This is the fourth part of a guest post series by Nuno Gas­par de Oliveira who works as con­sul­tant and advi­sor in Esporão, a por­tuguese main wine and olive oil com­pany, in the area of Strate­gic Man­age­ment for sus­tain­abil­ity using ‘Busi­ness Ecosys­tems’ models,

This guest post has pre­vi­ously been pub­lished on LinkedIn. It is the expres­sion of the author’s thoughts and expe­ri­ences and as such is acknowl­edged as a fruit­ful con­tri­bu­tion to the dis­cus­sion on bio­di­ver­sity off­sets. If you want to react or clar­ify your own posi­tion (under­pin or dis­prove), please leave a reply below!

Ernst Friedrich (EF) Schu­macher was born in Ger­many in 1911 but had most of his higher edu­ca­tion in Eng­land, partly because he dreaded the ris­ing of Nazism. His Ger­man ascen­dency brought him a fair share of prob­lems with the British gov­ern­ment dur­ing the war years, but his sophis­ti­cated knowl­edge of eco­nom­ics didn’t past unno­ticed and after the War, Schu­macher worked as an advi­sor to the British Con­trol Com­mis­sion charged with rebuild­ing the Ger­man econ­omy. Dur­ing 20 years he worked in the coal indus­try, gain­ing enor­mous expe­ri­ence in the com­plex issues of macro­eco­nom­ics and geopol­i­tics.

Yet, in 1955 an odd deal got him an expe­ri­ence of a life­time, a project in Burmabrought him closer to the ancient reli­gion and phi­los­o­phy of Bud­dhismand that, how unex­pected it might seem to most of our days macro­econ­o­mists,pro­vided indeed illu­mi­na­tion.

Dur­ing this mis­sion, he devel­oped the belief that good work was essen­tial for proper human devel­op­ment and that “pro­duc­tion from local resources for local needs is the most ratio­nal way of eco­nomic life” – ‘Bud­dhist Eco­nom­ics’ was then to become one of his masterpieces.

A few years later, under the influ­ence of great thinkers from Keynes to Gandhi wrote ‘Small is Beau­ti­ful: Eco­nom­ics as if Peo­ple mat­tered’ (1973). In his sem­i­nal work, Schu­macher elab­o­rates fur­ther on the prob­lem of tech­no­log­i­cal pro­duc­tion being asso­ci­ated with abu­sive prop­erty rights and bound­less use and degra­da­tion of finite nat­ural cap­i­tal thus depriv­ing future gen­er­a­tions of future options and ben­e­fits. Schumacher’s thoughts dwelled deep into the sole nature of eco­nom­ics and human well­be­ing, and ‘stand­ing on the shoul­ders of giants’, pro­duced some very pow­er­ful state­ments such as:

“Mod­ern man does not expe­ri­ence him­self as a part of nature but as an out­side force des­tined to dom­i­nate and con­quer it. He even talks of a bat­tle with nature, for­get­ting that, if he won the bat­tle, he would find him­self on the los­ing side. Until quite recently, the bat­tle seemed to go well enough to give him the illu­sion of unlim­ited pow­ers, but not so well as to bring the pos­si­bil­ity of total vic­tory into view. This has now come into view, and many peo­ple, albeit only a minor­ity, are begin­ning to real­ize what this means for the con­tin­ued exis­tence of human­ity.”

While Schu­macher was ‘in between books’, some­thing was hap­pen­ing amidst the spring of 68’ where once was the home of the Roman Empire. The ‘Club of Rome’ was forged mostly by inspi­ra­tion of inde­pen­dent thinkers, men and women com­ing from such dif­fer­ent fields as pol­i­tics, busi­ness and sci­ence, moti­vated to develop a new vision of a bet­ter world where eco­nom­ics and the Earth sys­tems and resources where on the same side of the story.

In short, the mem­bers of the Club of Rome were mostly focused on iden­ti­fy­ing prob­lems which might deter­mine the future of human­ity, develop prospec­tive analy­sis and sce­nar­ios and pro­pose ideas and solu­tions to solve them (or at least not to aggra­vate them).

In 1972, a bril­liant dynamic woman named Donella ‘Dana’ Mead­ows, an Amer­i­can Ph.D. in bio­physics from Har­vard and a research fel­low at MIT, was on a team work­ing on one of the first global com­puter mod­els, this one was called “World3″ and the ‘con­trac­tor’ was the Club of Rome. Mead­ows was very excited (and maybe a lit­tle ter­ri­fied) by the out­comes of the model and leaded the team to write one of the most impact­ing – and con­tro­ver­sial — reports of the 20th cen­tury.

‘The Lim­its to Growth’ dared to expose sce­nar­ios based on the inter­ac­tions of five global eco­nomic sub­sys­tems, namely pop­u­la­tion, food pro­duc­tion, indus­trial pro­duc­tion, pol­lu­tion, and con­sump­tion of non-renewable nat­ural resources. Although lim­ited by (then) cur­rent knowl­edge and infor­ma­tion tech­nol­ogy restric­tions the LTG team stated that:

“If the present growth trends in world pop­u­la­tion, indus­tri­al­iza­tion, pol­lu­tion, food pro­duc­tion, and resource deple­tion con­tinue unchanged, the lim­its to growth on this planet will be reached some­time within the next 100 years. The most prob­a­ble result will be a rather sud­den and uncon­trolled decline in both pop­u­la­tion and indus­trial capacity.”

30 years later, the team once more coor­di­nated by Dana Mead­ows would release the book ‘The lim­its to growth: the 30-year update’ (2004) reaf­firm­ing that the symp­toms of a world over­shoot where resources where either depleted or degraded much faster than it could be restored by the Earth’s nat­ural sys­tems are at the base of the global envi­ron­men­tal, social and eco­nomic col­lapse…

Back to the 70’s.

The tide of geopo­lit­i­cal unsteadi­ness, pow­ered by the ever increas­ing influ­ence of ‘dinosaur pâté’ (term coined by ‘Calvin & Hobbes’), a.k.a., oil. Yet, sail­ing the winds of (eco­nomic) change pow­ered by Odum, Hardin, Georgescu-Roegen, Schu­macher, Mead­ows et al., Her­man Daly, an Amer­i­can econ­o­mist, nowa­days rec­og­nized as one of the founders of the field of eco­log­i­cal eco­nom­ics and as a critic of stan­dard eco­nomic growth the­ory, dared to be one of the first econ­o­mists to look deeply into the rela­tion­ship of the econ­omy and the envi­ron­ment.

In his pro­posal for a ‘Steady State Econ­omy’ (1977), Daly applied clas­si­cal con­cepts of cap­i­tal and income to resources and the envi­ron­ment, the laws of ther­mo­dy­nam­ics, and the insights of ecol­ogy, par­tic­u­larly in rela­tion to lev­els of flows of mate­ri­als and energy through eco­nomic sys­tems, pro­vid­ing one of the most quoted insights regard­ing the bal­ance between nat­ural cap­i­tal and the eco­nomic sys­tem:

“The econ­omy is a wholly owned sub­sidiary of the envi­ron­ment, not the reverse”

Quite sim­ple and, let’s face it, obvi­ous, right? And yet, still we argue…

Daly intro­duced the con­cepts of iso­lated sys­tems and closed bios­phere into the post-modern eco­nomic think­ing and launched the ‘empty world / full world’ the­ory, nowa­days still largely mis­un­der­stood by what Daly called ‘growthists’.

It became evi­dent that, with­out nat­ural cap­i­tal, namely bio­di­ver­sity and ecosys­tem ser­vices and func­tions there would not be a sup­port for human soci­eties, thus, no sup­port for an eco­nomic sys­tem.

That obvi­ous.

Many authors came after Daly’s Steady-State hypoth­e­sis and built an even stronger case for the role of nat­ural cap­i­tal as the very foun­da­tion for the eco­nomic sys­tem.

The com­bi­na­tion of Daly’s break­throughs with the 1974 ‘util­i­tar­ian’ modeldevel­oped by a com­bi­na­tion of works by Sol­low, Das­gupta and Stiglitz (e.g., Das­gupta & Heal, 1974; Solow, 1974 and Stiglitz, 1974) pro­vided a descrip­tion of an econ­omy with two assets, man-made cap­i­tal and a non-renewable resource stock.

Together with man-made cap­i­tal the raw mate­r­ial from the resource is used as an input in the pro­duc­tion of a com­mod­ity that can be used forcon­sump­tion and for net invest­ments in man-made cap­i­tal.

This ‘util­i­tar­ian’ view of capital-resources-production still is largely com­mon these days. Yet, another major turn was about to occur…

Some Ref­er­ences

Daly, H. E. (1977). Steady-state eco­nom­ics. San Fran­cisco.

Das­gupta, P., & Heal, G. (1974). The opti­mal deple­tion of exhaustible resources.The review of eco­nomic stud­ies, 3–28.

Mead­ows, D. H., Mead­ows, D., Ran­ders, J., & Behrens III, W. W. (1972). The Lim­its to Growth: A Report for the Club of Rome’s Project on the Predica­ment of Mankind (New York: Universe).

Schu­macher, E. F. (1973). Small is beau­ti­ful: Eco­nom­ics as if peo­ple really mat­tered. Aba­cus, Lon­don, 64.

Solow, R. M. (1974). The eco­nom­ics of resources or the resources of eco­nom­ics.The Amer­i­can Eco­nomic Review, 1–14.

Stiglitz, J. E. (1974). Growth with Exhaustible Nat­ural Resources: The Com­pet­i­tive Econ­omy. Review of Eco­nomic Stud­ies, 41(5).