It seemed appropriate that I should take part in a debate about natural capital and wetlands yesterday, on International Biodiversity Day. I was invited (I think) to be the Natural Capital dissident. It was a good debate and I enjoyed discussing the issues with my old boss Martin Spray from Wildfowl and Wetlands Trust, and Charlie Stratford from CEH.
I understand a podcast of the debate will be made available in future and I’ll let you know when it is.
This is based on an article I wrote for Lush Times yesterday to coincide with the debate – actually this is based on the speech I wrote, though of course I completely deviated from it!
International Biodiversity Day
I have to say I think biodiversity is an ugly word. I much prefer Nature, or Wildlife. Biodiversity is clunky, and not easily understandable. It has its place – in technical discussions – but if you’re going to try and persuade people in different countries, with different cultures, that Nature is important (which I think is what these International Days are about) then it’s not the right word to use. But then biodiversity, as a word, is relatively harmless compared with the term ‘Natural Capital’.
Natural Capital is a relatively new (from about 1988) economic idea. The old notions of Capital referred to things like Land, resources like Coal, and Labour. Over the years, Capital was broadened to include Social Capital and eventually Natural Capital. Natural Capital is now described as the sum of all the things nature provides to people – which are also termed Ecosystem Services. Now there is growing movement to push for Natural Capital to be given a financial value, so that it can be properly accounted for in the economy.
The Language of Capital
Language is always important when working to achieve understanding and then change. And I am always interested to explore where the words we use come from.
Capital derives from the Latin Caput or head. Originally this referred to head of cattle, which was (and still is in some places) the measure of someone’s wealth. This is also where the word chattel as in ‘Goods and Chattels’, comes from.
Naturally, Stock derives from livestock, and the Stock Market was the place to trade your Cattle, long before anyone had the idea of companies or shares.
Less obviously a Fee comes from the Saxon Feoh, which means Livestock or Cattle.
Pecuniary comes from the Latin pecunia which means “wealth in cattle.”
Just for a change, Emolument originally meant “payment to a miller for grinding corn.”
And in a similar vein, Derivative comes from De rivo, literally water drawn from a stream.
The language of capital, and of economics is full of the ghosts of a much closer relationship with, and conscious dependence on, Nature. But these words have been appropriated, altered and yoked to serve other needs.
Natural Capitalism seeks to place a value on Nature, for our own benefit. But are there other values outside the human ones We don’t know whether an Elephant knowingly values an Acacia tree, but it certainly depends on it, whether it knows or not. And the same applies to every other animal, plant, fungi or bacteria that makes up every ecosystem on the Planet.
The ideas of Natural Capital, that value flows from nature to people, is based on the human notion of property rights – if you own a piece of land, or a tree (or an elephant) you have the right to do what you want with it. But does nothing else in Nature have property rights? Who decided that? Even more bizarrely, property rights are conferred on entirely artificial constructions, like companies, or public institutions. Again this ignores everything else.
How do we assign value to the ecosystem services a tree provides an elephant? Elephants have no need of money but that is irrelevant to what the tree provides the elephant. If all species can assign values to the things they need for life, then most of the value in an ecosystem lies in the relationships between the species that comprise it – the value is internal, not external. This could be called intrinsic value.
Natural Capital economists do not like the notion of intrinsic value, because it messes up their equations. Professor Dieter Helm, the leading Natural Capital economist and chair of the UK Natural Capital Committee, described intrinsic value as “dangerous” because it “opens up the possibility that the world might be better off without us.” This sounds a bit hysterical to me.
Natural Capitalists argue that we must adopt the language of the economist in order to persuade businesses, or Government economists, to change their calculations, and include a financial value for Nature. The evidence, such as it is, does not support this approach. One typical economist’s approach is that the needs of the economy have to be traded off against the needs of Nature – and this despite this idea being repeatedly debunked, it keeps turning up. (Just last week I wrote about proposals for a new Green Watchdog, which would balance environmental needs against the economy.)
One recent example shows up the dangers of using this trade-off approach all too well. Economists use a Cost Benefit Analysis (COBA) to look at the environmental impact of an activity, usually development. The costs (financial) of developing a road or a new housing development or whatever are balanced against the economic benefits – so, in order to do this financial figures have to be calculated for the benefits the environment provides (us.) During the Obama administration, an assessment of the value of US wetlands was made, which concluded they provided $450M a year of benefits to the US economy. On this basis Obama created a Waters of the United States (WOTUS) programme to support these wetlands. But when Trump took over, his “environment” man Scott Pruitt ordered are-evaluation and found them to be worth only $50M, far less than the costs to the economy of protecting them, calculated as $300M a year. At the press of a button, those wetlands suddenly had no (net) economic value. The Natural Capital Coalition argued that what Trump had done was terrible – and of course he is the most anti-environmental world leader, the world has ever seen. But all he was doing was showing how the COBA approach loved by the Natural Capitalists is so wrong. Put a financial value on nature, and you put it in peril. Now Trump is also attacking the legal basis for protecting nature in the States, but it will be a much tougher route, through the courts, and up against people using ethical arguments for why it needs protecting.
Evidence from the field of psychology suggests that when people think about the financial value of Nature, these thoughts “crowd out” any ethical or moral concerns for Nature. In other words, you may feel a moral duty to look after a tree, but if someone offers to pay you to do it, you then forget about that moral duty. And if they stop paying, you are more likely to cut it down.
Natural Capitalism tells us that the current economic system values natural capital at zero, and therefore ignores it. So, if natural capital is suddenly given a value (where previously it had none), then new economic value will be created. We could call it a magic money tree.
The Office for National Statistics tells us that UK natural capital has a value of £750Bn. This may sound like a lot, but London’s residential property is worth twice that.
One of the reasons why London is worth so much is because of Quantitative Easing: The last time the Magic Money Tree was harvested, £435Bn was created out of nothing – and that capital flowed into many places, not least property – here and elsewhere. How much of it flowed offshore, outside jurisdictions, away from tax payments for public good? Nobody knows. The National Crime Agency estimates that nearly £100Bn a year of stolen money is laundered through the UK (and into UK offshore territories), much of it from Russia.
Capital is always flowing to places where it can’ pool’, away from the grasping claws of Regulators and Taxmen. Land in the UK is a good example of this. Farmland (75% of the UK) has become a massive tax shelter. It’s a tax haven, hiding in plain sight. Tens of billions of pounds a year are lost to the Exchequer via this tax haven. Are all those tax reliefs providing any benefit – is Nature, let alone Natural Capital, benefitting from them?
If the value of the UK’s natural capital really was converted into financial capital i.e. real money – where would it flow? One thing we can be sure about – it will not flow back to the “providers” of the “services” i.e. nature itself. It becomes just another asset to be traded, and, like QE, it will contribute to asset price inflation.
Ecosystem Services is another appropriation, another euphemism for something quite different. The modern word is used to describe a transaction. A plumber provides a service by fixing your boiler, for which they receive payment.
But Ecosystem Services harks back to the original meaning of service – from the latin servitium “the condition of a slave.” And that is really much more accurate, because we have effectively enslaved large parts of the planetary ecosystem, to serve at our will.
Does the concept of natural capital recognise this injustice? Does it work to emancipate the enslavement of Nature? Slaves had value after all, and the market determined that value – even though that value never flowed to the slaves. The market had no interest in emancipating slaves, indeed some economic historians recognise the central role that slave-driven production had in kick-starting the industrial revolution and creating the wealth of the British and other Empires.
It was political campaigning, driven by moral arguments, plus a few slave revolts, which led to Emancipation. Ironically when Emancipation came, it was the slave owners who were compensated for their loss, not the slaves, who continued to live in penury. Similar campaigns exist today (mainly outside Europe) seeking to give Nature “legal standing”.
Natural Capital is supposed to be the way to address market failure, which describes when the market doesn’t price in the value of Nature to economic transactions. But there are tried-and-tested ways to address market failure: Regulation, Taxation, Subsidies (payments to create public benefits) and Education to reinforce the moral arguments for Nature. None of these approaches have been entirely successful, but they have all been used with some success and without needing to try and place a financial value on Nature.
There is a great danger, with the Natural Capital approach. It is that those who believe the market to be the only true solution to all problems (also known as Neoliberals) will seek to exploit the good intentions of others, and replace all the well-established remedies for market failure, with a market-based solution, turning Nature into just another commodity to be traded.
An alternative future?
We can look at some examples from the past which might help shape a new relationship between people and Nature, of which we are both part of and apart. Commons existed for 1,000 years in Britain. Commons restricted property rights of both owners and commoners, and in doing so required both to use the natural resources provided in a more sustainable manner than purely private property owners would do. Nature thrived on the Commons but the Enclosure Acts saw most of them privatised over a 300-year period.
The peasant poet John Clare mourned the loss of his commons (here’s just a fragment from The Mores)
“…Now this sweet vision of my boyish hours
Free as spring clouds and wild as summer flowers
Is faded all – a hope that blossomed free,
And hath been once, no more shall ever be
Inclosure came and trampled on the grave
Of labour’s rights and left the poor a slave…”
A belief in the sacredness of nature also helps people to work with Nature, rather than against it. Bali’s thousand year old water temples are a good example of this. The Temples and Balinese rice farmers worked together to ensure harvests were sustainable, water was shared out equally and different communities planted their crops at different times, according to where water was available. Pests were controlled by a system where every community fallowed their land at the same time, starving pests of food. When new crops and agrochemicals were introduced, alongside Government rules which ignored the traditional approach, the system fell into chaos, pests proliferated and rice harvests plummeted. Thankfully the value of the ancient system was recognised before it was too late, and the Temple control reinstated.
Rather than seeking to make more sacrifices to the God of the Financial Market, perhaps we need to find ways to create a new sense of the sacred in nature.
Photo of Balinese water temple by Michelle Maria [CC BY 3.0 (https://creativecommons.org/licenses/by/3.0)%5D, via Wikimedia Commons