8 Forms of Capital and Why They Matter
We are all familiar with the cliché phrase “money can’t buy happiness.” We take it as fact, even as we toil and grind our way through the world in pursuit of cash. But what if something else could buy happiness? What would that something else look like, and how would it function?
Update 8/2017: I have covered this topic in much greater detail in episode #17 of the Good Life Revival Podcast, which you can stream or download HERE:
“What if our financial system looked more like an ecosystem?”
This was one of the big-picture questions that eventually led Ethan Roland and Gregory Landua to propose that money isn’t the only form of capital driving the human economy.
This theory builds upon Bill Mollison’s original conception in the Permaculture Designers Manual of valuable assets, which categorized non-monetary forms of wealth by their potential – interesting on a conceptual level, maybe, but not easily applied to the real world.
So what is non-monetary capital, and how does it flow between people?
Consider a visit to your local farmers’ market: You spend some money at a farmer’s booth, exchanging financial capital for produce. But then you stick around for a few minutes and have an excellent conversation with the farmer – now you’re exchanging social capital.
You mention you’re having trouble with your backyard tomato plants and she offers some helpful advice – now she’s bestowing intellectual capital. By engaging with each other at this weekly gathering, you’re both generating cultural capital within your community.
By viewing the financial system through the lens of permaculture, Roland and Landua eventually settled upon eight forms of capital that they observed flowing between individuals and communities, each with their own unique currencies: Financial, material, living, social, intellectual, experiential, spiritual, and cultural.
This is the one that we are all familiar with, the means by which pretty much all humans today exchange goods and services. The materialist machinations of the capitalist market are driven principally by this form of the capital, to the detriment of all others.
Beyond money, it is easy for us to conceptualize physical goods and objects that we own as being their own sort of capital. These assets begin as raw materials extracted from the Earth and are developed into more complex forms such as houses, cars, consumer goods, etc.
Living (Natural) Capital
This form of capital is closely related to material capital, but involves both the living organisms upon which we depend and necessities of life which sustain us: plants, animals, water, air, soil, and the like. The currency of living capital is the diversity, abundance, and quality of these resources.
A person who is wealthy in social capital might be described as “well connected” or “highly influential.” She is in good standing with the people around her and trades in gifts and favors. Friends often feel “indebted” to her for the support that she provides. Interpersonal connections are the currency of this form of capital.
This is the knowledge that you possess, acquire, and exchange with others. Roland points out that this form of capital is what drives our global education system, for better or worse.
We are taught that intellectual capital is the primary factor for success in the world, which means that it should be readily exchanged for financial capital; anyone struggling to make ends meet after college might argue otherwise.
The things that you do comprise your experiential capital: work, travel, build, cultivate, etc. When I set off last year to learn some skilled trades, I was more interested in acquiring experiential capital than financial capital – none of the jobs paid well in terms of cash, but I gained an enormous amount of experience.
This form of capital goes hand-in-hand with intellectual capital, and we generally learn best when they are combined (another blow for the conventional education system, which tends to offer little in the way of practical experience).
Your understanding of yourself and your place in the universe can be measured in terms of spiritual capital. Most equate “spirit” with religion, but this need not be the case – when you’re out in the woods soaking up all the good vibes, you’re accumulating spiritual capital.
For me, Zen offers a wealth of this form of capital to pursue; in fact, Buddhism even has its own spiritual currency in the form of karma. Your actions – and thus, your intentions – always have consequences, and the energy you put out into the world will be returned in kind. Other religions trade in things like prayer and faith for currency.
Unlike all previous forms of capital, which are held and exchanged by individuals, cultural capital can only function on the community level. Think of it as “zooming out” on social capital and observing the bigger picture of interactions between people. The currency of cultural capital is things like art, music, stories, history, and holidays.
Why It Matters
Humans are pretty complicated social animals who interact with each other in myriad ways. We are trained to believe that money is the sole acceptable medium for exchanging value, and as a result, we neglect the numerous other meaningful ways we could connect and share.
Financial capital is the primary driver of oppression in the modern world, and it is successful precisely because we all take it as a given that “money makes the world go ‘round.”
Freedom from the pursuit of money, then, is a powerful form of liberation.
When we give equal credence to these seven other forms of capital, we minimize our need for money, and we build more well rounded individuals and stronger social bonds as a result.
If you measured our finances, you’d find that Brooke and I are well below the poverty line; but we recognize that we are immensely wealthy in other forms of capital. I don’t feel the need to make more money because I recognize that I am much happier and healthier when I focus my efforts on experiential, intellectual, and spiritual capital.
Fair and equitable distribution of all of these forms of capital is essential to a just and healthy society. Until that dream-day comes, it’s up to us to strike out on our own and seek value in all of our interactions, monetary or otherwise. We live in a world of abundance – if we want to.