The Next Reformation
by Sarah van Gelder
In the current problems of our economy, futurist Paul Hawken
sees the seeds of a new reformation as significant as the one that launched
the industrial revolution
here are few people who have contributed to our understanding
of the role of business on a small planet as Paul Hawken has. He has founded
several businesses, including Smith & Hawken, and is the author of The
Ecology of Commerce, The Next Economy, and Growing a Business.
Sarah: A lot of people are very concerned with recent events, particularly
in the United States, where we're seeing attacks on environmental legislation
at the state and federal levels, and an overall sense that our economic
and governmental institutions are failing us. How do you interpret all this?
Paul: I see these events as masking a more fundamental shift, a shift
so powerful that it will occur over the span of one lifetime if not more.
We're so accustomed - if not addicted - to rapid change that we are not
able to perceive a powerful long-term shift, especially one that is so quiet
and pervasive that it is not discernible by the methods we use to gauge
change, power, and control.
When you read the papers of Volta, Galvani, Barrows,
Shelley, Blake et al. at the beginning of the industrial revolution, they
didn't describe industrialism per se - they didn't use the word - but they
did describe its benefits, its promise, and its shadow. Nobody knew exactly
what it was that they were describing. Nobody at a party could say, "How
does it feel to be at the beginning of the industrial age?" And yet
that is exactly what was happening. People could sense it.
My guess is that we are in precisely the same situation.
People are naming it the Third Wave, the Information Age, etc. but I would
say those are basically technological descriptions, and this next shift
is not about technology - although obviously it will be influenced and in
some cases expressed by technologies.
Industrialism is about the appropriation by a relatively
small group of white Europeans of global resources that they mistakenly
thought were theirs, that they "discovered." That appropriation
of resources and the transformation of them into goods and services through
the European production system characterized, and characterizes to this
day, all industrial systems including the information age. If anything,
the technologies used to produce the information age are proto-industrial.
There is nothing about its underlying principles that are post-industrial.
The next stage, whatever it will be called, is being
brought about by powerful and much-delayed feedback loops. Information from
destructive activities going back a hundred years right up until today is
being incorporated into the system. And as that happens the underlying framework
of industrialism is collapsing and causing disintegration. We are losing
our living systems, social systems, cultural systems, governing systems,
stability, and our constitutional health, and we're surrendering it all
at the same time.
Sarah: Why is this such a well-kept secret? How is it that there
isn't more understanding about the decline of industrialism?
Paul: Globally and nationally we are still looking at this set of
problems as distinct and unconnected rather than seeing them as inextricably
bound to the underlying assumptions that inform linear industrial systems.
Basically, the underlying principles of industrialism don't work. In short,
industrialism is over.
The massive inefficiencies of industrialism are not
more apparent because they are masked by a financial system that gives improper
information. This is a classic case of "garbage in, garbage out."
In this case the "garbage in" is what money tells us, what prices
tell us, what the markets tell us.
Instead of markets giving proper information, everything
else is giving us proper information: our air-sheds and watersheds, our
soil and riparian systems, our bodies and health, our society, inner cities
and rural counties, the breakdown of stability worldwide and the outbreak
of conflicts based on environmental shortages. All these are providing the
information that our prices should be giving us but don't.
Sarah: What do you say to people who are feeling discouraged, particularly
by the strength of the backlash represented by the Republican Congress?
Paul: The shift we're seeing is incremental and slow, which is what
you would expect if it's to be long-lasting. What is being focused on, quite
rightly and understandably, is the strengthening of a laissez-faire corporate
socialism in Congress, and second, widespread attacks on the environmental
movement and ethos.
Those two trends would seem to suggest that the environmental
movement has reached the high-water mark and is now ebbing, and that something
else is replacing it. And I would say it's completely the other way. I think
an old style of addressing environmental problems is ebbing, but the rise
of the so-called conservative, political movement in this country is not
a trend towards the future but a reaction to this very broad shift that
we are undergoing. Newt and family are not pointing to an adventurous new
civilization, as much as they would like to claim that ground. They are
actually afraid of the future because their singular mindset cannot encompass
its complexity, even its beauty.
Thus, the forces and value systems that are most threatened
by this shift are becoming the most coherent and are rising to the top as
minority or plurality powers. But they do not represent either the shift,
the change, or the future. I think the media, Newt Gingrich, and others
are mistaking reactive thinking for a long-term trend. I see it as a short-term
oscillation, although we have to be careful here in recognizing that reactionary
minorities can easily come to power and wreak terrible damage on societies,
even the world as we experienced in the '3Os and '4Os.
If, as is natural, you focus on the corruption and on
those threatened institutions that are trying to prevent change - even though
they don't really know what they're trying to prevent - then you can get
But if you understand this collapse as both the precipitant
and the symptom of a reformation, then you can read it in a different way.
It's still just as greedy, corrupt, or - probably the nicest thing you can
say - inappropriate to this time and age. But you can also see it in a larger
context and understand a pattern that's occurring.
Sarah: What is the direction of this shift?
Paul: The shift is profoundly biological. It's not about the celebration
of nature, although that is certainly a part of it; it's about the incorporation
of natural systems into our industrial life, into our way of making things,
our way of processing things and deprocessing things. And the only reason
it's going to happen is because it works profoundly better.
We are in the process of reinventing our entire system
of making things, its relationship to living systems, our whole concept
of waste, and in turn turning neoclassical economics on its head, reversing
a 100-year process of emphasizing human productivity.
We are now heading down a centuries-long path toward
increasing the productivity of our natural capital - the resource systems
upon which we depend to live - instead of our human capital. We can no longer
prosper by increasing human productivity. The more we try to do, the more
poverty we will create.
We have spent the last century, and most of us, the
last decades or so, working our tails off in order to make fewer and fewer
people more and more productive using systems of manufacturing, distribution,
and communication that use more and more stuff. We are all doing this precisely
at a time when we have less and less stuff, and more and more people. Talk
about speeding trains racing towards each other in the night.
So this next industrial revolution, a terrible term
really, is about this great reversal. Not a reversal to little house on
the prairie, but one to an elegantly designed and imagined interrelationship
between human and living systems. We will do it because it's the only alternative
that allows us to stick around as a species, which most of us want to do.
Sarah: You said to me in a conversation quite some time ago that
global corporations aren't more efficient, they're just more able to externalize
their costs. Could you say more about that?
Paul: We assume that everything's becoming more efficient, and in
an immediate sense that's true; our lives are better in many ways. But that
improvement has been gained through a massively inefficient use of natural
That inefficiency is masked because growth and progress
are measured in money, and money does not give us information about ecological
systems, it only gives information about financial systems. Global corporations
are measured by that one financial denominator. They can most easily buy
financial efficiency because they have the most capital. They can go to
the factory, mining pit, forest, or country where they can do the most for
the least money and do so quickly and do so on a scale that makes it very
difficult for smaller companies to compete.
What this means is that we are seeing a worldwide pattern
of decapitalization. Capital, whether it be natural capital in the form
of resources, or human capital, in the form of low-wage workers, or local
capital in the form of functional and healthy local economies, is being
extracted and converted to financial capital at an increasingly accelerated
rate. The financial capital is being concentrated by corporations, institutional
investors, and even our pension funds, and being reinvested in companies
that repeat this process because it provides the highest return on that
This makes it nearly impossible for local or regional
companies who internalize their costs, i.e., companies that do not degrade
their resources, or do not take advantage of local labor surpluses, to contend
because they cannot compete on price. I don't know where the leadership
will rise to turn this situation around.
At the same time, the globalization of the world economy
is really due to the fact that energy has become increasingly less expensive
for 119 years. Since oil was discovered, there have been some little price
blips on the screen, but in constant dollars, energy is cheaper now per
BTU than it ever has been in the history of the world. And at some point
that will turn the other way. Interestingly, the oil companies know very
well that in less than 30 years they will not only be charging very high
prices, but that they will be uncompetitive with renewables.
When energy prices do go up and start to reflect their
replacement value, you will also see some weakening of global transnational
corporations. That's because their advantage comes overwhelmingly from centralization
and mass production, and those things depend on distribution and transportation
networks that are basically cheaper than local systems.
Sarah: Could you clarify the distinction between the effects of a
global corporation's operation on the environment and the community and
that of a local company?
Paul: A local company has more accountability. Local companies don't
have to internalize their costs, and few actually do, but they tend to more
often because the owners live there and they have to show their face in
town, and their kids play with other kids.
And also, more and more businesses really want to do
the right thing. They feel better about themselves, their workers feel better,
and so do their customers. I think this is equally true in the trans-national
corporations, but it is harder to express in those situations.
Sarah: Have you encountered businesses like that?
Paul: I think we all have. And I think we can all see that they're
frustrated because they're playing on an uneven field. Businesses who are
members of Businesses for Social Responsibility or the Social Venture Network
are internalizing costs on a voluntary basis and therefore raising their
costs of doing business, but their competitors are not required to. They
can only do that to a certain degree before they hurt themselves, their
company, and their future.
On the other hand, there are many things that companies
can do to make themselves more efficient, that internalize costs at a savings
rather than an expense. This is where the excitement is, and this is where
what we can call the next industrial revolution will start. It'll start
where the systems are badly designed.
Companies that create more elegant ways of doing things,
that create material and energy flows that are exponentially more efficient
will become inefficiency arbitrageurs. They'll force internalization onto
their competitors because these companies will achieve efficiency at negative
or nearly negative costs, which will set the standards for the rest of the
industry. This will be the wedge, the foot in the door. It's not going to
begin with legislation or regulation; it's going to begin by imagination.
Sarah: You're talking about the kind of work being done with energy
efficiency and so forth?
Paul: Yes, energy efficiency, material efficiency, and system efficiency.
The term used commonly in Europe now is "factor" for the amount
of efficiency, "factor four" being four times as efficient, or
a 75 percent reduction in throughput of energy and materials.
State-of-the-art thinking now, led by Amory and Hunter
Lovins of Rocky Mountain Institute, and Ernst von Wies-zacker of the Wuppertal
Institute in Germany, is that we are going to a factor ten economy, an economy
that allows us to do what we do now with 90 percent less energy and materials.
I agree. That's the future, and those companies that understand it and move
first - and I should say those countries, too - will find themselves in
an advantageous position throughout the coming decades and century.
The good news is that the perverse incentives that have
characterized industrial market economies are gradually failing, despite
the best efforts of national legislatures to keep them in place, and there
are now positive incentives to move towards efficient and sustainable systems
that do not rely on altruism or regulation. I'm not against altruism, or
against regulation either, but these new systems are self-regulating. It's
Sarah: Which companies are catching on to this? Where do you see
progress being made?
Paul: In many cases, the leaders are companies that would bore or
shock you, either because most people have never heard of them or because
they've been some of the worst despoilers of natural systems in their products
and processes. Some of these companies are now becoming quite taken by factor
four efficiencies because they have huge problems, both from the past and
in the present, and thus they have the most to gain from a wholesale revision
of what business they're in, how they conduct themselves, and how they design
their processes. It is not for me to say who they are because they are in
mid-transition and have not made their intentions known publicly or to their
shareholders. And there is always the chance that a new CEO could kill those
Sarah: What is the motivation for these large companies to change?
Paul: It varies. In some cases the CEO got religion. In some cases
it's because they've been badly burned and chastised, and they'll try anything.
They're open and they've been made open by failure.
Sarah: One of the things that seems to be getting in the way of a
real transformation is the amount of investment that is already sunk into
our current way of doing things.
Paul: Yes, and that's why any systems change has to refrain from
punishing current investment within a 15-20 year time line. So often, well-intended
regulation has punished capital investments that were made in good faith
- maybe not good science, but good faith. Any company whose capital investments
are affected by such regulations will be tigers in opposing new standards
or laws that basically create write-offs. An intelligent strategy of moving
towards a least-cost, carbohydrates-based, cyclical economy that rewards
resource efficiency rather than only financial efficiency, has to be as
imaginative as the very processes it seeks to replicate. Intelligent policies
will be largely self-regulating in the sense that the system of incentives
and standards makes it absolutely ludicrous to not move towards clean, internalized
systems of cost and production.
Sarah: Tell me more about what form those incentives would take.
Paul: Well, ecological tax reform is the primary one. Over a 20-year
period, in consistent and predictable increments, you shift the tax system
away from personal incomes towards primary resources, energy, and waste.
You approximate full-cost accounting, albeit in a somewhat simplistic way,
but better than not doing it at all. In so doing, the system gives companies
a long and predictable horizon within which they can invest in new technologies
and new systems of natural capital productivity. And if they can make money
by using less stuff, more efficiently through closed loops that do not cause
harm to the environment, they will.
Sarah: That brings to mind what's going on in Holland with their
Green Plans. But when I try to imagine that happening in the US, it seems
like the political situation here is heading in the opposite direction.
Paul: Yes, I suppose we are. That's what I was mentioning earlier
- the forces that are most threatened are the ones that are most coherent.
But ecological tax reform (ETR) in Europe will happen.
There's no question about it. The United States can try to go on its merry
way, but the Swedes and the Germans and others who are talking about ETR
are willing to pursue this because they are interested in two other important
aspects besides the reduction in use of resources and production of waste.
The first is that a tax shift lowers labor costs while at the same time
it doesn't lower real income. This makes the workers and their work more
competitive in comparison to workers in other countries where no such tax
shift has occurred.
The second is that it gives businesses incentives to
become leaders in technologies and processes that accomplish these factor
ten efficiencies ahead of other countries that don't do ETR. CEOs in Sweden
have already asked the Prime Minister to implement some form of ecological
tax reform to gain an advantage over American and Japanese companies.
So if the Europeans adopt ETR and the US ignores it,
American workers would become the highest paid in the world. They're already
having trouble competing with Germans, and if German wages go down 40 percent
and there's no change in real income for the German workers, then that's
going to be a real interesting situation for Americans.
With ETR, it's really a race to see who does it first
and best, and the others will have to follow. The country who does it first
is going to have an advantage.
Sarah: Where is the energy going to come from to make the kind of
system-wide transformation you describe?
Paul: I think it's coming up and not down. I think we're so used
to hierarchical implementation of power that it's hard to imagine that something
reformative if not transformative, can come up and be more powerful. But
I think that's exactly what we're seeing. We've seen it in Eastern Europe,
we've seen it in South Africa, we're seeing it right now in Belfast, between
the Protestants and Catholics.
I believe this kind of reformation will be remarkably
free of charismatic leadership. It's based on distributive and adaptive
intelligence - which is where the third wavers chime in for sure - and so
by its very nature, there will be no person who will, can, shall, or could
stand up and say, "This is the reformation. Let me tell you about it.
I'm here." Because that won't be it.
What I see is individuals, groups, families, communities,
regions, companies, institutions, classes, churches, and other groups comprehending
the shift, each in their own way. These groups are acting locally and regionally
and are not aware of how often and repeated their initiatives are. These
efforts don't connect yet, but they are going to.
I think of this era as being like the second age of
reformation. At the start of the Protestant reformation, Martin Luther was
angered by the Catholic church's sale of indulgences. Today, we are all
angered and disturbed to see the sale of indulgences, only in this case
it is by corporations and the indulgences are the profligate use of our
forests, soils, water, air, and species. When Luther nailed his 95 theses
to the door of the cathedral at Wittenburg, the resulting tectonic shifts
in the social fabric led to the scientific revolution, the age of enlightenment,
and the shift to the industrial age.
I believe we're in the midst of the next reformation,
which will be a shift from a secular to a biological age. There is no Martin
Luther, and there will be no cathedral door, but like the first reformation,
this shift is being precipitated by enormous corruption on the part of those
people who hold the public trust, both politically and commercially. It's
feeding off the collapse of industrialism. The reformation has started and
is as unstoppable as the last time.
Over the next 20 to 40 years we will witness the continued
breakdown of industrialism. At the same time, we will experience the connecting
of the dots if you will, a connecting of the different points of perception
So you can see two signals; one of hope, renewal, and
transcendence, and the other of decay and degradation. I suspect that the
media will pay attention mostly to the latter, but both are going to happen
very powerfully at the same time.