Chapter 1 The Next Industrial Revolution

Download the entire chapter (PDF-146k)

Emerging possibilities -- A new type of industrialism -- The loss of living systems -- Valuing natural capital -- The industrial mind-set -- The emerging pattern of scarcity -- Four strategies of natural capitalism -- Radical resource productivity -- Putting the couch potato of industrialism on a diet -- An economy of steady service and flow -- Restoring the basis of life and commerce

Imagine for a moment a world where cities have become peaceful and serene because cars and buses are whisper quiet, vehicles exhaust only water vapor, and parks and greenways have replaced unneeded urban freeways. OPEC has ceased to function because the price of oil has fallen to five dollars a barrel, but there are few buyers for it because cheaper and better ways now exist to get the services people once turned to oil to provide. Living standards for all people have dramatically improved, particularly for the poor and those in developing countries. Involuntary unemployment no longer exists, and income taxes have largely been eliminated. Houses, even low-income housing units, can pay part of their mortgage costs by the energy they produce; there are few if any active landfills; worldwide forest cover is increasing; dams are being dismantled; atmospheric C02 levels are decreasing for the first time in two hundred years; and effluent water leaving factories is cleaner than the water coming into them. Industrialized countries have reduced resource use by 80 percent while improving the quality of life. Among these technological changes, there are important social changes. The frayed social nets of Western countries have been repaired. With the explosion of family-wage jobs, welfare demand has fallen. A progressive and active union movement has taken the lead to work with business, environmentalists, and government to create "just transitions" for workers as society phases out coal, nuclear energy, and oil. In communities and towns, churches, corporations, and labor groups promote a new living-wage social contract as the least expensive way to ensure the growth and preservation of valuable social capital. Is this the vision of a utopia? In fact, the changes described here could come about in the decades to come as the result of economic and technological trends already in place.

This book is about these and many other possibilities.

It is about the possibilities that will arise from the birth of a new type of industrialism, one that differs in its philosophy, goals, and fundamental processes from the industrial system that is the standard today. In the next century, as human population doubles and the resources available per person drop by one-half to three-fourths, a remarkable transformation of industry and commerce can occur. Through this transformation, society will be able to create a vital economy that uses radically less material and energy. This economy can free up resources, reduce taxes on personal income, increase per-capita spending on social ills (while simultaneously reducing those ills), and begin to restore the damaged environment of the earth. These necessary changes done properly can promote economic efficiency, ecological conservation, and social equity.

The industrial revolution that gave rise to modern capitalism greatly expanded the possibilities for the material development of humankind. It continues to do so today, but at a severe price. Since the mid-eighteenth century, more of nature has been destroyed than in all prior history. While industrial systems have reached pinnacles of success, able to muster and accumulate human-made capital on vast levels, natural capital, on which civilization depends to create economic prosperity, is rapidly declining, and the rate of loss is increasing proportionate to gains in material well-being. Natural capital includes all the familiar resources used by humankind: water, minerals, oil, trees, fish, soil, air, et cetera. But it also encompasses living systems, which include grasslands, savannas, wetlands, estuaries, oceans, coral reefs, riparian corridors, tundras, and rainforests. These are deteriorating worldwide at an unprecedented rate. Within these ecological communities are the fungi, ponds, mammals, humus, amphibians, bacteria, trees, flagellates, insects, songbirds, ferns, starfish, and flowers that make life possible and worth living on this planet.

As more people and businesses place greater strain on living systems, limits to prosperity are coming to be determined by natural capital rather than industrial prowess. This is not to say that the world is running out of commodities in the near future. The prices for most raw materials are at a twenty-eight-year low and are still falling. Supplies are cheap and appear to be abundant, due to a number of reasons: the collapse of the Asian economies, globalization of trade, cheaper transport costs, imbalances in market power that enable commodity traders and middlemen to squeeze producers, and in large measure the success of powerful new extractive technologies, whose correspondingly extensive damage to ecosystems is seldom given a monetary value. After richer ores are exhausted, skilled mining companies can now level and grind up whole mountains of poorer-quality ores to extract the metals desired. But while technology keeps ahead of depletion, providing what appear to be ever-cheaper metals, they only appear cheap, because the stripped rainforest and the mountain of toxic tailings spilling into rivers, the impoverished villages and eroded indigenous cultures--all the consequences they leave in their wake--are not factored into the cost of production.

It is not the supplies of oil or copper that are beginning to limit our development but life itself. Today, our continuing progress is restricted not by the number of fishing boats but by the decreasing numbers of fish; not by the power of pumps but by the depletion of aquifers; not by the number of chainsaws but by the disappearance of primary forests. While living systems are the source of such desired materials as wood, fish, or food, of utmost importance are the services that they offer, services that are far more critical to human prosperity than are nonrenewable resources. A forest provides not only the resource of wood but also the services of water storage and flood management. A healthy environment automatically supplies not only clean air and water, rainfall, ocean productivity, fertile soil, and watershed resilience but also such less-appreciated functions as waste processing (both natural and industrial), buffering against the extremes of weather, and regeneration of the atmosphere.

Humankind has inherited a 3.8-billion-year store of natural capital. At present rates of use and degradation, there will be little left by the end of the next century. This is not only a matter of aesthetics and morality, it is of the utmost practical concern to society and all people. Despite reams of press about the state of the environment and rafts of laws attempting to prevent further loss, the stock of natural capital is plummeting and the vital life-giving services that flow from it are critical to our prosperity.

Natural capitalism recognizes the critical interdependency between the production and use of human-made capital and the maintenance and supply of natural capital. The traditional definition of capital is accumulated wealth in the form of investments, factories, and equipment. Actually, an economy needs four types of capital to function properly:

  • human capital, in the form of labor and intelligence, culture, and organization
  • financial capital, consisting of cash, investments, and monetary instruments
  • manufactured capital, including infrastructure, machines, tools, and factories
  • natural capital, made up of resources, living systems, and ecosystem services

The industrial system uses the first three forms of capital to transform natural capital into the stuff of our daily lives: cars, highways, cities, bridges, houses, food, medicine, hospitals, and schools.

The climate debate is a public issue in which the assets at risk are not specific resources, like oil, fish, or timber, but a life-supporting system. One of nature's most critical cycles is the continual exchange of carbon dioxide and oxygen among plants and animals. This "recycling service" is provided by nature free of charge. But today carbon dioxide is building up in the atmosphere, due in part to combustion of fossil fuels. In effect, the capacity of the natural system to recycle carbon dioxide has been exceeded, just as overfishing can exceed the capacity of a fishery to replenish stocks. But what is especially important to realize is that there is no known alternative to nature's carbon cycle service.

Besides climate, the changes in the biosphere are widespread. In the past half century, the world has a lost a fourth of its topsoil and a third of its forest cover. At present rates of destruction, we will lose 70 percent of the world's coral reefs in our lifetime, host to 25 percent of marine life. In the past three decades, one-third of the planet's resources, its "natural wealth," has been consumed. We are losing freshwater ecosystems at the rate of 6 percent a year, marine ecosystems by 4 percent a year. There is no longer any serious scientific dispute that the decline in every living system in the world is reaching such levels that an increasing number of them are starting to lose, often at a pace accelerated by the interactions of their decline, their assured ability to sustain the continuity of the life process. We have reached an extraordinary threshold.

Recognition of this shadow side of the success of industrial production has triggered the second of the two great intellectual shifts of the late twentieth century. The end of the Cold War and the fall of communism was the first such shift; the second, now quietly emerging, is the end of the war against life on earth, and the eventual ascendance of what we call natural capitalism.

Capitalism, as practiced, is a financially profitable, nonsustainable aberration in human development. What might be called "industrial capitalism" does not fully conform to its own accounting principles. It liquidates its capital and calls it income. It neglects to assign any value to the largest stocks of capital it employs�the natural resources and living systems, as well as the social and cultural systems that are the basis of human capital.

But this deficiency in business operations cannot be corrected simply by assigning monetary values to natural capital, for three reasons. First, many of the services we receive from living systems have no known substitutes at any price; for example, oxygen production by green plants. This was demonstrated memorably in 1991�93 when the scientists operating the $200 million Biosphere 2 experiment in Arizona discovered that it was unable to maintain life-supporting oxygen levels for the eight people living inside. Biosphere 1, a.k.a. Planet Earth, performs this task daily at no charge for 6 billion people.

Second, valuing natural capital is a difficult and imprecise exercise at best. Nonetheless, several recent assessments have estimated that biological services flowing directly into society from the stock of natural capital are worth at least $36 trillion annually. That figure is close to the annual gross world product of approximately $39 trillion--a striking measure of the value of natural capital to the economy. If natural capital stocks were given a monetary value, assuming the assets yielded "interest" of $36 trillion annually, the world's natural capital would be valued at somewhere between $400 and $500 trillion--tens of thousands of dollars for every person on the planet. That is undoubtedly a conservative figure given the fact that anything we can't live without and can't replace at any price could be said to have an infinite value.

Additionally, just as technology cannot replace the planet's life-support systems, so, too, are machines unable to provide a substitute for human intelligence, knowledge, wisdom, organizational abilities, and culture. The World Bank's 1995 Wealth Index found the sum value of human capital to be three times greater than all the financial and manufactured capital reflected on global balance sheets. This, too, appears to be a conservative estimate, since it counts only the market value of human employment, not uncompensated effort or cultural resources.

It is not the aim of this book to assess how to determine value for such unaccounted-for forms of capital. It is clear, however, that behaving as though they are valueless has brought us to the verge of disaster. But if it is in practice difficult to tabulate the value of natural and human capital on balance sheets, how can governments and conscientious businesspersons make decisions about the responsible use of earth's living systems?

1 | 2 | 3 | 4

To make comments or report problems with this site, please contact

© All rights reserved. Published by Rocky Mountain Institute.
2317 Snowmass Creek Road  |  Snowmass, CO 81654-9199  |  Ph: 970.927.3851


Powered by Intrcomm Technology's SMC