash starved” public sector. For others the answer will be found in stringent regulations covering every aspect of modern society. A better approach would be to discover what makes homes and backyards beautiful and apply the lessons to problem areas. Rather than bureaucratize, we should privatize our efforts to protect social and ecological systems. Behind every resource should stand a private steward, a private owner, willing and legally enabled to protect that resource.

Why do markets function so wonderfully? Simply because financial capital is the most prudently stewarded of all forms of capital. What if all other forms of capital were to be stewarded this way? What if human capital, in the form of labour and intelligence, culture and organisation, were valued much more than mere IPR laws account for? What if manufactured capital, including infrastructure, machines, tools and factories were actually taken care of? What if natural capital made up of resources, living systems and ecosystem services were actually valued in terms of finance?

To all those who respond to misuse, abuse, or misdirection of market forces with a retreat from ‘capitalism’ to heavy handed government regulation I have three suggestions: The first is to employ command and control measures (implement ‘Extended Product Responsibility’ (EPR), tax unsustainable products, subsidise environment friendly products, use the concept of tradable pollution permits and enforce laws), the second is to take heed to Herman Daly’s (Former Economist with the World Bank) advise with regard to economic reform which when summarised states that manufacturing ought to be taxed rather than products, natural capital ought to be priced and most vitally stop subsidising industries who depend on natural capital for raw materials because ultimately you are subsidising deforestation. The third is alternate economics, which includes measures such as greening the GDP, Natural Resource Accounting etc.

Markets are extremely good at what they do- in fact they are so successful that they are often the vehicle for runaway, indiscriminate growth- especially growth that degrades natural capital. The answer, however is not to simply discard market economics, nor reject its valid and important principles or its powerful mechanisms. I suggest we vigorously employ markets for their proper use– as a tool to solve problems we face, while better understanding markets’ boundaries and limitations.

This vision of India engaged in creative privatization may be radical, but it offers great promise of lasting success in dealing with the ever-changing circumstances of human interaction with the natural and social world. Furthermore it respects the most precious unit of society, the individual and his wish for true liberty.