Introduction: From Monocapitalism to Multicapitalism — 21st Century System Value Creation
By Bill Baue, Senior Director, r3.0
The Introduction of the r3.0 White Paper, From Monocapitalism to Multicapitalism — 21st Century System Value Creation.
Suddenly everyone was saying capitalism had failed. We started worrying about pitchforks.
Anonymous Wall Street chief executive, 2019[i]
Worldview. Paradigm. Frame. These are cousin concepts. What matters more than the one you choose to use is to realise that you have one in the first place, because then you have the power to question and change it…
Kate Raworth, 2017[ii]
The difficulty lies not in the new ideas, but in the old ones which ramify, for those of us brought up as most of us have been, into the very corners of our minds.
John Maynard Keynes, 1936[iii]
Misperception is the problem to be overcome by a paradigm shift, and only a paradigm shift can overcome it. Misperception will tend to motivate efforts to pursue ostensible “solutions” that will, when the circumstances are so much different from what people suppose them to be, make matters worse instead of better.
William Catton, 1980[iv]
You could say paradigms are harder to change than anything else about a system… But there’s nothing physical or expensive or even slow in the process of paradigm change. In a single individual, it can happen in a millisecond. All it takes is a click in the mind, a falling of scales from eyes, a new way of seeing.
Donella Meadows, 1999[v]
“Does capitalism need saving from itself?” asked a late-2019 Financial Times headline to a column by Editorial Board Chair Gillian Tett.[vi] This sentiment encapsulates the zeitgeist of our time — when even the staunchest of pro-capitalist institutions questions whether capitalism is a dying paradigm, in need of replacement with a new paradigm better suited to meet the challenges of our epoch (having shifted from the Holocene to the Anthropocene.) [vii]
Indeed, in the face of a climate emergency burning continents[viii] and threatening to hurtle us into a “hothouse earth,”[ix] a species extinction rate a thousand-fold higher than the background rate,[x] a global pandemic,[xi] rising global economic inequality that “can lead to various sorts of political, economic, and social catastrophes,”[xii] and a host of other systemic dysfunctions, even mainstream capitalists increasingly embrace the idea that capitalism needs transformation.[xiii] Many believe that capitalism, as currently practiced, is the root cause humanity’s predicament — which extends as far as the existential risk of civilization collapses and even possible extinction.[xiv] At the same time, if the constructive elements of capitalism can be configured properly, its power to operate at the proper pace, scale, and scope shows promise to serve as a savior.
“As currently practiced” is the key variable. In current practice, capitalism focuses monolithically on financial growth, hewing to the assumption that this is the most efficient engine of progress. But is that actually true — does economic growth lead inexorably to progress? The research suggests otherwise. Financial growth that exacerbates income and wealth disparity, for example, ends up undermining the wellbeing of both the poor and the rich.[xv] Researchers propose instead a kind of “spirit level” of balance when it comes to material distribution. (See Figure 1 below)
Other research shows how Gross Domestic Product (GDP — which primarily measures economic growth) and Genuine Progress Indicators (GPI — which measures well-being more broadly, inclusive of economic growth) rise in tandem until about $7k per capita, when the correlation plateaus, before falling — suggesting limits to benefits of economic growth.[xvii] (See Figure 2 below)
Personal income studies find a similar Hubbert Curve-like rise-peak-fall dynamic.[xix] A 2019 study finds alignment between rising income and greater emotional wellbeing until a kind of “peak happiness” level of $75k a year, which the researchers call “satiation.” Broadly speaking, “incomes beyond satiation are associated with lower life evaluations,” the researchers say. In other words, when our primary economic needs and wants have been satisfied, richer is actually worse — yet another limit to economic growth as an unalloyed “good.”[xx]
In addition to these socioeconomic problems, financial growth also closely correlates with ecological degeneration, which likewise ultimately undermines the wellbeing of both rich and poor. The Great Acceleration graphs for earth system (and socioeconomic) trends parallel global GDP growth graphs — they all resemble hockey sticks, with unsustainable upward trajectories.[xxi] As the old saying goes: what goes up must come down. (See Figures 3 and 4 below.)
Perhaps the fatal flaw is not capitalism per se, but rather its current practice — its monolithic focus on financial growth. In other words, perhaps the problem is Monocapitalism. And following the next logical step, perhaps the solution is Multicapitalism. These two terms were coined in 2014 by Mark McElroy and Martin Thomas, drawing on the long history of capital theory.[xxiv] With subsequent refinements, the terms are defined as follows:
- Monocapitalism: capitalism designed to grow and concentrate one form of vital capital — financial capital — very often at the expense of the ongoing viability of other capitals;
- Multicapitalism: capitalism designed to maintain the carrying capacities of all vital capitals (natural, human, social, intellectual, constructed, and financial) respecting normative thresholds.[xxv]
The definition of Multicapitalism begs the question: what are “normative thresholds” that define the “carrying capacities” of the vital capitals? It is perhaps easiest to explain in the context of the Coronavirus pandemic.
The meme in Figure 5 “went viral” in March 2020 as a visual demonstration of the importance of taking precautionary measures (such as social distancing and mask-wearing) to “flatten the curve” of COVID-19 cases, in order to prevent an exponential rise that surpasses the carrying capacity of the healthcare system. This system, after all, is comprised of the constructed capital of hospitals, beds, ventilators, etc… combined with the human capital of medical knowledge held by doctors, nurses, first responders, etc…, woven together through the social capital of emergency room and intensive care unit team work and administrative protocols, etc…
Interestingly, versions of this graphic had been produced by the US Centers for Disease Control and Prevention more than a decade before,[xxvii] but it wasn’t until the dotted line was added that understanding of their significance really took hold.[xxviii] The dotted line represents a normative threshold of the carrying capacity of the healthcare system: below the line, the system can handle the Covid cases; above the line, the system becomes overwhelmed, like an overloaded ship taking on water.
Multicapitalism holds that such carrying capacity thresholds apply across all of the capitals.[xxix] These thresholds distinguish healthy capital resource stocks, which can continue to generate healthy flows, from unhealthy stocks, too compromised to produce healthy flows.
This White Paper lays out the case for a societal transition — a paradigm shift — from Monocapitalism to Multicapitalism. It also identifies the existing trends creating momentum in this direction.
The foundations for integrated reporting are firmly established on the multiple capitals, as demonstrated in its 2013 International Integrated Reporting Framework:
An integrated report aims to provide insight about the resources and relationships used and affected by an organization — these are collectively referred to as “the capitals” in this Framework. It also seeks to explain how the organization interacts with the external environment and the capitals to create value over the short, medium, and long term.
The capitals are stocks of value that are increased, decreased, or transformed through the activities and outputs of the organization. They are categorized in this Framework as financial, manufactured, intellectual, human, social and relationship, and natural capital… [emphasis added][xxx]
The <IR> Framework also grounds itself in the notion that “integrated thinking” — or cognition of the interdependencies of the multiple capitals — is a next logical maturation step in the evolution of collective consciousness and societal adaptation to increasing complexities and challenges. Accordingly, a next step for integrated reporting is to embed the more developed thinking on the multiple capitals exhibited by the doctrine of Multicapitalism.
We at r3.0 believe that the shift from Monocapitalism to Multicapitalism carries profound implications, far beyond the realm of reporting, encompassing the necessary macro-level transformations in economic system design to confront today’s “super wicked problems.”[xxxi]
Stepping back for this broader perspective, Monocapitalism and Multicapitalism represent competing paradigms, in the sense of the term established by Thomas Kuhn in his seminal 1962 book, The Structure of Scientific Revolutions. In it, he stated that the “significance of crises is the indication they provide that an occasion for retooling has arrived.”[xxxii]Humanity is now navigating multiple intertwining crises, providing an occasion for “retooling” the current Monocapitalist paradigm, which is thus ripe for being transcended by a new Multicapitalist paradigm.
This is precisely the point made by Limits to Growth Co-Author Dana Meadows in her influential 1999 essay, Leverage Points: Places to Intervene in a System. She places paradigms atop her list of twelve such leverage points: the mindset or paradigm out of which the system … arises.[xxxiii]
Whole societies … resist challenges to their paradigm harder than they resist anything else. So how do you change paradigms? In a nutshell, you keep pointing at the anomalies and failures in the old paradigm, you keep coming yourself, and loudly and with assurance from the new one, you insert people with the new paradigm in places of public visibility and power. You don’t waste time with reactionaries; rather you work with active change agents and with the vast middle ground of people who are open-minded.[xxxiv]
Meadows’ focus on mindset change as the avenue for paradigm change aligns perfectly with the IIRC’s emphasis on “integrated thinking” — and its close cousin, “multicapitalist thinking.” The goal of this White Paper is to present the systemic, structural, strategic, and ethical shortcomings of Monocapitalism, as well as the strong case for Multicapitalismas a paradigm that transcends these shortcomings in ways that inspire new mindsets for you, the reader, to live into. We firmly believe that Multicapitalism represents the best way for capitalism to “save itself,” and ideally help save humanity by replacing the strangling primacy of the shareholder value paradigm with the regenerative and distributive paradigm of system value creation.
[i] Gillian Tett, “Does capitalism need saving from itself?” Financial Times, 6 September 2019. https://www.ft.com/content/b35342fe-cda4-11e9-99a4-b5ded7a7fe3f
[ii] Kate Raworth, Doughnut Economics: 7 Ways to Think Like a 21st Century Economist, Chelsea Green, 2017, p 19.
[iii] John Maynard Keynes, The General Theory of Employment, Interest and Money, Palgrave Macmillan, 1936.
[iv] William Catton, Overshoot: The Ecological Basis of Revolutionary Change, University of Illinois Press, 1980
[v] Donella Meadows, Leverage Points: Places to Intervene in a System, The Sustainability Institute, 1999. http://donellameadows.org/wp-content/userfiles/Leverage_Points.pdf
[vi] Tett 2019, op cit.
[vii] Colin Waters, Jan Zalasiewicz, Colin Summerhayes, et al, “The Anthropocene is functionally and stratigraphically distinct from the Holocene,” Science, Vol. 351, Issue 6269, 8 January 2016. https://science.sciencemag.org/content/351/6269/aad2622
[viii] Amy Gunia and Andrew Katz, “Australia Is Burning: Scenes From a Deadly Season of Bushfires,” Time, 7 January 2020. https://time.com/longform/australia-bushfires-photos/
[ix] Will Steffen, Johan Rockström, Katherine Richardson, et al, “Trajectories of the Earth System in the Anthropocene,” Proceedings of the National Academy of Sciences, 115 (33) 8252–8259; August 6, 2018. https://www.pnas.org/content/115/33/8252
[x] Jurriaan M. De Vos Lucas N. Joppa John L. Gittleman Patrick R. Stephens Stuart L. Pimm, “Estimating the normal background rate of species extinction,” Conservation Biology, Volume 29, Issue 2, pp 452–462, 26 August 2014. https://conbio.onlinelibrary.wiley.com/doi/abs/10.1111/cobi.12380
[xi] WHO Director-General’s opening remarks at the media briefing on COVID-19, 11 March 2020. https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020
[xii] Facundo Alvaredo, Lucas Chancel, Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, World Inequality Report 2018, World Inequality Lab, 2018. https://wir2018.wid.world/files/download/wir2018-full-report-english.pdf
[xiii] See, for example: Ray Dalio, “Why and How Capitalism Needs to Be Reformed (Parts 1 & 2),” LinkedIn, 5 April 2019. https://www.linkedin.com/pulse/why-how-capitalism-needs-reformed-parts-1-2-ray-dalio/
[xiv] David Spratt & Ian Dunlop, What Lies Beneath: The Understatement of Existential Climate Risk, Breakthrough (The National Centre for Climate Restoration), 2018. https://www.breakthroughonline.org.au/whatliesbeneath; Luke Kemp, “Are we on the road to civilisation collapse?” BBC Future, 18 February 2019. https://www.bbc.com/future/article/20190218-are-we-on-the-road-to-civilisation-collapse; Jem Bendell, Deep Adaptation: A Map for Navigating Climate Tragedy, Institute of Leadership and Sustainability (IFLAS) Occasional Paper 2, University of Cumbria, 27 July 2018. http://insight.cumbria.ac.uk/id/eprint/4166/1/Bendell_DeepAdaptation.pdf(“Currently, I have chosen to interpret the information as indicating inevitable collapse, probable catastrophe and possible extinction,” writes Prof. Bendell in Deep Adaptation.)
[xv] Richard Wilkinson & Kate Pickett, The Spirit Level: Why Greater Equality Makes Societies Stronger, Bloomsbury, 2009; Christopher Ingraham, “How rising inequality hurts everyone, even the rich,” Washington Post, 6 February 2018. https://www.washingtonpost.com/news/wonk/wp/2018/02/06/how-rising-inequality-hurts-everyone-even-the-rich/
[xvi] https://www.equalitytrust.org.uk/sites/default/files/files/SpiritLevel%20slides.pptx
[xvii] Ida Kubiszewski, Robert Costanza, Carol Franco, Philip Lawn, John Talberth, Tim Jackson, Camille Aylmer, “Beyond GDP: Measuring and achieving global genuine progress.” Ecological Economics, Vol. 93, pp. 57–68. https://www.sciencedirect.com/science/article/abs/pii/S0921800913001584
[xviii] Ibid.
[xix] M. King Hubbert. “Nuclear Energy and the Fossil Fuels” American Petroleum Institute & Shell Development Co. Publication №95, 1956. https://web.archive.org/web/20080527233843/http://www.hubbertpeak.com/hubbert/1956/1956.pdf; See also “Hubbert curve,” Wikipedia. https://en.wikipedia.org/wiki/Hubbert_curve
[xx] Andrew Jebb, Louis Tay, Ed Diener & Shigehiro Oishi, “Happiness, income satiation and turning points around the world,” Nature Human Behaviour, volume 2, 8 January 2018, pp 33–38. https://www.nature.com/articles/s41562-017-0277-0; Jamie Ducharme, “This Is the Amount of Money You Need to Be Happy, According to Research,” Money, 14 February 2018. https://money.com/ideal-income-study.
In addition to exploring emotional well-being, thus study also examined “life evaluation” (or broader long-term goal fulfillment), and found a $95k “cap.” A more recent Harvard/National Public Radio survey focused on the 1% of wealth-holders and this broader definition of “life satisfaction” finds that it continues to rise until a $500k peak, while the more narrow definition of happiness (or emotional well-being) correlated with the $75k cap of earlier studies. “The rich might not be any happier than the rest of us on a day-to-day basis, in other words, but they are an awful lot more self-satisfied.” Christopher Ingraham, “The 1% are much more satisfied with their lives than everyone else, survey finds,” The Washington Post, 9 January 2020. https://www.washingtonpost.com/business/2020/01/09/1-are-much-more-satisfied-with-their-lives-than-everyone-else-survey-finds/
[xxi] Max Roser, Economic Growth, Our World in Data, University of Oxford, 2018. https://ourworldindata.org/economic-growth; Will Steffen et al, “The trajectory of the Anthropocene: The Great Acceleration,” Anthropocene Review, Volume 2 Issue 1, pp 81–98, 16 January 2015. https://journals.sagepub.com/doi/abs/10.1177/2053019614564785
[xxii] http://www.igbp.net/images/18.950c2fa1495db7081eba2/1421318143401/great_accel-12graph-ES.png
[xxiv] McElroy & Thomas, 2014, op cit; See also Mark McElroy, Some Important Works in the Literature on The Capital Theory Basis of Sustainability, Center for Sustainable Organizations, 2012.
https://www.sustainableorganizations.org/Capital-Theory-References.pdf
[xxv] Mark McElroy, “Sustainability and Multicapitalism — Together at Last!” Sustainable Brands, 10 April 2014. https://sustainablebrands.com/read/defining-the-next-economy/sustainability-and-multicapitalism-together-at-last; Mark McElroy, Great Transition Inititive listserve, August 2016. On P2P Foundation Wiki Page https://wiki.p2pfoundation.net/Multicapitalism; the version of these definitions included in this White Paper are the result of further refinements resulting from discussions between Dr. McElroy and the author.
[xxvi] Drew Harris, tweet, 28 February 2020. https://twitter.com/drewaharris/status/1233267475036372992
[xxvii] United States Centers for Disease Control and Prevention, Interim Pre-pandemic Planning Guidance:Community Strategy for Pandemic Influenza Mitigation in the United States — Early, Targeted, Layered Use of Nonpharmaceutical Interventions, February 2007. https://stacks.cdc.gov/view/cdc/11425
[xxviii] Siobhan Roberts, “Flattening the Coronavirus Curve,” New York Times, 27 March 2020. https://www.nytimes.com/article/flatten-curve-coronavirus.html
[xxix] McElroy, 2008, op cit.
[xxx] International Integrated Reporting Council, The International <IR> Framework, 2013, p4. https://integratedreporting.org/wp-content/uploads/2013/12/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf
[xxxi] Kelly Levin, Benjamin Cashore, Steven Bernstein, Graeme Auld, “Overcoming the tragedy of super wicked problems: constraining our future selves to ameliorate global climate change,” Policy Sciences, Volume 45, Issue 2, pp 123–152, June 2012. https://link.springer.com/article/10.1007/s11077-012-9151-0
The article characterizes “super wicked problems” as “comprising four key features: time is running out; those who cause the problem also seek to provide a solution; the central authority needed to address it is weak or non-existent; and, partly as a result, policy responses discount the future irrationally.”
[xxxii] Thomas Kuhn, The Structure of Scientific Revolutions, University of Chicago Press, 1962.
[xxxiii] Meadows, 1999, op cit. She actually revised her original list to add one higher level: “the power to transcend paradigms.”
[xxxiv] Ibid.
Earlier parts of this series:
