There are five types of sustainable capital from where we derive the goods and services we need to improve the quality of our lives.
Natural Capital is any stock or flow of energy and material that produces goods and services. It includes:
- Resources – renewable and non-renewable materials
- Sinks – that absorb, neutralise or recycle wastes
- Processes – such as climate regulation
Natural capital is the basis not only of production but of life itself!
Human Capital consists of people’s health, knowledge, skills and motivation. All these things are needed for productive work.
Enhancing human capital through education and training is central to a flourishing economy.
Social Capital concerns the institutions that help us maintain and develop human capital in partnership with others; e.g. families, communities, businesses, trade unions, schools, and voluntary organisations.
Manufactured Capital comprises material goods or fixed assets which contribute to the production process rather than being the output itself – e.g. tools, machines and buildings.
Financial Capital plays an important role in our economy, enabling the other types of Capital to be owned and traded. But unlike the other types, it has no real value itself but is representative of natural, human, social or manufactured capital; e.g. shares, bonds or banknotes.
The Strange Failure of the Educated Elite
The chief accomplishment of the current educated elite is that it has produced a bipartisan revolt against itself.
.. A narrative is emerging. It is that the new meritocratic aristocracy has come to look like every other aristocracy. The members of the educated class use their intellectual, financial and social advantages to pass down privilege to their children, creating a hereditary elite that is ever more insulated from the rest of society. We need to build a meritocracy that is true to its values, truly open to all.
.. The real problem with the modern meritocracy can be found in the ideology of meritocracy itself. Meritocracy is a system built on the maximization of individual talent, and that system unwittingly encourages several ruinous beliefs:
.. Exaggerated faith in intelligence. Today’s educated establishment is still basically selected on the basis of I.Q. High I.Q. correlates with career success but is not the crucial quality required for civic leadership. Many of the great failures of the last 50 years, from Vietnam to Watergate to the financial crisis, were caused by extremely intelligent people who didn’t care about the civic consequences of their actions.
.. If you build a society upon this metaphor you will wind up with a society high in narcissism and low in social connection. Life is not really an individual journey. Life is more like settling a sequence of villages.
.. Misplaced notion of the self. Instead of seeing the self as the seat of the soul, the meritocracy sees the self as a vessel of human capital, a series of talents to be cultivated and accomplishments to be celebrated. If you base a society on a conception of self that is about achievement, not character, you will wind up with a society that is demoralized; that puts little emphasis on the sorts of moral systems that create harmony within people, harmony between people and harmony between people and their ultimate purpose.
.. Inability to think institutionally. Previous elites poured themselves into institutions and were pretty good at maintaining existing institutions, like the U.S. Congress, and building new ones, like the postwar global order. The current generation sees institutions as things they pass through on the way to individual success.
.. Some institutions, like Congress and the political parties, have decayed to the point of uselessness, while others, like corporations, lose their generational consciousness and become obsessed with the short term.
.. Diversity for its own sake, without a common telos, is infinitely centrifugal, and leads to social fragmentation.
.. The essential point is this: Those dimwitted, stuck up blue bloods in the old establishment had something we meritocrats lack — a civic consciousness, a sense that we live life embedded in community and nation, that we owe a debt to community and nation and that the essence of the admirable life is community before self.
The Morality of Charles Koch
A libertarian billionaire embraces a Catholic business school for its ethics.
the chairman and chief executive officer of Koch Industries finds two aspects of the Washington-based business school highly attractive: at the personal level, its emphasis on character and virtue; at the social level, its message that the right way to get ahead and contribute to your community is by creating wealth and opportunity for others.
.. for his own hires, Mr. Koch ranks virtue higher than talent. “We believe that talented people with bad values can do far more damage than virtuous people with lesser talents,” he says.
.. “Tim always said, ‘You’re a Catholic but just don’t know it,’ ” says Mr. Koch. While he wouldn’t go that far, he will say he is attracted to Catholic University’s effort to put the human person at the heart of business life.
.. or many on the Catholic left, and increasingly on the Catholic right, the idea that free markets might advance Catholic social teaching is anathema.
.. “One can be in business and pursue bad profit,” Mr. Koch explains. “That is, by practicing cronyism—rigging the system to undermine competition, innovation and opportunity, making others worse off. Good profit should lead you to improve your ability to help others improve their lives. But that’s not how many businesses act today.” For Mr. Koch, everything from protectionist restrictions on goods and services to subsidies for preferred industries to arbitrary licensing requirements promote bad profit by unfairly limiting competition.
.. This distinction between good and bad profit illuminates the fundamental difference between how Mr. Koch regards the market and how his critics do. In the view of the critics, free markets treat working men and women as commodities to be bought and sold, and only through strong government intervention can workers hope for a decent standard of living. In Mr. Koch’s view, the most important capital is human, and the truly free market is vital because it’s the only place where the little guy can use his or her own unique talents to offer better a product or service without being unfairly blocked from competing.
.. workers, whose greatest protection is possible only in a dynamic, growing economy: The ability to tell the boss to “take this job and shove it”—secure in the knowledge that there is a good job available somewhere else.
.. The opposite of market competition is not cooperation, as is often assumed. It’s collusion—and almost always the kind that benefits the haves over the have-nots. Which explains why the moral threat to capitalism these days comes not from socialism but from cronyism and corporate welfare.
.. What he wants to encourage, he says, is an economic system open enough so that ordinary people who work hard and have their own unique abilities can build lives of dignity and hope for their families.
Thoughts on Will Wilkinson’s post on cities
it’s not really cities that are doing well, but certain kinds of cities, suburbs, and towns. It’s really the places with high levels of human capital. To understand the real pattern, read Enrico Moretti’s The New Geography of Jobs. The engineer-heavy suburbs of Fremont or Milpitas are doing great, as are college towns like Ann Arbor and Gainesville. Meanwhile, big cities like Baltimore and St. Louis are still stagnating and crime-ridden, while others such as Detroit and Cleveland have only just now started climbing up out of their Rust Belt doldrums. It’s not city vs. country, it’s innovation hubs vs. old-economy legacy towns.
.. Many American cities remain extremely segregated, especially between black residents and others. Chicago is a thriving, diverse, fun, relatively safe metropolis – unless you go to the poor black areas, in which case you’re in “Chiraq“.
.. the most segregated cities in America include places like Chicago, Milwaukee, Philadelphia, St. Louis, Baltimore, and Cleveland. Those are precisely the places that are having the most difficulty adapting to the new, innovation-based economy. And those tend to be the places where crime rates have rebounded to their early 1990s highs, or never really fell in the first place.
.. Either America succeeds as a polyracial nation, or it doesn’t succeed at all.