Book review: Natural Capitalism by Paul Hawken, Amory B. Lovins & L. Hunter Lovins

Genuine prosperity is not won at the expense of the earth.

Just as the foundation of all personal wealth is good health (you have no energy to make your mark if you are sick), so the foundation of global wealth is a healthy natural environment. Prosperity is inherently about wealth and wellbeing that are not won at the expense of other people or things. Real prosperity invokes the 'circle of life'.

Natural Capitalism popularised the idea of 'natural capital' that clean air, water and other natural assets are valuable and must be recognised by the accounting discipline, and are not free things to be looted. Yet the book is not a rant against industry and how it is destroying the world. Through copious examples it shows that being 'green' can be financially smart as well as ethically right.

The capital that economists forgot The authors note that industrial capitalism has been incredibly successful in marshalling resources and delivering great wealth. But this wealth has come at a great cost to the natural environment. They admit that the cost of raw materials continues to fall and that the actual amount of resources never becomes depleted, thanks to the development of easier ways of finding and extracting metals from the ground and yet, these 'easier' ways also come at a cost.

Underlying the industrial mentality is that nature supplies goods that can be transformed into something more valuable. But more important than the materials that nature offers are the services that it provides. For instance, a forest not only gives us wood but is a form of water storage, cleans our air and is a buffer against weather extremes.

Nature's provision of a carbon cycle involving the exchange of oxygen and carbon is irreplaceable. There is no other way to manage this other than through large amounts of green plants.

The famous Biosphere 2 experiment in Arizona in the 1990s could not even maintain enough oxygen to support the life of eight people. The planet earth provides this every day for billions.

Conventional economics sees wealth as a cycle that begins with raw materials and ends with their distribution. What is not taken into account is the origin of the raw materials, or what happens to the products once discarded. How would our world change, the authors wonder, if these 'invisibles' became integrated into accounting and economics?

Neoclassical economics has 'counted only what was countable, not what really counted'; the concept of natural capitalism, in contrast, sees the environment not as 'a minor factor of production' but rather as 'an envelope containing, provisioning, and sustaining the entire economy'.

There are four distinct types of capital:

Human what people can create.

Financial money and money instruments.

Manufactured infrastructure and products.

Natural the natural world from which all things come.

Each is as necessary as the others for prosperity and wellbeing.

Radical resource use While many companies pay attention to 'eco-efficiency', in reality this just means incremental improvements to processes. It does not alter the ever-increasing production of the wrong products, using the wrong processes, from the wrong materials, while the more fundamental factors affecting the environment are ignored.

Amory and L. Hunter Lovins' previous book, Factor Four: Doubling Wealth, Halving Resource Use, showed how companies, countries and people could 'live twice as well but use half as much material and energy'. Such a revolution was not only possible, it was vital, given that the world population would double while global natural resources available per person would decrease.

Natural Capitalism notes how the Industrial Revolution brought in technology that allowed one person to do the work that 200 were needed to do only 70 years before. The same thing could happen now, the authors say, if we embrace techniques and technologies of 'radical resource productivity'.

The potential for energy efficiency in manufacturing processes is enormous, and much of it involves simple retrofitting of new valves, ducts, fans, motors, insulation, heat exchangers, better compressed air maintenance and so on. None of these things is new technology, but involves better use of what we already have.

The road to a greener world

The authors draw attention to the environmental and social effects of the automobile industry, the largest in the world. They note that up to 80% of the energy generated by a car engine is lost, mainly through heat loss and exhaust, with only 20% used to turn the wheels. Today's cars use so much energy because they are made of steel, designed more in the manner of tanks than aircraft, and are overpowered for most of their uses.

The cars of the future will be much lighter, which means far less energy will be required to move and stop them. Made

of composite materials, which are much lighter than steel but stronger, they will do without weighty power steering and power brakes, and will be driven by a combination of electricity and fuel (the Toyota Prius was the first commercially successful example of this), with many fewer moving parts and without heavy clutches and transmissions. When such cars becomes widespread, the authors note, it could 'ultimately spell the end of today's car, oil, steel, aluminium, electricity and coal industries and herald the birth of successor industries that are more benign'.

Government waste The standard green-left position is that the government must move in to regulate industry to save the natural environment. But the authors note that much of the time, the government (in the form of subsidies and regulation that favours energy use rather than energy savings) is part of the problem.

At the time Natural Capitalism was written (in 2000), the US government was subsidising the automotive industry to the tune of $464 billion per year, including road construction, and giving preferential treatment to mining, logging, and waste-disposal industries that had few incentives to change their ways. Little support was given to emerging clean technologies.

The book's radical suggestion is that governments should stop taxing labour and income and instead tax pollution, waste, carbon fuels and resource exploitation. The result would be a new order of radically better use of resources, which at the same time redirects government spending toward social ills and fixing damaged environments.

Final comments Natural Capitalism inspires because it says we do not need to go back and live in the forests and abandon modern comforts in fact, part of the fulfilment of civilisation will be to enjoy great technological advances that use much less energy. Alternative ways of living, transporting and working do not necessarily involve compromise. This book makes you think about prosperity in the largest sense; that is, what we leave future generations.

In a similar vein Joe Dominguez & Vicki Robin: Your Money or Your Life.

Milton Friedman: Capitalism and Freedom.

Paul Zane Pilzer: God Wants You to Be Rich.

The authors Born in 1946, Paul Hawken is a leading speaker on environmental, economic and social justice issues, and has consulted many corporations. In his 20s he founded Erewhon, a natural foods wholesaler, and later co-founded garden supplies company Smith & Hawken. He has been involved in the establishment of software and engineering firms Metacode, Groxis and The Pax Group, which provides fan technology to industry.

Other books he has written include The Next Economy (1983) and Blessed Unrest (2007), about the growth of non-profit bodies worldwide concerned with improving social justice and the environment. Hawken is based in Sausalito, California, where he heads the Natural Capital Institute.

Amory B. Lovins, born in 1947, is an advocate of 'soft energy' (wind, solar, etc) and is chair and chief scientist of the Rocky Mountain Institute.

L. Hunter Lovins was co-founder of the Rocky Mountain Institute and founder of Natural Capitalism Solutions. Trained as a sociologist and lawyer, she is Professor of Business at Presidio School of Management and was named a Hero of the Planet by Time magazine in 2000.

Extracted from 50 Prosperity Classics: Attract it, Create it, Manage It, Share It Wisdom from the best books on wealth creation and abundance by Tom Butler-Bowdon, published by Nicholas Brealey Publishing.