Two big books for 2014: Capital in the Twenty-First Century by Thomas Piketty and This Changes Everything by Naomi Klein … and a poem and a memoir

The two biggest books I’ve read this year, in a year of reading dictated mostly by my work, are Thomas Piketty’s Capital in the Twenty-First Century and Naomi Klein’s This Changes Everything. They are big in every way, in their thinking, their innovative synthesis of vast amounts of disparate material, their size. Both tap the zeitgeist, both became bestsellers, both say things well that need to be said: Piketty that the returns on capital tend to exceed the rate of economic growth (or income, in his model) and that this is responsible for the rising inequality we all so palpably feel, and that since the 1980s we have increasingly privileged the owners of capital over wage and salary earners in our tax structures; Klein that our present economic practices driven by the pursuit of profits and GDP growth, and powered by carbon-based fuels, are destroying the planet and must be changed.

This Changes EverythingI like Robert Manne’s review of This Changes Everything in the latest issue of The Monthly. Manne thoroughly summarises Klein’s enormous and often expansive arguments and tales from the cutting edge of climate change, and gives an excellent appraisal of her book’s achievement. I particularly like his opening observation:

‘Unless it turns out, through a miracle, that virtually the entire cadre of the world’s scientists who work in the area of climate are fundamentally wrong, the only people these future generations will be able to look upon with respect are those who saw the monstrousness of what we were doing and who gave their lives to the climate cause. One such is the Canadian leftist, Naomi Klein …’

And his conclusion – regarding the enormous changes that are required in the face of climate change – where he writes:

‘None of this will happen without a revolution in the way we think about our relations with the Earth and with our fellow human beings. Naomi Klein understands all this as clearly as any contemporary thinker, which is why I regard This Changes Everything as among the most brilliant and important books of recent times.’

I agree. (And say something similar in my review of Klein’s book for The Australian.)

9780674430006Piketty is that most rare of contemporary economists: one concerned with and well versed in history, the long term, and one who writes with verve and clarity (which is no mean feat over almost 577 pages). He also has a disarming frankness which is endearing, such as when he confesses the idealism of his proposed solution to the inequality of returns on capital versus income:

‘the ideal policy for avoiding an endless inegalitarian spiral and regaining control over the dynamics of accumulation would be a progressive global tax on capital. Such a tax would also have another virtue: it would expose wealth to democratic scrutiny, which is a necessary condition for effective regulation of the banking system and international capital flows. A tax on capital would promote the general interest over private interests while preserving economic openness and the forces of competition. The same cannot be said of various forms of retreat into national or other identities, which may well be the alternative to this ideal policy. But a truly global tax on capital is no doubt a utopian ideal.’

Piketty is also – hooray! – scathing of his discipline’s over-dependence on mathematics:

‘To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.’

Despite his aversion to the abstractions of mathematical economics, Piketty’s historical insights and revelations come from number crunching. (And he acknowledges the importance of numbers: ‘Refusing to deal with numbers rarely serves the interests of the least well-off.’)

Among the highlights for me – beyond his general theory about capital versus income – is Piketty’s analysis of our changing attitudes to taxing capital income versus labour income, especially in Britain and the US concerning progressive estate tax. He says ‘both countries distinguished between “earned income”, that is, income from labor (including both wages and nonwage compensation) and “unearned income”, meaning capital income (rent, interests, dividends, etc) … This distinction is interesting, because it is a translation into fiscal terms of the suspicion that surrounded very high incomes: all excessively high incomes were suspect, but unearned incomes were more suspect than earned incomes. The contrast between attitudes then and now, with capital income treated more favourably today than labor income in many countries, especially in Europe, is striking.‘ In other words, today as many so palpably feel, the tax burden on labour in some countries is greater than on those whose incomes derive from their wealth. How did it happen that this former (more egalitarian) suspicion of unearned incomes has gone the way of the welfare state?

For me Piketty’s historical analysis is more powerful than his proposed solutions to the problems he unearths, which mostly require unimaginable (to me) levels of political resolve, financial transparency and global cooperation. And given the urgency of climate change and its inextricable link to the imperatives of capital, I was dismayed to find Piketty dealt with this subject only as an aside, in a two-page section called ‘Climate Change and Public Capital’. This despite his acknowledging that:

‘The public debt … is not our major worry. The more urgent need is to increase our educational capital and prevent the degradation of our natural capital. This is a far more serious and difficult challenge, because climate change cannot be eliminated at the stroke of a pen (or with a tax on capital, which comes to the same thing).’

In other bookish news, I’ve been floored by a poem and am now engrossed in a memoir. I’ve been longing for poetry all year – the need became especially acute because I’ve been so immersed in accounting and economics – but nothing could penetrate my accounting brain, not even TS Eliot’s Four Quartets, the poems I always return to. Until on 17 November Mireille Juchau tweeted these lines:

Whenever I visit my mother
I feel I am turning into Emily Bronte

my lonely life around me like a moor …

Anne Carson

And I was gone. I found the poem – ‘The Glass Essay‘ – and devoured it. And have been returning to it and digesting it ever since.

And thanks to an irresistible (because it features a bookish girl) trailer for the film Testament of Youth, I’m now reading Vera Brittain‘s riveting memoir, which is also a big book – and which The Times called ‘A haunting memoir for a lost generation.’ Among its many pleasures are its complex 1930s syntax, its often labyrinthine and many-claused sentences, rarely seen in today’s prose. Here’s how it opens:

‘When the Great War broke out, it came to me not as a superlative tragedy, but as an interruption of the most exasperating kind to my personal plans.

‘To explain the reason for this egotistical view of history’s greatest disaster, it is necessary to go back a little – to go back, though only for a moment, as far as the decadent ‘nineties, in which I opened my eyes upon the none-too-promising day. I have, indeed, the honour of sharing with Robert Graves the subject of my earliest recollection, which is that of watching, as a tiny child, the flags flying in the streets of Macclesfield for Queen Victoria’s Diamond Jubilee.’

Testament of Youth, still from the 2014 film

Testament of Youth, still from the 2014 film

Posted in Economics, Environment and the planet, Novels, poetry, book news | Leave a comment

Natural capital: is translating nature into the language of economics the only way to make it count?

photoAlong with questions about the nature of the corporation – monster and psychopath or historically-contingent legal person capable of evolving? – Six Capitals was driven by the question of how to make nature count, so we don’t continue to destroy it in our endless pursuit of more GDP and profits. The accountants’ solution to this question of nature is to redefine it as natural capital.

I’ve been planning to write about natural capital here for some time, initially prompted by Tony Abbott and Joe Hockey’s refusal to countenance the discussion of climate change at the G20 conference in Brisbane, a forum they wanted focused squarely on economic growth, as if the two were separate issues. But Barack Obama, Angela Merkel, Xi Jinping, Francois Hollande and other leaders scuppered that plan. Climate change became one of the G20’s talking points and was included in the G20 communique.

What I’m really interested in is the debate that continues to erupt around natural capital accounting in the UK. The concept of natural capital has been around at least since 1973 – when the term was first explicitly used by British economist EF Schumacher in his book Small is Beautiful – but it only made its first formal appearance on the world stage in 2012. Here are some highlights in the recent history of natural capital:

- in 2012 the United Nations gave natural capital equal status to the GDP, officially adopting a new statistical standard to account for natural capital. This was the first new UN standard since the advent of its GDP accounting standards in 1952.
- the same year 40 financial institutions, including the National Australia Bank, signed the Natural Capital Declaration to promote the private sector’s use of natural capital accounting by 2020. At the launch the World Bank’s Rachel Kyte said: ‘Let’s look back in twenty years from now and remember that this was the time when we changed the way we accounted for nature.’
- in 2012 at the Rio+20 conference on sustainable development over 50 countries and 86 companies committed to valuing natural assets, including Walmart, Woolworths and Unilever.
- in 2013 the inaugural World Forum on Natural Capital was held. The second World Forum on Natural Capital is being held in Edinburgh in November 2015.

So, things are proceeding apace for natural capital.

What is natural capital? The World Forum on Natural Capital defines it as ‘the world’s stocks of natural assets which include geology, soil, air, water and all living things’. It continues:

‘It is from this Natural Capital that humans derive a wide range of services, often called ecosystem services, which make human life possible. The most obvious ecosystem services include the food we eat, the water we drink and the plant materials we use for fuel, building materials and medicines. There are also many less visible ecosystem services such as the climate regulation and natural flood defences provided by forests, the billions of tonnes of carbon stored by peatlands, or the pollination of crops by insects. Even less visible are cultural ecosystem services such as the inspiration we take from wildlife and the natural environment.’

The problem with our current accounting systems – both national and corporate – is that they don’t account for natural capital, they don’t value living nature, and so it is invisible.

For many accountants (like Michael Peat), ecological economists (like Robert Costanza), bankers (like Pavan Sukhdev), ecologists (like Mark Everard) and environmentalists (like Tony Juniper), the best way to make nature visible is to translate it into the dominant global language: economics. In this language nature becomes ‘natural capital’.

It is exactly at this moment – the very conception of nature as capital – that journalist and environmental activist George Monbiot recoils from the new accounting paradigm. And it is also at this moment that I find myself torn between the two sides of the debate, which first erupted in 2012 with Monbiot’s article on biodiversity offsetting (an offshoot of natural capital accounting) and continues to blaze.

In April Lynn Crowe, Professor of Environmental Management at Sheffield Hallam University, responded to Monbiot’s article damning natural capital accounting ‘Can you put a price on the beauty of the natural world?‘ (published on 22 April 2014, Earth Day) and Tony Juniper’s reply ‘Framing natural capital: economy and ecology are not in competition‘.

She said: ‘As ever, I find my heart in complete agreement with George, but my head is wavering towards the Tony Juniper position.’

Although I wouldn’t express it in quite the same way (head versus heart as if they were so easily separable), I find myself similarly torn between the logic of these divergent views. Their range was well expressed by Lynn Crowe herself, Robert Costanza, Joss Tantram and Tony Juniper in ‘Is natural capital a neoliberal road to ruin?’, published by the Guardian on 1 August 2014 in response to Monbiot’s speech ‘Put a price on nature? We must stop this neoliberal road to ruin‘.

On her blog Crowe said of Monbiot’s ‘perceptive comments': ‘I agree with many of his concerns about policies such as biodiversity off-setting and similar approaches which appear to ignore the intrinsic value of nature. But I don’t believe we can blame the tool for the way it is used by others. The powerful have always abused their position, and no doubt will sadly continue to do so. We can only continue to lobby and campaign to try to bring about change where necessary.

‘I believe an ecosystem approach is still a powerful technique for framing our decisions about the use of natural resources which reflects the integrated nature of our environment and society generally.’

The rapid rise of natural capital accounting is helped by the fact that it’s easier to gauge than the other new capitals (intellectual, human, and social and relationship capital). There are now rigorous metrics for carbon and measures for water usage are being developed. Its language is now spreading into the broader environmental conversation. For example, it makes possible the spectre of ‘stranded assets’ in relation to the stocks of carbon held by fossil fuel companies, an idea being used by financial analysts as well as by Bill McKibben’s 350.0rg to call for investors to pull out of fossil fuel companies.

Natural capital is on the agenda at the Accounting Frontiers Forum – ‘Beyond the financial: Re-thinking the capitals in practice and assurance’ – being held next Thursday 11 December 2014. Professor Roger Burritt and Michael Spencer will be speaking about natural capital accounting.

I also learnt (from Sally Hill of Wildwon, which hosted the B Lab meeting last week) about a conference being held by the Australian Institute of Environmental Accounting in Sydney’s Customs House next May. I’ll be writing about it when more information is available.

I think the question of how we value and account for nature – or, how we make nature count – will be the most important question of this century. And given the rapid rise of natural capital accounting, I think anyone who cares about the future of the planet should pay attention to it right now.

Litchfield National Park, west of Darwin

Litchfield National Park, west of Darwin



Posted in Can accountants save the planet?, Six Capitals | 7 Comments

How Brisbane’s worst storm in decades turned my Avid Reader event into a street party

Last Thursday at 5.45pm I set out to Avid Reader bookshop in Brisbane for my conversation with Radio National’s Paul Barclay. My hotel lobby was crowded with people taking refuge from the storm which had just ravaged Grey Street outside. There was no public transport, no taxis, no way of contacting the bookshop. I decided to walk. This is what I found.

Grey Street, Southbank

Grey Street, Southbank

Grey Street, Southbank

Grey Street, Southbank

Russell Street, West End

Russell Street, West End

Avid Reader bookshop

Avid Reader bookshop

Avid Reader is in Boundary Street, West End. At 6.15pm last Thursday night one side of the street was a blaze of lights. The other side was completely blacked out, the power cut. As this picture shows, Avid Reader was on the other side, shrouded in darkness.

But inside were Avid Reader’s fabulous Fiona Stager and Krissy Kneen, wondering if it was still possible to run the conversation as planned, as was the intrepid Paul Barclay, his sound recordist and several people who’d braved the storm for the event. Paul and I ended up recording our conversation in the ABC studios the next day, but on the night of the storm we all stood in the street drinking wine and had a party. It was fantastic, despite the chaos.

And here’s how Avid Reader usually looks.

Avid Reader

Avid Reader

Next up I’ll be writing about natural capital (the new ‘It Capital’) and the Accounting Frontiers Forum being held by the Chartered Accountants of Australia and New Zealand on Thursday 11 December 2014. By happy chance, the conference is called ‘Beyond the Financial: Re-thinking the Capitals in Practice and Assurance‘.

Posted in Six Capitals | 2 Comments

B Lab in Sydney – and Avid Reader in Brisbane

Yesterday morning I had the pleasure of going to the B Corporation Morning Tea at the Common Room in Surry Hills, Sydney. B Corporations – and B Lab, the organisation which conceived them and is promoting them globally – turned out to be among the heroes of my new book.

B Lab was founded in Philedelphia in 2006 by long-term friends Jay Coen Gilbert, Bart Houlahan and Andrew Kassoy to create a new sort of corporation designed for the 21st century: one encoded with an environmental and social purpose, as well as a profit-making one, aka the B Corporation (the ‘B’ stands for benefit). To make these new corporations legally possible in every state of the USA, B Lab is going across the country asking state legislatures to amend their corporate charters so that companies can be incorporated with explicit social and environmental ends. To date 26 states have passed benefit corporations legislation and fourteen states are working on it. New generation businesses such as outdoor clothing company Patagonia, vintage and handmade e-commerce website Etsy and icecream makers Ben & Jerry’s are all B Corporations.

In July 2013 B Lab celebrated a legislative milestone when Delaware – the US state for incorporation and home to one millions businesses – enacted benefit corporation legislation. Esquire magazine noted the potentially epoch-shifting nature of this move then it said: ‘B Corps might turn out to be like civil rights for blacks or voting rights for women – eccentric, unpopular ideas that took hold and changed the world.’

And in August 2014 B Lab arrived in Australia when B Lab Australia and New Zealand opened for business in Melbourne. Its chief executive, Alicia Darvall, ran yesterday’s meeting. She is super impressive and very inspiring. And in a nice collision of my worlds, she is (as I discovered yesterday) also on the board of the Stella Prize, an annual award which celebrates Australian women’s writing.

I plan to write more here about the fascinating entrepreneurial types who came to yesterday’s meeting, but in the meantime, here’s Alicia Darvall (black t-shirt on left-hand side) speaking to the gathering about B Corporations around the world.


And in other news, I’m heading to Brisbane tomorrow to talk about Six Capitals to Paul Barclay from ABC Radio National Big Ideas at 6.30 pm at Avid Reader (193 Boundary Street, West End).


Posted in Can accountants save the planet?, Six Capitals | 1 Comment

‘Truth? – it is one of the many miserable conventions the human brain has tortured itself with': Henry Handel Richardson’s Maurice Guest

m4qcR5xsiWyqSZjYDyGowCwMaurice Guest is my favourite of Henry Handel Richardson’s novels, with its extravagant passions, music and Leipzig setting. And I now realise that it does actually connect with the Overland essay that prompted last Monday’s blog: Christopher Scanlon‘s ‘HappinessTM‘. In particular, I’m thinking of what Scanlon writes about the fact that in extreme cases ‘the constant requirement to be “up” at work left some employees estranged and alienated from their true feelings’. This, he says, is consistent with research that shows that ‘When faking emotions becomes a habit, rather than a temporary coping strategy, people can become estranged from their authentic emotions.’

I’m interested in fake and authentic emotions, the very idea that we might tell the difference, and have been thinking a lot about the extent to which we all fake emotions – or put them on hold, suppress them, manage them – to a greater or lesser extent to get through our days, live our lives. Emotional states are of course the stuff of literature – and Maurice Guest is about emotions let loose in the extreme. Which is, I think, one of the main reasons I love it so much.



Maurice Guest, Richardson’s first novel, is the story of a young music student – Maurice Guest – who travels from his ‘cheerless’ middle-class home in provincial England to Leipzig to study the piano and is soon caught up in a dissolute love triangle. The novel opens with Maurice filled with the ecstasy of music, wandering into the woods beyond the town after a public concert rehearsal:

‘He was under the sway of a twofold intoxication: great music and a day rich in promise. From the flood of melody that had broken over him, the frenzied storm of applause, he had come out, not into a lamplit darkness that would have crushed his elation back on him and hemmed him in, but into the spacious lightness of a fair blue day, where all that he felt could expand, as a flower does in the sun.’

Maurice arrives in Leipzig filled with hopes for a brilliant career as a concert pianist: ‘He felt so ready for work, so fresh and unworn; the fervour of a deep enthusiasm was rampant in him …’ But Leipzig was one of the most sophisticated centres of music and culture in 1890s Europe, and Maurice is a decent provincial boy – and the mix proves fatal for him. As the novel unfolds, Maurice drifts further and further from the spacious lightness of the fair blue days into the recesses of a lamplit darkness, for his enthusiasm and ‘anxiousness to oblige’ cloak a ‘deathly indifference’.

Eleonora Duse

Eleonora Duse

The agent of Maurice’s undoing is a fiery, provocative, gifted Australian music student, Louise Dufrayer. Richardson based Louise on a celebrated actress of the day with whom she was obsessed, Eleonora Duse, whose tempestuous ten-year affair with Italian writer Gabriele D’Annunzio was the talk of Europe. Louise Dufrayer, that ‘scentless tropical flower, with stiff, waxen petals’, is to shape Maurice’s life. And tragically so, for Louise is in love with another man, the insolent opportunist and genius violinist Shilsky, whose great symphonic poem he names ‘Zarathustra’. One portentous day, Louise’s beauty enchants Maurice as powerfully and irreversibly as any Wagnerian love philtre: ‘The beauty, whose spell thus bound him, was of that subtle kind which leaves many a one cold, but as if just for this reason, is almost always fateful for those who feels its charm.’

Maurice Guest, with its portraits of student life and passionate debates about love and art and music, unerringly charts Maurice’s corruption as he succumbs to the allure of Louise and abandons music for the dictates of sexual desire.

Henry Handel Richardson

Henry Handel Richardson

Henry Handel Richardson, born Ethel Florence Lindesay Richardson in Melbourne in 1870, was herself a gifted musician. Her father, Walter Richardson, was an Irish medical graduate from Edinburgh University and her English mother, Mary, had followed her brothers to the Victorian goldfields, where she met her future husband. Richardson’s musical distinction brought some much-needed recognition to her otherwise unhappy boarding-school years at Presbyterian Ladies’ College in Melbourne (the subject of her second novel, The Getting of Wisdom (1910)), but her life was forever marked by the slow, traumatic deterioration of her father’s health from the tertiary syphilis and associated dementia that led to his death in 1879.

In 1888, Richardson sailed with her mother and sister to England. The following year she began a three-year course to train as a concert pianist at the famed Conservatory of Music in Leipzig, founded by Mendelssohn Bartholdy. Leipzig, in the new nation of Germany (founded in 1871, just 18 years before Richardson’s arrival), was one of the great cultural centres of Europe. It was renowned for its age-old choir, St Thomas’s Boys Choir, where JS Bach had once been choirmaster, and as the birthplace of Richard Wagner. Here Richardson immersed herself completely in music.

In 1890 she met JG Robertson, a shy, brilliant, Wagner-loving 23-year-old science graduate from Glasgow who was writing his PhD in philology at Leipzig University. Robertson invited Richardson to a series of Wagner operas, which she later said was the beginning of her real musical education. They quickly discovered their shared love of music and books, and in 1891 they were engaged.

Henry Handel Richardson by Rupert Bunny

Henry Handel Richardson by Rupert Bunny

The following year Richardson graduated and abandoned her plans to become a concert pianist, deciding to become a writer instead. Perhaps she discovered in Germany that her talent, so prodigious in isolated Australia, was not great enough for the world stage. And she began to suffer agonies when exposed on the concert stage, like Krafft in Maurice Guest, who speaks ‘with a morbid horror – yet as if the idea of it fascinated him – of the publicity of the concert-platform.’

In December 1895 Richardson and Robertson were married, and the following year Richardson began work on Maurice Guest, based on her student life in Leipzig. In 1903 the couple moved to London when Robertson was appointed to a German chair at the University of London. Here, with Robertson’s unfailing moral support, Richardson threw herself into her manuscript and finally finished it in 1907.

Maurice Guest was published in 1908 under the pen name ‘Henry Handel Richardson’. The novel’s European sensibility was influence by Richardson’s reading of Scandinavian literature, particularly Ibsen and Jacobsen (whose Niels Lynne she had translated from the German, published in 1896), Dostoyevsky and Nietzsche, and the music of Wagner. Nietzsche’s influence can be felt in her portrait of the genius artist Shilsky, and in the views of the eccentric, sexually fluid music student Krafft:

‘No, there is no such thing as absolute truth. If there were, the finest subtleties of existence would be lost … Truth? – it is one of the many miserable conventions the human brain has tortured itself with, and its first principle is an utter lack of imaginative faculties.’

Richardson was a passionate, driven, unconventional woman, and perhaps formed a love triangle of her own when the musically gifted Olga Roncoroni (whom she met in Lyme Regis, Dorset, in 1919) moved in with her and Robertson, remaining with Richardson as her secretary and constant companion until her death in 1946. Richardson returned only once to Australia, in 1912, to research her trilogy The Fortunes of Richard Mahony, based on her father. The third volume, Ultima Thule, published at Robertson’s expense because Richardson’s publisher rejected it, finally brought her the fame and commercial success she had longed for all her life. A review in the Daily News (14 January 1929) gave Ultima Thule high praise: ‘if our age has produced a masterpiece at all, this is a masterpiece’.

Henry Handel Richardson by Rupert Bunny

Henry Handel Richardson by Rupert Bunny




Posted in Classics | 2 Comments

‘Our people are our machinery': HappinessTM in Overland 217 and human capital in the post-industrial age

Now my new book Six Capitals is out, I’ve been thinking through and talking about the various manifestations of the four ‘new’ capitals – intellectual, human, social and relationship, and natural capital – whose application in business and economic life is embryonic, nascent.

The new It Capital – and the one I’m most interested in – is natural capital, which made its formal appearance on the global stage in 2012 when it was adopted by the United Nations as a statistical standard with equal status to GDP. So far it’s yet to be widely used in practice, but the UK’s early forays in natural capital accounting have proven controversial. They’ve been fiercely opposed by George Monbiot and vehemently defended by others, including long-time environmentalist Tony Juniper, many ecologists, and environmental economists such as Robert Costanza. (I wrote a little about natural capital here two years ago.) I’m planning to write about the language of natural capital in relation to the G20, especially regarding Tony Abbott and Joe Hockey’s rhetoric which pits climate change against the idea of economic growth, as if the economy existed only in a mathematical model and not as a human activity here on earth.


The simplified view of one proponent of natural capital


But in the meantime I have been reading an absolutely fascinating essay in the new Overland (Issue 217) by Christopher Scanlon called ‘HappinessTM’. Scanlon writes about the applications of ‘positive psychology’ to incite happiness in workers in call centres and other service industries who must be ‘up’ all the time in order to do their jobs properly. He writes:

‘Call it HappinessTM: a form of happiness that, like any other industrial product, is manufactured in a predictable, standardised and, perhaps most importantly, reproducible fashion. As we’ll see, Happiness TM is both a management tool to ensure compliant and efficient workers, and a product in its own right.’

I’m interested in the resonances of this for the idea of human capital, a concept which has emerged in accounting because we humans are now among businesses’ most important assets (who knew we weren’t?), thanks to the advent of the information age and the slow demise of the industrial era with its factory production and blue collar workers.

As management guru Peter Drucker noted in 1999: ‘The most valuable assets of a 20th century company were its production equipment. The most valuable asset of a 21st century institution, whether business or non-business, will be its knowledge workers and their productivity.’

Attempts to value employees – or ‘human assets’ – date to the 1960s, but only recently have a few companies begun to include such information in their financial statements. Notable among these are India’s global technology company Infosys and corporate giant Tata. In 2012 Infosys valued its ‘human-capital externality’ at US$1.4 billion. This value is generated largely through its intensive technical training program. Infosys has built the world’s largest corporate university, which trained 100,000 software professionals between its founding in 2002 and 2012.

The authors of Natural Capitalism: Creating the next industrial revolution – who advocate natural capital accounting as well as human and social capital accounting – argue that just as nature needs to be accounted for and safeguarded, so society and humans must be nurtured in the same way to prevent their breakdown and exhaustion:

‘Just as ecosystems produce both monetised “natural resources” and far more valuable but unmonetized “ecosystem services”, so social systems have a dual role. They provide not only the monetised “human resources” of educated minds and skilled hands but also the far more valuable but unmonetized “social system services” – culture, wisdom, honour, love, and a whole range of values, attributes, and behaviours that define our humanity and make our lives worth living.’

And just as there are better and worse ways of handling nature, so there are ‘unsound methods of exploiting human resources’ that can ‘destroy the social integrity of a culture so it can no longer support the happiness and improvement of its members’. When people are overworked and undervalued, and when their jobs are insecure, community and civil society break down.

UnknownLike all the new capitals, the idea of human capital is … a double-edged sword? While it might offer ways to rethink the value of employees, argue for investment in their training and education, for their better care, the stories Scanlon tells from the frontline of call centres sound more like Aldous Huxley’s Brave New World with its soma-numbed humans.

He quotes Stuart, the Manager for Culture at one call centre, who said:

‘Our people are our machinery and so we need to invest money in order to maintain that machinery. If that means giving someone an opportunity to put a streamer up, or giving someone the opportunity to celebrate their birthday or a birth or a marriage or something else that’s important to them, then we need to make that happen.’

As Scanlon says, ‘Just as a steel mill needs to ensure its machinery is operating efficiently, a call centre needs to grease the wheels of its employees’ emotional lives. The growing interest in managing the emotional lives of employees is not at all surprising. It is the logical outcome of a shift towards services-based work.’


And in services-based work, we have to be happy – or, as Scanlon puts it ‘projecting a positive outlook and, more importantly, being able to elicit positive emotional responses from clients matters much more than in manual labour’.

‘If you work in a service role, emotions aren’t just one part of the job – displaying emotions and, in turn, inducing emotional responses is your job. Emotions are the product.’

Welcome to our brave new world.

It’s a thought-provoking essay in a strong issue of Overland (which happens to be the last issue under the brilliant editorship of Jeff Sparrow).

And next up here, moving right away from capitals and happiness into the throes of doomed passion, is Maurice Guest, about which the great literary blogger John at Musings of a Literary Dilettante said: ‘As a study of obsession and erotic love it has few equals. Madame Bovary comes to mind as the obvious touchstone … But there’s something about the very European Maurice Guest that defies comparison, even with the great novels.’



Posted in Can accountants save the planet?, Economics | 5 Comments

‘Our ideas about marriage and divorce are particularly old-fashioned': Edith Wharton’s The Age of Innocence

709931‘Our ideas about marriage and divorce are particularly old-fashioned. Our legislation favours divorce – and our social customs don’t,’ says Newland Archer to Countess Olenska, attempting to explain the subtle but rigid unspoken conventions of the patrician New York society to which they both belong. The Countess Olenska arrives in New York from Europe as Archer is about to announce his engagement to her cousin May Welland, a beautiful, athletic and irreproachable society girl. Ellen Olenska has fled her philandering husband, a Polish count, and returned to her family in New York to get a divorce. ‘The individual, in such cases, is nearly always sacrificed to what is supposed to be the collective interest: people cling to any convention that keeps the family together,’ continues Archer, dismayed to find himself forced to resort to such platitudes.

Michelle Pfeiffer as Countess Olenska

Michelle Pfeiffer as Countess Olenska

The ferocity with which the Countess longs for her freedom from her husband, her inability to be surprised by anything, her bold talk and eccentric style – ‘Madame Olenska, heedless of tradition, was attired in a long robe of red velvet bordered about the chin and down the front with glossy black fur’ – conjure for Archer a mysterious European world that grows to fill the void in his life, which is rapidly becoming apparent to him with the approach of his society marriage. Brought together by May’s family, the Countess and Archer find themselves consumed by desire for one another.

In the unfolding of Archer’s story and his divided heart, Edith Wharton teases out the tensions between individual needs and social obligations – the shame of divorce, the pain of marriage, the restrictive codes of society, its damning of outsiders and yet its generosity to its own, the irresistible charm of its ways – and draws a complex and subtly delineated portrait of upper-class New York in the 1870s. Only in its quiet closing moments does the novel reveal the truth of May’s lucid understanding of her husband and marriage, and demonstrate the ambiguity of Wharton’s rounded perception of life.

Edith Wharton was in her late 50s when she wrote The Age of Innocence. She had experienced in her own life the pain of loveless marriage, the shame of divorce, the pleasure of illicit sexual passion and the unyielding power of New York’s upper class. She had also experienced at first hand the devastation of the First World War. The war broke out when Wharton was living in Paris and she immediately became energetically involved in assisting those whose lives it had ruined, helping refugees from northeastern France and Belgium, and travelling to the front in her motorcar. (Wharton loved driving and bought her first automobile in 1904.) In 1916 Wharton edited The Book of the Homeless, an anthology with contributions from Thomas Hardy, John Galsworthy and WB Yeats, to raise money for the refugees. In recognition of her wartime relief work, Wharton was made a Chevalier of the Legion of Honour by the French government.

Following the war, totally consumed by an urge to write about its overwhelming intensity, almost as an aside Wharton began to work on a new novel about the New York of her childhood. If before the war Wharton had seen society exclusively in terms of its power to crush the individual, her experience of the war years opened her eyes to the benefits of civilisation, the ways in which family, history and tradition can provide the context and security essential for life. Her new insights can be felt in The Age of Innocence.

Edith Wharton

Edith Wharton

Born in New York in 1862 during the Civil War, Wharton was the youngest child (by twelve years) and only daughter of George and Lucretia Jones, members of the New York upper class whose English and Danish ancestors had acquired their vast wealth in business, law and banking. (They were the original Joneses with whom the term ‘keeping up with the Joneses’ originated.) As a teenager Edith was known as ‘that handsome, disagreeable little Pussy Jones’. In her milieu a girl’s only conceivable ambition was to make a successful society marriage and become an exemplary wife and mother. Wharton’s family was not at all interested in literature and was surprised by Edith’s passion for reading and writing. Educated at home and on the family’s travels through Europe (which began in 1866 and lasted six years), Edith wrote poetry and finished her first novella, Fast and Loose, when she was 15. A few years after the death of her beloved father, Wharton, at the ripe old age of 23 (at which she was considered almost on the shelf), married Boston banker Edward Wharton in 1885.


Wharton’s first notable book was published in 1897. Written with friend and architect Ogden Codman, her book The Decoration of Houses advocated simple, classical design and immediately influenced designers throughout America. Wharton also designed her own house, ‘The Mount‘, in Lenox, Massachusetts. Completed in 1902, the house was described by Wharton’s friend Henry James as ‘a delicate French chateau mirrored in a Massachusetts pond’. Wharton adored her house and garden, and wrote in her diary that architecture and flowers (as well as books, dogs and a good joke) were among her ruling passions.

The Mount

The Mount

In 1905 the popular and critical success of her novel The House of Mirth established Wharton as a prominent American writer. But she felt enormous tensions between her position as a society matron and her vocation as a writer. This may have contributed to the breakdown of her health, which took the Whartons to France and Italy, where her health was restored. In 1907 Wharton moved with her husband to Paris, a city she felt was in her blood.

Following her move to Europe, Wharton flourished as a writer but her marriage foundered. In France she wrote in bed, dropping page after page onto the floor for a secretary to type. Her daily output was massive and she produced a book a year for 40 years. But in 1913 Wharton and her husband Edward were divorced, prompted by his mental instability, financial irresponsibility and numerous affairs with other women.

In 1908 at the age of 46, Wharton fell in love with American expatriate Morton Fullerton, a journalist on The Times who’d had affairs with men and women, and they had a passionate sexual affair as well as a meeting of minds. Henry James had introduced her to Fullerton, with whom Henry was also in love and on whom he modelled Merton Densher in The Wings of the Dove. Wharton was a lifelong supporter of Henry James, which included campaigning for him to win the Nobel Prize (which he never won) and secretly diverting some of her own more abundant royalties to him via her publisher.

Contracted for publication by The Pictorial Review, a popular magazine for women, The Age of Innocence appeared in four large instalments from July to October 1920. The book, published the same year, was an immediate success. In 1921 The Age of Innocence won the Pulitzer Prize. In what was to be her only journey home following the war, Wharton returned to America to receive the award. Two years later, in 1923, she became the first woman to received a Doctorate of Letters from Yale University. For a girl born into a society in which women writers were unheard of, that Wharton had become a writer at all was a remarkable feat of courage and determination. That she had risen to such heights of critical acclaim was testament to her abundant talent and fierce intellect.

Martin Scorsese’s sumptuous 1993 cinema adaptation of The Age of Innocence starred Daniel Day Lewis as Newland Archer, Winona Ryder as May Welland and Michelle Pfeiffer as Countess Olenska. Scorsese was passionately committed to directing Wharton’s great novel and brings to his film all the subtle characterisation, complex social mores, signs and codes, all the claustrophobia and beauty of Wharton’s original.


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