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Regenerative Capitalism

Regenerative Capitalism by John Fullerton - April 2015

How Universal Principles And Patterns Will Shape Our New Economy

By JOHN FULLERTON, Founder and President of Capital Institute

Together with our collaborative network, we are searching for a new narrative that will illuminate how our economy and financial system can operate to promote a more just, regenerative, and thus sustainable way of living on this earth.

Also see: Capital Institute’s Field Guide to Investing in a Regenerative Economy

EXECUTIVE SUMMARY 12-minute read

Global threats – from climate change and accelerating inequality, to the financial crisis of 2008 – have led an increasing number of thought leaders and policymakers to question the long-term viability of today’s dominant form of capitalism (3). Even the rise of terrorism is fueled, at least in part, by the repression and exploitation of the economically and politically disempowered.

At the same time, a multitude of innovators and entrepreneurs around the world are experimenting with practical ways to reimagine capitalism so that it works for all levels of society, as well as for the planet. In our terms, their common goal is to create a self-organizing, naturally self-maintaining, highly adaptive Regenerative form of capitalism that produces lasting social and economic vitality for global civilization as a whole.

Over the last two years, Capital Institute has been working with many of these thought leaders and entrepreneurs in a quest to understand what a theoretical framework for regenerative economies would look like, and what conditions and processes contribute to their long-term systemic health. We also explored how a Regenerative Economy would differ from today’s flawed theory of capitalism, and how it would compare to other New Economy ideas such as natural capitalism, sustainable capitalism, conscious capitalism, doughnut economics, circular economies, sharing economies, steady-state economies, etc.

Where today’s mainstream economic debates are usually couched in liberal versus conservative ideology, we felt a much deeper inquiry was required, one that examined the unquestioned assumptions of both the left and the right. For instance, does exponential, undifferentiated economic growth — the still largely unquestioned objective of liberal and conservative economists alike — really define the path to long-term prosperity? Is such constantly expanding growth even possible given the already massive scale of today’s global economy and our planet’s finite resources? And, what role does modern finance play with its single-minded pursuit of optimizing returns, in driving the systemic outcomes that are unsustainable?

Language issues surrounding the term “capitalism” are very complex today (3). What we’re calling “today’s dominant form of capitalism” is generally called neoliberalism and the Washington Consensus, with heavy influence from the free-market-oriented Chicago School of economics and the Hayek philosophy. Since the financial crash of 2008, a resurgence of Keynesian and particularly post-Keynesian ideas have pushed back into the mainstream debate, calling for a greater role for the State in regulating free-market capitalism.  

Let me say up front very clearly: Regenerative economics is not about the well-worn debate of capitalism versus socialism. Both systems, even if flawlessly executed, are unsustainable. Nor is it a proposal for incremental change to a system that is fundamentally sound but for a few glitches.

What I am saying is that the history of economic theory is not over with Keynes and Hayek (or Minsky and Friedman), leaving their disciples to squabble on the public square indefinitely into the future. In fact, recent events including the 2008 financial collapse, the (under) statement by pre-eminent economist Sir Nicholas Stern that climate change represents the largest market failure in the history of capitalism, and the phenomenon surrounding the release of Thomas Piketty’s Wealth in the Twenty First Century, collectively signal the end of the beginning. Regenerative Capitalism aims to contribute to the vital shift in thinking that is a precondition for us to embark on what follows the beginning.

What is Regenerative Capitalism? We began our quest for deeper explanations with biomimicry (4) in mind. That is, since living systems are both sustainable and regenerative over long periods of time, we began exploring whether following nature’s rules of health and development might lead to sustainably vibrant economies as well. But, the more we explored this thesis, the bigger and more diverse the picture became. We discovered that what we call “systemic” or “holistic” approaches could be seen in work ranging from Jane Jacobs’ on-the-ground urban observations in Death and Life of the Great American Cities, to Herman Daly’s theories of steady-state economics. Indeed, close examination showed holistic concepts emerging in almost every field imaginable, from agriculture and healthcare to monetary systems, urban planning, and network-centric technology.

This broad form of holism grew out of the observation that everything in the universe is organized into “systems” whose interlinked parts work together in some larger process or pattern. The incredible range of holistic work we were encountering reflected a common quest to understand the reasons for such “systemic behavior,” a pursuit that stretched from the sacred geometries of the ancient Greeks to the study of ecosystems and social media today.

This quest’s most important discovery was that universal principles and patterns of systemic health and development actually do exist, and are known to guide behavior in: living systems from bacteria to human beings; nonliving systems from hurricanes to transportation systems and (4) “Biomimicry is an approach to innovation that seeks sustainable solutions to human challenges by emulating nature’s time-tested patterns and strategies.” – see the Biomimicry Institute,   
the Internet; and societal systems including monetary systems (5) and yes, economies.

Furthermore, though such holistic thinking is sometimes viewed as the province of mystics or hippies, we soon discovered that new fields of science were turning this core holistic discovery into rigorous explanations of how universal dynamics – such as energy and pressure – shape health and development in real-world systems of all kinds. The resulting science of “flow systems” not only provides the empirical theory and precise measures of systemic health we need to guide our steps, it also grounds long-standing observations about the importance of circulation, balance, and even of ideals such as justice and fair play.

In short, the study of systemic behavior is now producing a very practical, rigorous, and even commonsense new picture of how the world works. We believe the combination of practical experience gleaned from investing in and observing regenerative New Economy experiments rising up worldwide, anchored in today’s rigorous form of holism, can show us how to turn today’s lopsided (and unsustainable) form of capitalism into an integrated network of balanced, vibrant, and regenerative economies, all serving systemic health within their own unique contexts.

Our goal here is to illuminate this new synthesis and to craft a coherent narrative around it so that it may be applied to defuse today’s global threats, particularly those arising from outdated and at-times-misguided beliefs in business, finance, and economics.

The implications for how we think about organizing and managing our capitalist system are profound. Some will reject this framework as idealistic; others will say it does not go far enough with reform. Our belief is that this framework can bridge between the current world and the one that is in the process of emerging in a way that is both realistic and necessarily fundamental. This paper aims to make a contribution to the learning journey that lies ahead for policymakers, as well as progressive leaders in business and finance.


Our Regenerative story starts with a single core idea:

The universal patterns and principles the cosmos uses to build stable, healthy, and sustainable systems throughout the real world can and must be used as a model for economic-system design.

We then distill our research into eight key, interconnected principles that underlie systemic health (see Chapter 3):

(5) Lietaer, B., Arnsperger, C., Goerner, S., & Brunnhuber, S. 2012. Money and Sustainability, The Missing Link. Devon, UK: Triarchy Press.

1. In Right Relationship (6) – Humanity is an integral part of an interconnected web of life in which there is no real separation between “us” and “it.” The scale of the human economy matters in relation to the biosphere in which it is embedded. What is more, we are all connected to one another and to all locales of our global civilization. Damage to any part of that web ripples back to harm every other part as well.

2. Views Wealth Holistically – True wealth is not merely money in the bank. It must be defined and managed in terms of the well-being of the whole, achieved through the harmonization of multiple kinds of wealth or capital, including social, cultural, living, and experiential. It must also be defined by a broadly shared prosperity across all of these varied forms of capital. The whole is only as strong as the weakest link.

3. Innovative, Adaptive, Responsive – In a world in which change is both ever-present and accelerating, the qualities of innovation and adaptability are critical to health. It is this idea that Charles Darwin intended to convey in this often-misconstrued statement attributed to him: “In the struggle for survival, the fittest win out at the expense of their rivals.” What Darwin actually meant is that: the most “fit” is the one that fits best i.e., the one that is most adaptable to a changing environment.

4. Empowered Participation – In an interdependent system, fitness comes from contributing in some way to the health of the whole. The quality of empowered participation means that all parts must be “in relationship” with the larger whole in ways that not only empower them to negotiate for their own needs, but also enable them to add their unique contribution towards the health and well-being of the larger wholes in which they are embedded.

5. Honors Community and Place – Each human community consists of a mosaic of peoples, traditions, beliefs, and institutions uniquely shaped by long-term pressures of geography, human history, culture, local environment, and changing human needs. Honoring this fact, a Regenerative Economy nurtures healthy and resilient communities and regions, each one uniquely informed by the essence of its individual history and place.

6. Edge Effect Abundance – Creativity and abundance flourish synergistically at the “edges” of systems, where the bonds holding the dominant pattern in place are weakest. For example, there is an abundance of interdependent life in salt marshes where a river meets the ocean. At those edges the opportunities for innovation and cross-fertilization are the greatest. Working collaboratively across edges – with ongoing learning and development sourced from the diversity that exists there – is transformative for both the communities where the exchanges are happening, and for the individuals involved.

7. Robust Circulatory Flow – Just as human health depends on the robust circulation of oxygen, nutrients, etc., so too does economic health depend on robust circulatory flows of money, information, resources, and goods and services to support exchange, flush toxins, and nourish every cell at every level of our human networks. The circulation of money and information and the efficient use and reuse of materials are particularly critical to individuals, businesses, and economies reaching their regenerative potential. (6) Brown, P. and Garver, G. 2008. In Right Relationship, Building a Whole Earth Economy. San Francisco: Berrett-Koehler Publishers.

8. Seeks Balance – Being in balance is more than just a nice way to be; it is actually essential to systemic health. Like a unicycle rider, regenerative systems are always engaged in this delicate dance in search of balance. Achieving it requires that they harmonize multiple variables instead of optimizing single ones. A Regenerative Economy seeks to balance: efficiency and resilience; collaboration and competition; diversity and coherence; and small, medium, and large organizations and needs.

The resulting theory shows us how to build vibrant, long-lived, regenerative economies and societies using the same holistic principles of health found consistently across widely different types of systems throughout the cosmos. This theory grounds our understanding of why integrity, ethics, caring, and sharing lead to socially vibrant communities and healthy economies – while at the same time making perfect practical and scientific sense.

It differs most from current approaches to sustainability in that, instead of focusing on social and environmental health using traditional reductionist logic to “solve problems,” it aims directly at building healthy human networks as the objective, drawing on universal principles and patterns, with “sustainability” becoming an outcome, a natural byproduct of systemic health. It is like (holistic) healthcare in contrast to (reductionist) disease care.

Because the theory focuses on building healthy human networks, it is not actually new. Instead, it has been discovered and rediscovered time and again over the millennia, appearing from the ancient Greeks’ invention of democracy, to the rules of mutually beneficial, give-and-take relationships that allow stakeholder-owned enterprises to be effective today.

Furthermore, instead of a political philosophy of the left or right, this rigorous form of holism specifically sees regenerative economies as a new stage of capitalism built around an integration of the best of both political leanings. Consequently, instead of jettisoning capitalism wholesale, this holism uses the universal design principles underlying all systemic health to show us how to preserve and build on the many strengths of our free enterprise system, while addressing its failings head on.

While we expect healthy debates among liberals and conservatives to continue, the scientific framework behind regeneration places them in a new context with sharp contrasts between regenerative perspectives and current assumptions. This integrated approach offers the potential for polarized perspectives to find common cause in the best of both side’s original ideals.

For example:

  • Instead of assuming economic efficiency and undifferentiated GDP growth automatically lead to prosperity, actors in a Regenerative Economy understand that long-term economic vitality depends on creating conditions that will unlock the vast potential for true wealth creation that lies dormant in every individual, community, business network, and bioregion. Consequently, instead of viewing moral issues as irrelevant to “rational” economic decision-making, in Regenerative Capitalism, human and moral concerns become central to decision-making, and policymakers view those concerns as critical to the maintenance of a healthy whole. In this sense, Regenerative Capitalism is also a humanist capitalism.

  • Instead of believing a laissez-fair market system can somehow magically solve long-term systemic challenges if only we can improve market efficiency and transparency, regenerative actors understand that markets, while central, are but one of a number of institutions involved in systemic health – others include governments, community institutions, educational institutions, commons trusts, non-profits, foundations, etc. Markets address certain problems well but not others. For example, since climate change and other threats occur over multiple scales and across the very long run, they demand governance and tools like incentives and feedback loops that act as guard rails and, where necessary, limits that coordinate across scales and focus on the long-term.

  • Instead of pursuing greater government regulation as the only realistic solution to markets run amok, policymakers in a Regenerative Economy understand the importance of designing incentive-driven, self-regulating systems that embody the critical balance between the freedom upon which innovation thrives and the constraints necessary for effective collaborative communities to work.

  • Instead of assuming that maximum health comes from maximizing shareholder profits alone, or, that it can be achieved through the imposition of a welfare state, regenerative actors realize that systemic health can only be maintained when all stakeholders who contribute to the profit of an enterprise are empowered to negotiate just compensation on their behalf. Instead of accepting the inevitability of extreme concentrations of financial wealth, or advocating for wealth to be redistributed equally, they know some inequality is natural but also that balance is essential to systemic health and that robust circulation of wealth throughout all levels of the economy is critical. Instead of believing increasing efficiency and cutting costs are always good, they understand that resilience is equally necessary, and vitality requires balancing numerous equally critical, but competing factors.

  • Instead of seeing industrialism as either the ultimate form of economy or a product of misguided arrogance and greed that is destroying the planet, the regenerative actors see it as a crossroads along the evolutionary path that our self-organizing human creativity is traveling. Instead of suffocating in a flawed economic ideology, we must now trust in our creative human qualities to learn, improve, and acquire a new more exact understanding of the regenerative nature of healthy economies. We must also confront our collective misunderstandings with objectivity and integrity.


As we see it, today’s greatest challenge is to address the root cause of our systemic crises – today’s dominant (neoliberal) economic paradigm and the financial system that fuels it and rules it – by transitioning to a more effective form of capitalism that is regenerative and therefore sustainable over the long term. We see this as something akin to humanity’s economic Copernican moment (7). Simply stated, if we want to achieve the many outcomes we desire and generally agree on, we must bring our economic theory and practice into alignment with our latest understanding of how the universe actually works! Yet we see today’s task as more than just an intellectual endeavor. To bring to scale the Regenerative Economy we see emerging all around us, those pursuing a transition to a regenerative world must integrate elements of head, heart, and hands – the three key factors that move human beings.


These translate into:

  • A rigorous understanding of what makes human networks healthy;

  • A unifying, noble purpose that inspires people to serve a cause greater than themselves; and

  • The ability to turn noble ideas and purpose into effective practical action.


The purpose of this white paper is to outline and to integrate what we have so far towards these ends. It is our hope that the resulting story will help catalyze the paradigm shift away from today’s flawed form of capitalism – one that is unjust and unsustainable – to a healthy, pluralistic system of regenerative economies aligned with the patterns of regenerative health.

(7) The Copernican Revolution challenged the belief that the sun revolved around the earth. In the process, it also challenged a pillar of the medieval belief system, which threatened the power of church and aristocratic elites who depended upon that belief system. Questioning today’s reductionist models in economics threatens today’s “economic priests” in much the same way.

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