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The New Economics: The Age of Capital

Originally published in the April 2012 issue of Country Wisdom News.

The new economics is about working toward a way of thinking and acting that is valid for our present day world. To put it ironically, it’s an economics “as if the human race were capable of learning something.” Of course we are capable of learning, but much of conventional economics is based on thinking that’s rooted—and stuck—in a much earlier historical era. To give a huge example, most of economics as an intellectual discipline developed before there was any real knowledge of the ecological consequences of our behavior. And despite the best efforts of a lot of fine people, such views still hold a great deal of power.

To arrive at a view that illuminates the positive prospects of the present, we need to look at history from the perspective of present-day knowledge, rather than try to make our present reality conform to views that are inherited from the past.

Case in point: the concept of capital. Since the dawn of the Industrial Revolution, we have lived in an age of capital. In simplest terms, this means that machines started doing significant amounts of the work. The original meaning of capital in modern times was the actual factory machinery itself, the means by which greater efficiencies were achieved in all manner of production processes. Today we use an expanded definition of capital to include the whole notion of financial capital, money that is invested to make more money. In essence, capital means the ownership of the economic machinery, as it were.

In his major work, Das Kapital, Marx argued rather famously that the profits arising from capital were essentially stolen from the workers, since, in his view, all productivity arises from labor. I differ radically from Marx’s view, since I see productivity arising more fundamentally from knowledge than labor. But the questions of fairness and justice he raised have never been adequately addressed, not by Marxian economics, and certainly not by the outdated views of neo-classical economics (the historical adversary of Marxian economics). Nor have they been addressed in practice by today’s system of global capitalism.

A very important and insightful contribution to the theory of capital came from Folkert Wilken (1890-1981), a rather obscure German professor who was a friend of E.F. Schumacher. In his book The Liberation of Capital (first published in German in 1976), Wilken drew a very useful picture of the nature of capital at the most basic level. He believed that capital could not be understood fully in material terms, but that it is a hybrid of sorts. You’ll recall in my last column I sketched out the notion of a threefold viewpoint on the economy, namely the tangible, symbolic, and imaginative, or ideational, levels. Seeing things within that framework helps us understand capital as Wilkin saw it. Capital actually straddles the three economies.

Wilkin saw capital as having two main components. The first and most important of these he called geist, a German word that can be translated as spirit or idea. The second part is the component of financial power. In simple terms, you have to have an investment idea, and you have to have the financial power to move it forward. That’s what creates capital. Geist, of course, corresponds to the ideational level of the economy, and financial power corresponds to the symbolic and tangible levels, since it deals with money and the material processes of putting capital into operation. The brilliance of Wilkins’ conception of capital is that it opens many doors for, well, the liberation of capital from our limited conceptions of it. For example, geist, or idea, really includes the wealth of commonly shared human knowledge from the dawn of history. This raises many questions as to how the profits from capital investment should be disbursed. Who owns the intellectual property for the wheel? No one? Or everyone? How we answer that question is quite significant.

An even more potent line of reasoning arises as well: even though spirit of capital as we conventionally conceive it is merely to create financial return for investors, what if there were an entirely different spirit at work, one of unbiased concern and aspiration for the whole human family? In other words, rather than a project to extract wealth for the few, exploiting people and nature along the way, is there another way to invest money that benefits people and the planet?

Of course, if you follow the progressive business world you know about Socially Responsible Investing (SRI), Slow Money, Impact Investing, and the like. These are huge steps forward, but they are incomplete. They do not address the great wealth divide that looms over the whole of human society. They are about wealthy but decent people trying to do some good in the world while making a profit at the same time.

I advocate the creation of a new category of capital, civil capital, which is fully detached from private ownership and dedicated to the common good of humanity. Investments and endowments that are dedicated in this way are truly possible if (and it’s a big if) we are able to make a leap to a new conception of capital, one that goes beyond historical and socially conditioned concepts and strips capital down to its bare essence and possibilities. Once we see the essence of something, we can see the perfection of that thing. I believe that civil capital is the perfection of capital.