Capital Valuation & Securitization Models for Natural Resources, Small Businesses, and Individuals
Abstract: regarding sustainable economic development and the conflict / alignment of public policy interests vs corporate interests in emerging markets -- I believe the crux of the matter is providing valuation and securitization models for yet-to-be-capitalized assets (natural resources, small businesses, individuals and aggregations thereof) for which we already have some notion of value, but have not yet been accurately or effectively captured in monetary terms and current capital systems. If we can accurately value and securitize these assets, capital systems will begin working to optimize long-term benefit and enhancement of public policy interests, and balance these along with corporate interests.
In capitalist systems, it is difficult to avoid any business activity that is positively motivated by the flow and optimization of capital. However, some of these business activities may have a negative effect on natural resources and other public infrastructure, and such infrastructure may be traditionally maintained only by government and/or non-profit organizations. The disadvantage here is that corporations have the power of equity capital, while natural resources and individuals generally have only some or no liquid assets or perhaps some debt capital at work (though governments do have debt capital via government bond markets). While some of these desirable resources and infrastructure may be defended via certain large and well-endowed foundations -- with quite significant growing economic power in recent years -- probably the only effective long-term solution is to accurately capture and securitize the value of clean water, breathable air, and other natural and man-made public resources. At the same time, we should include capturing and securitizing the value we as individuals (and groups of individuals) and small businesses create.
In the past, tax policy and product liability law have been used to provide a negative monetary incentive for business to avoid "unsustainable development" behavior, however this has had only limited effect. While class action lawsuits and activist tax policy can be utilized in positive fashion, they are not optimal tools -- these are band-aids and crutches for treating symptoms after damage has already been done. A better approach is to proactively solve the structural problems of "missing" securitized capital of community and individual assets. (Note: that being said, there are good things that do happen via class action lawsuits, even if in some cases the lawyers are the only ones that make money. The law can certainly be abused by overzealous attorneys, however class action lawsuits can be a reasonable proxy for aggregated mass consumer benefit, which otherwise might have no effective check or balance on deleterious corporate activity. I don't advocate a lawsuit-happy society, but an unfortunate side effect of the inability to capitalize community or individual assets is that such blunt instruments are required for aggregation. On the other hand, if we solve the problem of micro-capitalization of individuals and macro-capitalization of the community, we might avoid class action lawsuits as a poor man's proxy for missing capital assets).
Going forward, if we were to value and capitalize public infrastructure systems, and then allow some portion of those capital assets to be "floated", we would then have distributed and positive monetary incentive to maintain and enhance these assets. Thus do we have alignment of capitalist systems and sustainable resources. Previous efforts by people trying to capitalize the Amazon rain forest are along these lines, however that is a rather large and extreme example. Simpler and more local models can also exist, and will provide incremental benefit as we build out additional securitation systems for yet-to-be-capitalized natural resource assets. Securitizing and floating some portion of public assets would allow capitalism to work on their behalf.
Finally, a future vision might be to capitalize humanity itself, and provide derivative valuation models for the health, education and overall well-being of society. Such securitized assets would direct business behavior towards generating infrastructure to support and optimize long-term sustainable health and education benefits for all individuals (including those in developing countries). This is again not that far-fetched, but simply a side-effect of accurately capturing the values of our society as they exist in a functional capital system, which subsequently would allow capital to optimize itself for overall human benefit.
In summary: value = money, money = value. Corporations are not "bad" or "evil", nor is Capitalism bad... though it does have flaws. Existing capital systems are not quite accurate, and they [currently] don't capture certain large classes of public and individual assets. While corporations can aggregate and magnify a specific set of society's interests in monetary form via equity capital, public infrastructure and individual interests are typically not equivalently represented. Since we [currently] can't take a river or a rainforest public (or even less lofty goals, such as securitizing an individual or small business), these various interests are not similarly aggregated or magnified; they are not valued accurately; and they are effectively illiquid -- and thus they are not able to effectively utilize our existing capital systems.
But this is within our power to change. We do have the capacity to create securitized and market-driven community and personal infrastructure. It is only our current iteration on monetary systems that is somewhat out of whack with public and personal value systems. Future iterations will create more accurate models. Once we create these new assets in capital form, capitalism will work on behalf of not only the corporation, but also on behalf of natural resources and for individuals as well.
It may be a jarring concept for some inflexible liberal thinkers and the traditional leftist anti-corporate movement to envision Capitalism accomplishing these goals. However one would have to assess current efforts of WTO protesters and GreenPeace activists as more effective at breaking windows and capturing headlines than achieving real change in the status quo. Quite to the contrary, real change will more likely be accomplished by utilizing the same financial systems and securitization methods that have successfully created our current global markets -- however, now on the behalf of aggregated and properly valued public, community and personal assets.
In fact, if we build these new public financial systems properly, we can't AVOID having Capitalism fix these problems. Just as Corporations aim to make money and profits, so can the Invisible Hand of Adam Smith guide the distribution of resources on behalf of capitalized public policy infrastructure. We simply need to provide a capital system that allows society to value and express its assets and goals in these areas.
So let's create one.
Update (6 years later):