Like a cheap negligée, Natural Capital is alluring but not attractive

October 2021

For several months I’ve been trying to monetise my kisses. To me, this seems perfectly reasonable. Demand for them in my house is high and there are maintenance costs to consider. To keep my lips in peak condition I put a balm on them every evening. I buy toothpaste so my mouth smells fresh. And there are dental costs to think about – future dental costs too. Kisses should not be free.

I want cash for kisses.

To get my wife to understand this, I’ve tried to make kisses more like a business transaction. I’ve set up a Kiss-Counter, a bit like a shop. I lean out of a window which opens onto a balcony and shout “Kisses!”. She then appears on the balcony and consumes liberally.

But she refuses to pay.

Were I a free-market economist this wouldn’t do at all.

I mention this because it’s a good way to think about Natural Capital, which also attempts to monetise things it shouldn’t.

People have known for years that the biggest flaw of modern economics is that doesn’t account for nature. Trade and business carry on as if in a vacuum, free from the real world. If the environment gets trashed in the pursuit of economic growth, this is classified by economists as an externality, and ignored.

One response to this criticism has been to develop the concept of Natural Capital. At first glance, this seems sensible. Bringing nature and capital together looks like it solves the problem. The economic system aims to maximise short term returns on capital. Apply that to nature and it should be possible for the free-market to solve the world’s ecological challenges, just like it can solve every other problem.

Nature + Capital = Natural Capital.

This idea has been enthusiastically adopted by those who work for the IMF, World Bank and OECD, as well as by some less profit-oriented people, including a few who work for environmental NGOs.

Before, a bit of rainforest was just a bit of rainforest. Now a bit of rainforest has a monetary value. When the trees are chopped down they could be sold as fire-wood. That has a value. Then the land can be sold to a developer. That has a value too. Economists also put a value on the ‘eco-system services’ the trees provide: the CO2 they absorb, which can offset pollution from the fossil fuel industry. The nutrients they give to the soils also purify water.

Adding all this value together allows economists to put a total price on the bit of rainforest. If Megacorp wants to produce palm oil or build a housing complex where the trees now stand, that’s fine as long as the money it makes is more than the current value of the rainforest.

Simple. Capitalism protecting nature.

My iPad’s worth more

But this only makes sense at a very superficial level. The value of minerals under a hill can certainly be measured, as can the price of a hectare of pine trees when they have been turned into pulp. It’s also possible, at a pinch, to say that the Great Barrier Reef has a monetary value. It’s possible to measure the tourist income it generates, and the number of jobs it provides. This has actually been done. The Great Barrier Reef is apparently worth A$65bn (US$47bn). Without it, the Australian economy would be A$6.4bn smaller. The Reef apparently supports more jobs that Qantas Airlines.

Sounds great.

But hang on. That means the Great Barrier Reef is not worth very much at all. Apple Computer is worth 53 times more – $2.4trn*.

So, according to Natural Capitalists, a 45 year-old company that makes billions of phones and computers, which are thrown away after a few years, is 53 times more valuable than a vast and ancient natural eco-system stretching over 2,300 square kilometres, teeming with life.

It turns out that the Great Barrier Reef is worth about the same as a Swiss company called Sika which makes chemicals for the building trade. It’s worth half as much as Uber, a company with a short and controversial history, which has never made a profit. But then the Great Barrier Reef has never made a profit either. And its value is falling because it’s dying. So who cares? Its added value is just 0.4% of the Australian economy. The Ozzies can live without it just fine.

But let’s think bigger.

According to Natural Capitalists “the environment provides some $72tn a year of “free” support to the global economy.”

Wow. Isn’t that just great.

But hang on. Did anyone tell nature that? All those animals, birds, insects, fish and plants are so stupid! They are giving all that value away for free! They could be rich and have whatever they want. They could have fancy houses and fast cars. Or take a vacation. They could even buy a bit of protected forest, or an unpolluted river, or a coral reef to live in. You can buy those, right? Sure you can. Get them to talk to an ecological economist. They’ll be set in no time.

Hmm. Let’s think even bigger. Call those venture capital guys, and the private equity folks in London. Want to invest in a new project? Amazing returns! We can offer $72trn of profit each year. How much are you willing to put up? Will you take a 10% return on capital? No? Too low. OK, 15%.


We’ve got the $480trn! Now we can build a new planet.

Is that Rio Tinto? I’d like 450 trillion tonnes of iron ore and a quintillion tonnes of silicon by Tuesday.

These numbers are silly, of course, just like my plans to charge my wife for kisses was silly. (See, I’ve admitted it, darling. Can I come in now?)

Natural Capital is a perfect example of knowing the price of everything and the value of nothing.

The planet doesn’t provides $72trn of free services each year. It’s a living ecosystem, which is not providing anything specifically for humans at all. Does your heart provide free services? Or does it keep you alive? (Don’t ask economists that question.)

Putting a monetary value on nature makes sense only to those who think the economy is more important than life. Forests, spiders and lions don’t think like that.

Besides, there is no way to value anything in nature consistently.

Did he pay for those eco-system services?

How should we compare a 1,400 year-old giant Sequoia and an African baobab which is 700 years older? Is the Californian tree worth more or less? If I’m not interested in killing them are they worth anything at all? Is a mountain worth more with or without a glacier? Is soil contaminated with lead worth more than soil contaminated with arsenic? How should we value the anthrax spores that are being released from the melting permafrost in Siberia? (They could fetch a pretty sum from those planning a bit of genocide.) What about a sea-lion, or a flock of puffins living on a small island off the Scottish coast? What about a wasp or an iguana? What about the love I have for my daughter? What’s that worth? Can I sell it if I get a bit short of cash?

Thinking in Natural Capital terms just promotes more capitalism. It invites more exploitation of nature. It encourages societies to monetise everything they can, and underpins free-market thinking. It’s easy to show that the earnings from an aluminium smelter are greater than the value of a hectare of rainforest, or to jiggle the numbers till they work. Ten years of returns are not enough? Let’s make it 20. Bingo.

And who, exactly, do you pay for all these natural services? Can we give the Great Barrier Reef $47bn in Walmart vouchers and tell it, “sorry, time’s up cobber, fish farming offers a better return now”.

And, if we can pay nature for its services, can it sue us if we cause its death?

Are we even insured for that?

I better call my insurance broker and check. Till I get back, please stop monetising things.

* Based on Apple’s market capitalisation in October 2021

Kiss – Myriams-Fotos

Puffin – Jonathan Cannon

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