Why Regenerative Economics is the Future

Mechanistic and detached from life’s creative web of interactions, the conventional model of economic development is failing our societies on all counts. What would an organic view of the economy look like?

I. The need for regenerative economics

Earth Overshoot Day marks the date when humanity’s demand for ecological resources and services in a given year exceeds what Earth can regenerate in that year. In 2021, it fell on July 29. Globally, the ecological deficit cumulated year after year results in staggering numbers of animal and vegetal species steadily going extinct. The lesson, as anyone would suspect, is that we cannot have it both ways: pillaging the planet and expecting to do it sustainably. If the Earth Overshoot Day is a stark reminder of how heavily our current economic system is indebted to future generations, can the frame of reference that has led us to this absurd situation be modified? Is there a positive and constructive way to address both economic and environmental needs?

You may know already about Hunter Lovins’ work on natural capitalism1 as well as about the growing importance of impact investing,2 respectively clarifying the synergy between environmental concern and economic efficiency and acting upon it. The concept of Regenerative Capitalism,3 for its part, goes at the core of what sustainable development is about. It is, quite simply, the technical blueprint for the quantum leap the world so desperately needs.

John Fullerton, the author of the white paper linked to above, argues that the modern scheme of economics and finance has locked the human community in an inexorable ecological, social, and, therefore, economic crisis. This issue runs prior to the usual political opposition between right and left; what has to be addressed is the common flawed understanding of the science behind economics. Labeled either regenerative capitalism or regenerative economics, the relevance of this approach is that it is based on factual evidence regarding how all types of networks thrive. Nothing more, nothing less. But it’s a total game-changer.

The rules by which natural or man-made networks sustain and regenerate themselves can today scientifically be discerned and measured. Regenerative economics is about applying these findings to the economy. We consequently might be closer than we usually think to let go of the old extractive and exploitative scheme that widely overshoots the earth’s capacity to keep up with it.

The purpose of this article is to explain what, specifically, makes this paradigm shift toward a much more integrated economy self-evident. I do not pretend to do more or better than the author of Regenerative Capitalism. I just felt it could be useful to share a personal reading of his work. Having no particular competence on the topic, I am precisely the one guy whose struggles in clearly grasping the depth of some concepts and ideas can become as many steps on the same path of discovery for anyone else. If you think the future of humanity is at stake at that point in history, I am confident you will be glad to travel that path too.

In today’s dominant form of capitalism, broad-based prosperity is assumed to be mechanically achieved through the operations of unfettered, free markets that efficiently allocate resources. Taken at face value, this abstract construct is inherently problematic.

If mechanically achieved, prosperity is then just about the accumulation of material wealth but not necessarily about the betterment of general conditions of living. The latter requires a committed involvement in fine-tuning a whole range of conditions other than the freedom of making business deals. As growing income inequality the world over shows today, maximizing profits for shareholders, growing GDP, and optimizing consumer “material utility” (more stuff) might benefit some in the short term but are not by themselves sufficient conditions to foster lasting prosperity for the greater number.

In such a view, moreover, our natural environment is primarily considered as a resource for raw material extraction and a landfill for waste dumping, not as the biosphere we belong to. We already know that earth has lost more than half of its wildlife in the past 40 years because of the way we choose to live.4 As the sixth mass extinction of species in the history of the planet is now in order, this obvious and direct threat to our own species’ survival epitomizes the absurdity of ignoring the proper conditions of material growth in a finite world.

Traditional View of Economic Activity

The idea that the economy is primarily about markets efficiently allocating resources, however, is not just some bad excuse from raging capitalists. To most of us, whether of liberal or more social-oriented economic stripes, it is the bedrock of economics as such. Common wisdom in business schools and circles of power worldwide is that economics exclusively involves human exchanges, and only at a material and financial level. In other words, an analysis of prosperity is supposed to be conducted through the sole prism of trade.

View of Economics as Part of a Larger System

The whole purpose of John Fullerton’s paper is to show that this assumption is fundamentally at odds with the laws of systemic health in an interconnected world. We have to look at society, the economy, and nature as an interdependent whole. The good news is that we have today the ability to measure their relevant network flows. By fully taking these into account we can very likely bring about much better results in prosperity and for the planet.

Willingly or not, this basic disconnect between conventional economics abstract fantasy and the real world remains largely ignored. The fact is, however, that “(…) research using the Genuine Progress Indicator5 suggests genuine progress decoupled from GDP growth in the U.S. around 1980.” (Regenerative Capitalism p. 37) This “Genuine Progress Indicator” focuses on the degree to which society’s goals (i.e., to sustainably provide basic human needs for food, shelter, freedom, participation, etc.) are met, as opposed to the commonly used measures of the mere volume of marketed economic activity.

Real GDP and GPI per capita
Real GDP and GPI Per Capita 1950–2004. Source: Talberth, Cobb, et al. 2007.

From there on, you would think that having noticed the discrepancy between genuine progress and GDP growth, policymakers would have broadly and officially adopted more relevant criteria in evaluating their policy results. They did not, so far. According to John Fullerton, the fundamental reason why is that the notion that reality can be assessed and measured as a working whole directly contradicts the vision of a dichotomized world our knowledge tools have historically constrained us to. Prior to the methodological shift regenerative capitalism is all about, it is a cultural one that needs to be operated. Specifically, by addressing our assumptions about science and rationality.

We are humans. We like stories, whether in books or in the background of our collective mind. Concerning science, our narrative revolves around the mechanistic model of reality that used to be the only one accessible to measurements at the dawn of modern science. In their dream of achieving a universal methodology of knowledge that would open the door to constant and indefinite progress for humanity, rationalist philosophers in the sixteenth and seventeenth centuries asserted that the true expression of knowledge is the ability to reduce complex phenomena into their simplest parts. Science, since then, has mostly been about deciphering the mechanism of things.

Indubitably valid and necessary as the basic pattern that allows measuring and experimenting without the interference of non-verified assumptions, this reductionist view is nevertheless incomplete. In a breathing and living world, the end result is always more than the sum of its parts.

As a side effect, this originally dichotomized and abstract scientific view of reality has given our collective mind an intellectual free rein in exploiting our environment any way we see fit. If nature is a vast mechanism that will eventually be read through in all its parts, then it makes sense to relegate it as a useful material resource just waiting to be exploited the proper way—with, unfortunately, all the disastrous consequences we see today. Aside from greed and indifference to humanity’s collective fate, where we went wrong is simple to assess. We failed to recognize that considering physical phenomena as mechanisms—even though this has proven hugely productive for the expansion of human knowledge and for our subsequent domination of planet earth—is nevertheless just a methodological stand, not reality itself.

For lack of adequate models of interpretation and proper methods of investigation, the organic dimension of phenomena’s interaction has been for a long time entirely ignored in the development of modern science. History, biology, and ecology, for instance, have become proper scientific endeavors in the course of the nineteenth and twentieth centuries only.

What about economics? While the original model of scientific investigation has steadily evolved, integrating and structuring new fields of knowledge, mainstream economics still rely exclusively on what is readily quantifiable and measurable. Looking at the economy through the narrow scope of trade, its vision is that of a mere mechanic. There again, the model is taken for the reality.

Dealing with reality, therefore, starts with asserting the model. Along with history or psychology, economics is confronted with an overabundance of possible parameters to take into account, which makes its conclusions more the result of a rational interpretation than of a strict deduction. Its purpose, in other words, is to detect in the most relevant and accurate way possible the interdependencies that make the economic world, not to abstractly hide behind mere quantities. Economics is an interpretative scientific endeavor. It has to be. In that sense, asking it to “simply do the math”, as it is often heard when arguing against social expenditures—which, in reality, are investments—amounts to the wildest interpretation of all. An interpretation whose focus on financial quantities obfuscates a deeper understanding of how all quantities play out as a whole.

Do you find this post interesting? Share it and let others benefit too!
(Scroll to the bottom of the screen on smartphones)

II. The concept of Energy Network Sciences

Focusing on the interdependencies that make a world in the first place, while being able to provide data to back them up, is regenerative economics strong point. We have today a much more precise view of the correlations that shapes reality as a whole than we used to in the sixteenth century. Even though this holistic approach has obviously been the basic pattern of understanding in biology and ecology, models and tools are now available to measure network flows in many different fields. By the same token, economic life’s patterns are not detached from all other patterns that form our world and allow it to regenerate itself.

For that reason, regenerative economics’ goal is to contribute to creating a healthy economy within the larger bodies of a healthy society and a healthy planet. In John Fullerton’s document, this aspect will nevertheless be addressed later on. First, there needs to be an explanation of why regenerative economics is indeed scientifically accurate and economically relevant.

Our “Top 10” measures of systemic economic health. Source: Dr. S. J. Goerner

Dr. Sally Goerner, Science Advisor to Capital Institute and co-author of The New Science of Sustainability6 states the following in her contribution to Regenerative Capitalism: “Over the last 60 years, researchers in a wide variety of fields have created a sophisticated, empirical understanding of a cosmos based not on separate, randomly colliding bits, but on interconnected networks of flow.” (Id. p. 110) This encompasses all and any system whose existence arises from and depends on circulating matter, energy, resources, or information throughout the entirety of their being.

That understanding of the world as interconnected networks of flow calls for three preliminary remarks:

  • First, this shift has come through the very requirements of a scientific approach. Concerning this point, moreover, “measuring critical characteristics of network health and development is often relatively straightforward because most can be assessed by mapping the layout and magnitudes of flows, and counting the number, size, diversity, and connectivity of nodes and connecting channels.” (Id., p. 111)
  • Second, the dynamics of flow are not just a convenient way of providing models; they are real and universal. Instead of just being an intellectual frame useful to quantify the phenomenal world, and thus to give us a grasp in experimenting and measuring it, they are the very way this world operates. The intellectual shift from mechanist or reductionist science to what Dr. Sally Goerner calls the “Energy Network Sciences” (ENS) let us see the world as the co-constructing, ever-evolving, emergent whole that it really is.
  • Third, even though discerning functioning patterns in the circulation of matter, energy, resources, or information has been mostly applied to living beings and ecosystems, society and the economy are obvious network systems of flow too. The question is to know how to evaluate, in a practical and relevant way, their specific operative state of health.

Regarding this last question, Dr. Sally Groener explains that the answer is a two steps approach. The first step is to use the biological template metaphorically, in order to draw some basic principles of functionality. They are the following:

  • The health of the whole is inseparable from the health of its parts, and the health of every part is inseparable from the health of the whole. Basic well-being, security, and community relationships are as essential to systemic economic health as they are to individual and community health.
  • Money is like blood, a vehicle for catalyzing processes, exchanging resources, and nourishing economic muscle. It is a means and not an end, in contrast to how it is understood in conventional economic thinking.
  • Robust cross-scale circulation is critical: poor monetary circulation to lower levels of an economy—insufficient wage levels, few small-scale commercial loans, etc.—results in economic necrosis and the dying off of large swaths of economic tissue.
  • Long-term survival depends on “self-feeding” return loops. Channeling energy and resources into building and maintaining the internal processes the system needs to thrive includes everything from roads, schools, and communication infrastructure to business incubators and effective governance systems.

The second step is to then validate the use of predictive models that can provide precise targets for measuring systemic health and development. The modern study of fractals is one example of such models. A fractal is a natural phenomenon or a mathematical set that exhibits a repeating pattern that displays at every scale. “Lungs, for instance, says Dr. Sally Goerner, have a branching structure—with a few, highly efficient, big conduits on top and successively more numerous, less efficient, smaller conduits on the bottom—because this particular structure optimizes the diffusion of oxygen into the bloodstream.” (Id., p. 113)

What is particularly interesting with fractals is that they “provide a foundation for local uniqueness because, like snowflakes, the same repeating pattern manifests in unique ways as determined by the unique context in which it emerges. So, while fractals seen in lungs, lightning bolt, and trees are universal patterns, no lungs, lightning bolts, and trees are ever exactly the same.” (Id., p. 36) Besides, and as already stated for the dynamics of flow in general, fractals do not bend reality toward an abstract representation. They simply are one aspect of how the world does really operate. This is why, adds Dr. Sally Goerner, “Fractal arrangements are found in everything from root systems and river deltas to ecosystems because they help optimize the many aspects of function and flow.” (Id., p. 114)

River Delta in Myanmar
Aloe Vera
Her Majesty

By using fractal patterns, Energy Network Sciences cannot predict each step of a system’s evolution but they can nevertheless assert its systemic health. Applied to the economy, this is simply done by measuring how closely a given system approximates the optimal network structures seen in the real world. From a layman standpoint, as Dr. Sally Groener reminds us, “We experience outsourced jobs and decrepit schools as local events, but underneath we know they are symptoms of global economic dysfunction.”

This approach has huge consequences for the implementation of a sustainable economy since it means that ENS can help correct the underlying causes of economic dysfunctions. Notably by “Providing rigorous measures of systemic health that support practical applications; identifying the optimal network structures and peak patterns of development needed to build healthy, self-sustaining, regenerative systems; showing the logical connection between whole-system dynamics and the boom-bust cycles seen in human systems, thus providing effective diagnoses of their causes and cures; validating the dream of free enterprise democracy and showing us how to achieve it.” (Id, p. 115)

Based on conventional economics, whether seen from Keynes or Hayek’s point of view (or Minsky’s vs Friedman’s), today’s form of capitalism is totally at odds with the biosphere’s boundaries as well as with the laws of systemic health in the world as it is—interconnected. The practical and somewhat disheartening consequence of this doctrinal confinement is that we keep destroying the planet because there is a financial profit in doing so. We engineer our short-term benefits by helping ourselves off of the world in total disregard of its fundamental reality as a whole.

As long as the theoretical framework for creating prosperity is not changed, the course we are following and that leads to large social, economic, and environmental disruptions will not change either. It is not enough to consider energy and material efficiency, closed-loop business model redesigns, getting prices true and right, transparency of integrated reporting, or the concept of a triple bottom line (planet, people, profits) as critical parameters of economic sustainability. If the economic pattern of conventional capitalism is not re-engineered at its base, implementing such parameters on a broad scale will always be an upstream and virtually lost battle.

Seeing economic development as primarily being the art and science of dealing with living systems, on the other hand, helps to acquire the necessary new understanding of what is possible. Effectively creating a healthy economy within the larger bodies of a healthy society and a healthy planet is what the third part of Regenerative Capitalism is about.

Do you find this post interesting? Share it and let others benefit too!
(Scroll to the bottom of the screen on smartphones)

III. Unlocking the regenerative economic potential

The internet has unlocked the possibilities of search and social media interactions only years after it was invented, generating social and economic evolutions of a magnitude that no one could have ever imagined. John Fullerton sees there a validation of the natural world and economics similarity: “Understanding the conditions that enable us to unlock this type of regenerative potential, thereby mimicking the abundance found in the natural world, is the key challenge to transforming our economics.” (Regenerative Capitalism, p. 42-43).

Besides, one could argue that these creative characteristics of a regenerative economy are precisely what a free enterprise system is supposed to be about. The irony is, of course, that instead of relying on an accurate understanding of how to make free enterprise networks healthy in a complex and interdependent world, today’s dominant form of capitalism favors mega-corporations and financial institutions through the exclusive power of money. We can do better. The question is how.

From conventional to regenerative economics. Source: Adapted from “Trajectory of Ecological Design” (courtesy of Bill Reed).

From his own experiences with regenerative entrepreneurs, as well as from his exploration of systems theory, ecology, and the physics of flow-networks, John Fullerton identifies eight operating principles that can, in his own terms, “lead to and support widespread, long-term, regenerative vitality”, adding “these conditions are not an à la carte menu from which we can pick and choose, but an overarching pattern of qualities and principles that feed into one another—overlaps and interactions among them all are to be expected.” (Regenerative Capitalism, p 44) Here is how he labels these principles:

  1. In Right Relationship
  2. Views Wealth Holistically
  3. Innovative, Adaptive, Responsive
  4. Empowered Participation
  5. Honors Community and Place
  6. Edge Effect Abundance
  7. Robust Circulatory Flow
  8. Seeks Balance

1 – In Right Relationship

In contrast with a very common idea about both business and life, current research shows that collaboration, not competition, is their defining quality. It appears that while competition serves an important winnowing role, collaboration is core because it increases development and reduces risk. This is why in ecosystems “less mature species compete until environmental pressures force them to develop mutually beneficial relationships with other species, which allows them to thrive continuously in more efficient niches. (…) Salmon, for example, play a value-adding role in regenerating life in a river system and associated forests and prairies.” (Regenerative Capitalism, p. 46)

Brought back to the field of economics, value-added exchanges need a context of healthy relationships in exactly the same way. Being in synergetic collaboration with each other and the broader host systems we are part of—which is what Peter Brown calls the “right relationship” in a book7 dedicated to this question—is a necessity for our long-term economic health and, ultimately, for our survival as a species. In practice, this implies that decisions should always be made from the perspective of mutual benefit and health promotion across all levels and systems. They should always be made in subsidiarity too, i.e. at the lowest possible level.

2 – Views Wealth Holistically

Regenerative Capitalism requires that we expand the meaning of “capital” far beyond monetary value. As of today, the decision process in firms is being primarily driven through a quantitative analysis that rules out negative long-term impacts as “externalities”. Balance is just not part of the equation. From a holistic and truly rational perspective, however, there are no externalities. It is all one system. Because our decision-making process is centered at the level of the firm, our economic decisions fail to take into account the larger context.8 This goes further than just measuring long-term environmental or social impacts of short-term, self-interested business decisions: “value and wealth must be defined in terms of the well-being of the whole, achieved through the harmonization of multiple kinds of wealth or capital, and critically, a broadly shared prosperity.” (Id., p. 50)

6 forms of capital. Source: International Integrated Reporting Council

Someone like Hunter Lovins has done tremendous work in clarifying the concepts of social or human capital and natural or living capital, now commonly used in the context of sustainable development. For its part, the International Integrated Reporting Council identifies six forms of capital that the business world could and should measure and make transparent to stakeholders.9

Besides, “Evidence of a growing shift in values towards a more holistic, multiple-capital view of wealth can be seen in the emergence of “stakeholder capitalism,” exemplified by companies such as Patagonia, the Dutch bank Triodos, and the rise of the B Corp movement where corporate directors are explicitly empowered by charter to consider all stakeholder interests.” (Id., p. 53)

The different types of non-monetary capital that are now being defined and implemented in the economic process are interdependent and effectively not substitutable to money. They are a form of wealth which, by nature, is irreducible to accumulation and greed but, as David Orr points out, is nurtured by affection and foresight, no less. To put it bluntly, cynics who might think that anything can be bought should ponder again why we have given up slavery and what the effective economic outcome of the emancipation of black people has been. Assessing values that are irreducible to money but play a direct role in economic health is a call back to reality.

Most importantly and because they are effectively nurtured by affection and foresight, non-monetary forms of capital “have no limits, are immensely abundant, and developing and using them tends to increase abundance for all.” (Id., p. 54) Whether we think of intellectual, experiential, social, cultural, or spiritual capital, we are dealing here with true individual and collective wealth. Material wealth, power, and fame can easily be delusional. If considered honestly, shifting away from the mental frame of separation and scarcity they create to one of connectedness and abundance is not such a big personal or collective challenge.

3 – Innovative, Adaptive, Responsive

Continuous learning could be the motto of regenerative economies. We have to embrace our capacity to innovate across all sectors of society, as well as to address the needs of all segments and levels of global civilization. This implies research, collaboration, and accountability. In that respect, John Fullerton underlines the two main issues at stake in today’s corporate world.

The first one is that “State bureaucracies and oversized, corporate hierarchies—filled with narrowly prescribed specialists in an overly emphasized pursuit of efficiency and control that stymies individual creativity—are inherently degenerative and must be transformed.” (Id., p. 56)

The other is that “Free enterprise was supposed to be responsive to human needs, and democracy was supposed to be responsive to citizens—yet this is not how things have turned out. Whether it is coolly calculating the cost-benefits of poisoning local water sources or cutting costs by creating sweatshops in Third World countries, global capitalism has become notoriously unresponsive towards the needs and well-being of the larger public including its customers and employees. Democratic governments dominated by monied interests often become similarly unresponsive to the needs and well-being of the citizens they supposedly serve—particularly when public needs for, say, affordable health care, fair elections, or clean water, conflict with the desires of certain powerful donors.” (Id., p. 56-57)

4 – Empowered Participation

Empowered Participation is about ensuring the chance for everyone to prosper and realize one’s own potential. The concept at play here is not about passively redistributing wealth but about actively unleashing the unique potentials of millions of disempowered people. According to John Fullerton, this would also unleash “a tidal wave of vitality undreamt of in current economic theories”.

A pipe dream? Quite the reverse. Today’s economic system is stranded in a form of management by default that exclusively favors top to bottom decision-making. Business and social structures have to evolve so that each and everyone’s talents can be much better integrated into creating benefits for the whole.

When considering the jobs market, it does not make much sense that such a large part of the population cannot find one or remains stuck in low-paying occupations without any solid prospect of professional evolution. In this perspective, empowered participation implies using talents as they are and where they are, thus creating local added values instead of trying to cram everybody in narrowly defined job market categories.

In a more narrowly defined sense and regarding business structures, empowered participation means that “Expanded experimentation with direct pension fund business ownership in negotiated partnerships, cooperative forms of ownership, private partnerships, and broadly distributed equity ownership of business enterprise is the norm.” (Id., p. 61) Effectively recognizing that no one is little and no one is insignificant makes corporate governance that much more effective in the long term. One can consider, for instance, that “The German requirement for labor representation on boards of directors is a successful demonstration of this principle already in action.” (Ibid.)

5 – Honors Community and Place

Modern capitalism is geared toward efficiency and scalability. However, as opposed to “placeless” global corporations running roughshod over anything that stands in the way of optimizing their “shareholder value”, we need to understand that true wealth is built on the foundation of healthy local and regional economies that do honor their people and place.

There is no contradiction between local and global economies if the necessity of integration across scales is respected. Public policy, as John Fullerton stresses out, should encourage and fortify “a diversity of unique, collaborative, place-based economies at multiple scales from community, to city, to regional. Each is a core node in a global interconnected economy that engages in trade from a position of place-based resilience and strength.” (Id., p. 65)

By the same token, in an economy that “honors community and place” prosperous global corporations “remain place-sourced in their culture, and become genuinely connected to more distant communities as supportive partners, not extractive predators.” (Id.) This happens when global corporations follow the business strategies of enlightened companies. To take just one example, DNV GL, the global shipping-certification leader, “has opened over 30 offices in China in order to operate close to its customers and to understand the local community context of their business.” (Id., p. 66)

6 – Edge Effect Abundance

Prior to the industrialization of agriculture, farmers understood the amazing fertility of hedgerows and consequently used them to create artificial “edges”, where pollinators would dwell and where the soil would be buffered from the wind. Brain research, sociology, or ecology, give us the same lesson: creative synergy emerges best at the “edges” of systems, where the bonds holding the dominant pattern in place are weakest, and the opportunities for cross-fertilization are the greatest. Cosmopolitan cities where diverse ideas intersect and opportunities to pursue novelty outside mainstream pressures are more open are common examples of this law.

Another good example, on a business scale, is when TNT, the Dutch postal company, decided to leverage its logistics assets to add efficiency in the challenge of emergency food relief. This not only helped populations in need but gave also a renewed purpose to its staff, improving employee retention and saving TNT money in the process.

These types of partnerships are implemented through informed self-interest. Becoming a catalyst for collaboration between various industry sectors or between the private and the public ones, thus advancing policies and practices that sustain the social systems and ecosystems in which all operate, is simply more profitable.

7 – Robust Circulatory Flow

“Just as human health depends on the robust circulation of oxygen, nutrients, etc., so too economic health depends on robust circulatory flows of money, information, resources, and goods and services to support exchange, flush toxins, and nourish every participant at every level of our human networks. The circulation of money and information are particularly critical to individuals, businesses, and economies reaching their regenerative potential.” (Id., p. 70)

Platitude? It might seem at first that everybody would agree with such a statement. But why, then, do we keep going in the opposite direction? “Like a body with poor circulation to its limbs, an economy cannot be healthy if money from profits and savings are systematically sucked from the periphery into the center—but, this is precisely what neoliberalism’s hyper-efficient, globalized, financialized, and centralized version of capitalism does. Its relentless pursuit of “economies of scale” constantly drains money, people, and resources from local communities and the real economy, while shifting the burden of the real costs it creates to other parts of the system. Walmart workers on publicly funded food stamps are but one familiar example.” (Id., p. 72)

Dr. Sally Goerner draws from this reality an obvious conclusion as to how the well-being of the economy at any given time should be monitored: “The rate of circulation of money at local and regional levels may be the most critical measure of economic health. Imagine an aggregation of the monthly local and regional money-circulation metrics replacing GDP growth as our barometer of economic health!” (Id., p. 71) Indeed, one can only dream of the day when economists and politicians will get rid of the GDP smoke-screen and begin paying attention to what is going on in the real world, where not only giant corporations and financial institutions but all the people live!

John Fullerton adds that, at a purely financial level, “Community banks, community cooperatives, loan funds like the one managed by RSF Social Finance, complementary currencies, and buy local movements are all expressions of an intuitive drive to increase the circulation of money and credit at the local and regional levels by reasserting relationship (Cf. principle one: “In right relationship”) at the heart of transactions.” (Id., p. 72)

Improving local and regional money circulation goes hand in hand with a circular economy, where the waste of one process becomes the raw material for another. By reclaiming, recycling, and remanufacturing, a circular economy tends to find solutions locally and only then steps up to a wider scheme of reprocessing. As the Ellen Mc Arthur Foundation has shown in various detailed reports, this is much more efficient regarding both business vitality and community health than the take-make-waste scheme inherited from our entrepreneurial great-grandparents.

8 – Seeks Balance

The same way we ride a bike, regenerative systems are always engaged in a delicate dance requiring harmonizing multiple variables instead of optimizing single ones. For the most part, this balance has to be found between efficiency and resilience.

The window of vitality
Source: Dr. Robert Ulanowicz and Dr. Sally Goener

“Theoretical ecologist Robert Ulanowicz and his colleagues used the balance of small, medium, and large organisms found in nature to identify the optimal balance of system resilience and system efficiency. Ulanowicz noticed that, though resilience and efficiency are both important to systemic health, the factors that contribute to resilience such as diversity, small size, and dense connectivity were in opposition to those which contribute to efficiency, such as streamlining, high capacity and large size. Ulanowicz found that actual ecosystems maintain a balance of the two. He then used (…) measures and data from these highly functioning ecosystems to identify the range of balance, the “Window of Vitality,” within which all healthy systems fell10 (Id., p. 75).

The study shows “why an emphasis on increasing scale and efficiency is useful up to a point, beyond which it is destructive to the system as a whole. Ulanowicz’s work actually provides a way of measuring this balance point.” (Ibid.)

In order to illustrate this concept of balance and window of vitality with an example that everyone can relate to, let’s go back to the 2008 financial crash. “(…) the collapse of 2008 was the direct result of decades of globalization and deregulation combined with the innovations of derivatives and securitization, all done in the name of efficiency, but with the unintended consequence of destroying system resilience leaving dangerous fragility. Indeed, since the global economy lacked sufficient resilience, it would have collapsed were it not for unprecedented interventions by central banks to shore up the seemingly “efficient” but deeply reckless and fragile financial system.” (Id., p. 75) Aside from the 2008 financial crisis, moreover, medium and small-sized banks, having a focus on the real economy with a dedication to supporting economic, social, and environmental impact, significantly and regularly outperform the megabanks.11

Unfortunately, the flawed ideology that promotes economic efficiency at the expense of system resiliency is applied to all other critical circulatory systems of the economy as well: energy, fresh and waste-water, telecommunications, etc. The issue is that we are confusing efficiency with some quest for perfection at all activity levels. We have a hard time letting go of what we cannot plan or control through a set of simplified schemes. But the truth is that regenerative systems are arranged to “self-regulate by design”. “In living systems, self-regulation comes from a complex and hard-won balance of positive and negative feedback systems evolved over long periods of time. In human networks, creating naturally self-regulating economies will require similarly hard-won cultural shifts along with legal and moral constraints that allow the messiness of learning to continue.” (Id., p. 78)

In practical terms and at the financial level, the search for balance would translate, for instance, in “(…) a financial transaction tax to create a feedback loop that discourages excessive speculation, and positive incentives that encourage long-term investment in the things we need, beginning with investments that will drive the transition of our energy system away from fossil fuels.” (Id., p. 79)

Do you find this post interesting? Share it and let others benefit too!
(Scroll to the bottom of the screen on smartphones)

IV. Conclusion

John Fullerton’s document gives in its final part various examples of companies specifically working within the frame of regenerative economics. This is definitely useful for a practical understanding of the concepts presented in Regenerative Capitalism. As for this short review, its first and main conclusion could be that profit-making is one segment only of a healthy economy.

We have to stop considering the economy as the search field for some kind of engineering allowed to use, as such, a set of simplified schemes. On the contrary, the true exercise of rationality in that field is to respect its subject as the embedded body of work that it is. The economy is part of a living system of systems or network of networks, where models can only be drawn by taking into account the creative effects of time and complexity.

In the real world, two plus two does not equal four but five or three, depending on how favorably or unfavorably the whole pattern of relevant circumstances shapes itself together. As for any type of study dedicated to the mesh of living interactions, mathematics is a useful tool but cannot predict how life will reinvent itself under changing circumstances, or assign which conditions are necessary to the genuine satisfaction for mankind. Scientific evidence is of one type only. If, unfortunately, examining how relationships between the many parts of a system shape the behavior of the whole still looks like a novel field of science to many, it is nevertheless the one that must be practiced to gain a proper grasp of most of humanity’s biological, ecological, economic, social, and political challenges.

So far, conventional economics has been bent on mimicking experimental sciences. Rather than having to deal with the operating principles of interdependent wholes, the assumption has been that the topic of economics is quantities neatly linked in linear causality. This has led to implicitly considering that more is better. Granted, if human life was simply about dealing with quantities in an abstract world cut from any environmental roots, social needs, and spiritual endeavors, it would then make sense to consider profit-making as the exclusive parameter for a healthy economy. But growth is not necessarily health.12

Regenerative capitalism is about acknowledging the organic and integrated nature of true economic progress. Most importantly, it offers the conceptual tools to assess the specificity of the economic field and to measure all its relevant flows. In other words, regenerative capitalism—or regenerative economics—is the epistemological shift needed to effectively provide the best social, environmental, and economic outcomes.13 John Fullerton says it best: “If this more democratic vision of capitalism is to succeed, it must embrace a holistic worldview, and learn to mirror the lessons of regenerative systems. The implications of a world where: wealth is viewed holistically; empowered participation makes innovation common and adaptation easy; circulation is robust; community and place are honored and edge effect abundance at their intersections is facilitated; and everything is in balance and in right relationship with everything else—are far-reaching and profound. Yet, in some ways, this vision also brings us back to our original free enterprise roots, while clarifying where current capitalism went wrong.” (Id, p. 81)

Share your thoughts in the comment section below.


  1. See for instance, Natural Capitalism: Creating the Next Industrial Revolution
  2. See the Global Impact Investing Network (GIIN)
  3. Regenerative Capitalism – How Universal Principles And Patterns Will Shape Our New Economy, by John Fullerton (2015).
  4. Humanity has wiped out 60% of animal populations since 1970, report finds, The Guardian
  5. Beyond GDP: The Need for New Measures of Progress, Boston University.
  6. The New Science of Sustainability: Building a Foundation for Great Change, by Sally J. Goerner, Robert G. Dyck, and Dorothy Lagerroos.
  7. Right Relationship: Building a Whole Earth Economy, by Peter G. Brown, Robert Howell, Geoffrey Garver, Thomas E. Lovejoy, Keith Helmuth, and Steve Szeghi. Berrett Koehler Publishers, 2009.
  8. For a view of different methodologies at play, see Center for Sustainable Organizations.
  9. IR-Background-Paper-Capitals.pdf, as well as the IIRC website.
  10. Quantifying sustainability: Resilience, efficiency and the return of information theory, Ecological Complexity, 6 (1), 27-36), by Ulanowicz, R., Goerner, S., Lietaer, B., and Gomez, R. 2009
  11. Real Economy – Real Returns: A Continuing Business Case for Sustainability-focused Banking, Global Alliance for Banking on Values
  12. For a closer look at these fundamental distinctions and the overall missteps of conventional economics about Gross Domestic Product, Rational Economic Man, mechanical equilibrium, as well as cumulative and linear growth, see this website book club discussion of Kate Raworth’s Doughnut Economics.
  13. A course is available on the Capital Institute website: https://capitalinstitute.org/course-introduction-regenerative-economics/
Stay in the loop
Notify me of

Inline Feedbacks
View all comments