Shortcomings of Monocapitalism: Capital — Singular or Plural?
By Bill Baue, Senior Director, r3.0
The first section of the “Shortcomings of Monocapitalism” chapter from the r3.0 White Paper, From Monocapitalism to Multicapitalism — 21st Century System Value Creation.
As suggested above, the shortcomings of Monocapitalism are essentially two-fold:
- its limited purview of financial capital alone; and
- its fixation on economic growth, and the concomitant concentration of financial capital.
This second point encompasses a subsidiary aspect — namely, financial capital concentration is often achieved through enclosure (or privatization) of the Commons. Nobel Laureate Elinor Ostrom defined the Commons more precisely as “common pool resources” — namely, the vital capital resources that exist in the world that we share for the common good, in order to meet the needs of all. While Monocapitalism is predicated on private ownership, Multicapitalism is not thus burdened, as it recognizes that many of the capitals can be categorized as Common Capitals, and thus require an economic doctrine predicated not only on private ownership but also on collective and cooperative stewardship that transcends the notion of ownership.
To set firm foundations for this White Paper, we explore each of these limitations, in turn, here at the outset.
2.1.1. Capital: Singular or Plural?
The other worde, the Italians call the Capitall, that is to saie, the Stocke or principall that the Marchant began with all…. And it is at your pleasure whether ye will use this worde Stocke in Englishe, or Capitale.
Jan Ympyn Christoffels, 1547
A stock of wealth existing at any instant of time is called capital. A flow of services through a period of time is called income.
Irving Fisher, 1906
The essential measure of the success of the economy is not production and consumption at all, but the nature, extent, quality, and complexity of the total capital stock, including in this the state of human bodies and minds included in the system.
Kenneth Boulding, 1966
[A] more functional definition of capital [is] ‘a stock that yields a flow of valuable goods and services into the future.’
Bob Costanza & Herman Daly, 1992
Extending the definition of capital to natural, human, and social capital could provide an easily understood base for calculating and integrating [sustainable development].
Dana Meadows, 1998
Vital capital is a stock of anything that yields a flow of valuable goods or services important to human well-being.
Mark McElroy & Jo van Engelen, 2012
While common consciousness conflates capital with cash, the term applies more broadly, as we can see by tracing back to its origins. Double-entry bookkeeping, which dates back to Roman and Egyptian antiquity, was first codified in Franciscan friar Luca Pacioli’s 1494 treatise, Summa de arithmetica, geometria, proportioni et proportionalità. In Jan Ympyn Christoffels’ first English translation of this seminal text a half-century later, he proposed that the term “capital” could be considered synonymous with “stock”:
The other worde, the Italians call the Capitall, that is to saie, the Stocke or principall that the Marchant began with all…. And it is at your pleasure whether ye will use this worde Stocke in Englishe, or Capitale. 
This etymology has important implications, as the term “stock” carries very broad denotations and connotations, stemming from the Old English notion of the “trunk” (of a tree) and developed in late Middle English from the notion of “growth from a central stem.” The fundamental point is that the term “capital” has never carried a singular, exclusively financial denotation, but has always carried much wider application associated with the “firm foundation” of “stock” from which growth flows.
This “stocks” and “flows” notion of “capital,” which serves as a foundation of Multicapitalism (as we will explore in more depth in later chapters), was enshrined in the pioneering 1906 work of Irving Fisher, The Nature of Capital and Income. Here, he defined capital as a
stock of wealth existing at any instant of time.
Fisher paired this concept directly with his definition of income as a
flow of services through a period of time.
Note that common consciousness often conflates “wealth” with financial wherewithal, but the term is by no means limited to this lens. The Oxford dictionary defines wealth as “abundance of valuable possessions” and even “plentiful supplies of a particular resource,” and traces its etymological roots back to “well-being,” from “weal” or the “pattern of health.” This last connection is vitally important, as we shall shortly see.
In 1949, economist Kenneth Boulding diversified the definition of capital beyond finance quite explicitly, naming four types of non-financial capital: human capital, cultural capital, intellectual capital, and geological capital (a subset of what we now call natural capital). Several key figures advanced this multiple capital definition, including:
- In 1992, Paul Ekins published “A four-capital model of wealth creation” in which he proposed “environmental,” “human,” “physically produced,” and “social/organizational” capitals.
- In 1997, in his book Cannibals with Forks: The Triple Bottom Line of 21st Century Business, John Elkington coined the term “Triple Bottom Line,” which focuses on “economic prosperity, environmental quality, and — the element which business has preferred to overlook — social justice” by integrating “a better understanding not only of financial and physical forms of capital, but also of natural, human, and social capital.”
- In 1998, in her seminal Indicators and Information Systems for Sustainable Development report, Dana Meadows explicitly called for “extending the definition of capital to natural, human, and social capital” to “provide an easily understood base for calculating and integrating the Daly Triangle” — a visual representation of a causal relationship between the capitals, with natural capital representing the “ultimate means,” built and human capital representing the “intermediate means,” human and social (and financial) capital as the “intermediate ends,” and well-being (not a capital itself, but the physical, emotional, psychological, and spiritual result of capital “appreciation”) as the “ultimate ends.” (See Figure 1 below)
- In 2005, in his book Capitalism as if the World Mattered, Jonathon Porritt proposed a “five capitals framework,” consisting of natural, human, social, manufactured, and financial capitals. Forum for the Future, the not-for-profit sustainability think tank he founded in 1996, popularized this framework through a graphical meme that represents financial and manufactured capitals nested within social and human capital, which are all nested within natural capital. (See Figure 2 below.)
In his book, Porritt defined “capital” as
a stock of anything that has the capacity to generate a flow of benefits which are valued by humans.
This definition brings us back to Boulding, who much earlier embraced and advanced a stocks-and-flows take on the capitals, as evidenced in one of his best-known essays, “The Economics of the Coming Spaceship Earth.” Published in 1966, the essay contrasts the “open system” of the illimitable “cowboy economy” with the “closed system” of a bounded “spaceman economy.” The density and artistry warrant quotation at length:
For the sake of picturesqueness, I am tempted to call the open economy the “cowboy economy,” the cowboy being symbolic of the illimitable plains and also associated with reckless, exploitative, romantic, and violent behavior, which is characteristic of open societies. The closed economy of the future might similarly be called the “spaceman” economy, in which the earth has become a single spaceship, without unlimited reservoirs of anything, either for extraction or for pollution, and in which, therefore, man must find his place in a cyclical ecological system which is capable of continuous reproduction of material form even though it cannot escape having inputs of energy.
The difference between the two types of economy becomes most apparent in the attitude towards consumption. In the cowboy economy, consumption is regarded as a good thing and production likewise; and the success of the economy is measured by the amount of the throughput from the “factors of production,” a part of which, at any rate, is extracted from the reservoirs of raw materials and noneconomic objects, and another part of which is output into the reservoirs of pollution. If there are infinite reservoirs from which material can be obtained and into which effluvia can be deposited, then the throughput is at least a plausible measure of the success of the economy…
By contrast, in the spaceman economy, throughput is by no means a desideratum, and is indeed to be regarded as something to be minimized rather than maximized. The essential measure of the success of the economy is not production and consumption at all, but the nature, extent, quality, and complexity of the total capital stock, including in this the state of human bodies and minds included in the system. In the spaceman economy, what we are primarily concerned with is stock maintenance, and any technological change which results in the maintenance of a given total stock with a lessened throughput (that is, less production and consumption) is clearly a gain. This idea that both production and consumption are bad things rather than good things is very strange to economists, who have been obsessed with the income-flow concepts to the exclusion, almost, of capital-stock concepts.
Fast-forwarding back toward the present: in 1992 World Bank Economist Herman Daly (originator of the Triangle that bears his name), along with his Ecological Economics Co-Founder Bob Costanza, proposed a “more functional definition of capital,” generalized beyond finance, as “a stock that yields a flow of valuable goods and services into the future.”
In their 2012 book Corporate Sustainability Management, Mark McElroy and Jo van Engelen distill all of these definitions to their essence:
Vital capital is a stock of anything that yields a flow of valuable goods or services important to human well-being.
Importantly, they tied the term back to the roots of vitality and health (established a Century earlier by Fisher). By commencing the definition with the term “vital” and ending with the notion of “well-being,” McElroy and van Engelen stress that these capital resources are not mere trifles for idle consideration, but rather necessary for humanity’s sustenance and welfare.
Clearly, financial capital fits this definition, but not exclusively — natural, social, human, manufactured, and intellectual capital (among many others, as we will see later) fit this definition just as clearly. And this exposes the first shortcoming of Monocapitalism: its singular focus on the lone capital of finance. This is an arbitrary boundary that excludes diverse forms of value that are inextricably embedded in the value creation process, which capitalism is supposed to advance. In this sense, Monocapitalism fails to live up to the richness embedded in the much broader cornucopia of capitals.
 Elinor Ostrom, Managing the Commons, The Evolution of Institutions for Collective Action. Cambridge University Press, 1990.
 Sustainability Accounting Standards Board (SASB), Conceptual Framework of the Sustainability Accounting Standards Board, October 2013, p18. https://www.sasb.org/wp-content/uploads/2013/10/SASB-Conceptual-Framework-Final-Formatted-10-22-13.pdf; Sustainability Context Group, Public Comment to the Sustainability Accounting Standards Board re: its Conceptual Framework Exposure Draft, 26 July 2013. https://www.r3-0.org/wp-content/uploads/2020/03/SCG_SASB_Comment.pdf
 Jan Ympyn Christoffels, A Notable and very excellente woorke expressyng and declaryng the maner and forme how to kepe a boke of accoptes or reconynges, verie expendiente and necessary to all Marchantes, Receivers, Auditors, Notaries, and all other, 1547. https://books.google.com/books/about/A_Notable_and_very_excellente_woorke_exp.html?id=-HFhPgAACAAJ
“9 Financial Words with Surprising Origins,” Merriam-Webster. https://www.merriam-webster.com/words-at-play/financial-word-origins/capital.
 Irving Fisher, The Nature of Capital and Income, 1906, p 52. https://play.google.com/books/reader?id=1PVKAAAAYAAJ&hl=en&pg=GBS.PA52
 Kenneth Boulding, “The Economics of the Coming Spaceship Earth,” in H. Jarrett (ed.), Environmental Quality in a Growing Economy, Resources for the Future/Johns Hopkins University Press, 1966, pp. 3–14. http://arachnid.biosci.utexas.edu/courses/THOC/Readings/Boulding_SpaceshipEarth.pdf
 Robert Costanza & Herman Daly, “Natural capital and sustainable development,” Conservation Biology, v6 n1, p38, 1992. http://www.life.illinois.edu/ib/451/Costanza%20(1992).pdf
 Mark McElroy & Jo van Engelen, Corporate Sustainability Management: The Art and Science of Managing Non-Financial Performance, Earthscan, 2012.
 Jane Gleeson-White, Double Entry: How the Merchants of Venice Created Modern Finance, W. W. Norton, 2012. “The records of the most important account book of the Roman businessman (the tabulae rationum) were divided into two pages. The Roman naturalist Pliney the elder was much taken with this division, which meant that the two sides comprise the whole. In 70 A.D., he wrote: ‘on one page all the disbursements are entered, on the other page all the receipts; both pages constitute a whole for each operation of every man.’” (p 294)
 Christoffels, op cit.
 “Stock,” Lexico / Oxford Dictionary. https://www.lexico.com/en/definition/stock
 Fisher, op cit. Via McElroy & van Engelen, op cit.
 “Wealth,” Lexico / Oxford Dictionary. https://www.lexico.com/en/definition/wealth
 Kenneth Boulding, “Income or Welfare,” The Review of Economic Studies, Volume 17, Issue 2, 1949, Pages 77–86. https://academic.oup.com/restud/article-abstract/17/2/77/1567378. Via McElroy & van Engelen, op cit.
 Paul Ekins, “A four-capital model of wealth creation,” in Paul Ekins & Manfred Max-Neef, Real-Life Economics, Routledge, 1992.
 John Elkington, Cannibals with Forks: The Triple Bottom Line of 21st Century Business, Capstone, 1997. pp 70, 72.
 Donella Meadows, Indicators and Information Systems for Sustainable Development, Sustainability Institute, 1998. http://donellameadows.org/wp-content/userfiles/IndicatorsInformation.pdf
 Jonathon Porritt, Capitalism as if the World Mattered, Earthscan, 2005.
 Forum for the Future, The Five Capitals. https://www.forumforthefuture.org/the-five-capitals
 Meadows 1998 op cit.
 Forum for the Future, The Five Capitals — a framework for sustainability. https://www.forumforthefuture.org/the-five-capitals
 Porritt, op cit. p 112.
 Boulding, 1966, op cit.
 Costanza & Daly, op cit.
 McElroy & van Engelen, op cit.
Earlier parts of this series:
Who knows where the wisdom goes?
By Lois Guthrie, introduced by Bill Baue and Ralph Thurm, r3.0
From Monocapitalism to Multicapitalism: The Forewords
In December 2020, r3.0 published its first White Paper — From Monocapitalism to Multicapitalism: 21st Century System…
Executive Summary: From Monocapitalism to Multicapitalism — 21st Century System Value Creation
By Bill Baue, Senior Director, r3.0