Social Europe

politics, economy and employment & labour

  • Themes
    • Strategic autonomy
    • War in Ukraine
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Why We Should Stop Talking About ‘Human Capital’

Carlos Joly 13th January 2016

Carlos Joly

Carlos Joly

The extent to which the world has become Orwellian is reflected in the widespread use of the term `human capital`, as if it were a humanizing concept, whereas it´s really a contradiction in terms. What is human about capital in the 21st century? Any attentive reader of Picketty, Sadler or Stiglitz gets my point.

In our capitalist society capital is seen as the ultimate value. More capital, more value. Ergo, if we are to value people, dignify them, why not imbue them with capital value? It would seem like this is an ennobling strategy to substantiate the business claim that “people are our greatest asset”, as if attributing the quality of capital to people were a moral enhancement. But this is misleading and fails, even on its own terms.

Consider what capital really is. Equity capital is made up of tangible assets like plant and equipment and intangible assets like brands, copyrights, patents and goodwill. Buildings, plant and equipment are amortized. Each year we write down their value. This fits with how we treat employees: once we use them up, and amortize them, we can consider them expendable, redundant, like so many 50+ year olds to be replaced by new improved models in their 30s, requiring lighter pension outlays. Not quite the glorious substantiation aimed for.

Intangible assets make up a large part of equity capital in the big high tech players like Google or Microsoft, and also in traditional package goods companies like Unilever. But this kind of capital is high maintenance, notoriously demanding of continuous upgrade, ad expenditure, R&D, and legal outlays. When corporate earnings risk falling behind Wall Street´s expectations, what gets sacrificed? What´s the preferred variable to show future productivity gains to keep stock prices from falling? Employees. `Human resource` expenditures get slashed, firings multiply. Share price capital trumps human capital.

What´s going on is that this naming strategy is really an objectification of the subject, revealing the extent to which people are commodified by an economic model so pervasive that it has become a dominant cultural reality, perverting our language and how we think about ourselves. We have to remember: we are not capital, we are people.


Our job is keeping you informed!


Subscribe to our free newsletter and stay up to date with the latest Social Europe content. We will never send you spam and you can unsubscribe anytime.

Sign up here

The Pensions Trap

Capital is failing us, not helping us. Think of what goes on in asset management and pensions. The mainstream investment industry fails most of those affected by the consequences of its actions, particularly savers and pensioners. It fails on both ethical terms and on its own terms. Pension funds are generally not providing the financial returns people need for their retirement.

The replacement of defined benefit pension schemes by defined contribution in most Western developed countries in the past 10 years is a technical solution aligned with the primacy of individualism over collective solidarity. It means collective pensions negotiated for retirees by labor unions are replaced by individual private pensions. In the earlier schemes, retirement income is guaranteed as a percentage of salary. In the later ones, income depends solely on whatever the individual´s savings yield minus intermediary fees. And this is accompanied in many cases by a reduction in state pensions. This means the transfer of investment risk onto individual savers who are rarely able to make the right decisions – a captive market for the fee-gouging chain of investment intermediaries.

The resulting retirement income shortfall in some countries is staggering. In the US, 34% of the workforce has no savings set aside for retirement, and for those working households about to retire and with defined contribution retirement savings, the median balance is little more than $100,000 and that means an income of less than $5,000 a year. The amount added by social security payments is on average about $16,000 per annum per retired worker. In sum, not the level of income most people think they´ll be getting.

Furthermore, how fund managers invest keeps on destroying nature, on which human existence and survival depend. This is self-destructive financially, a moral failure, and negligent as regards sustainability. Managers for the most part mindlessly invest in passive or index investment funds that mirror the market as it is, thus helping to perpetuate the polluting industries, companies and products that should be a thing of the past. The lame justification for this is the dogma of efficient markets that assumes market pricing represents the right price, the right value as determined by rational actors. In fact, it has little to do with the empirical reality of how prices are formed in the world of passive investment, algorithmic trading or round-robin guessing whether and how much the other guy is buying or selling. Stock market prices are notoriously disconnected from the real world, from consideration of long term economic, societal and environmental matters and are generally more responsive to short term news, sentiment, irrational exuberance or fear, easily resulting in bubbles and crashes. Hardly something you´d want to ascribe to “human capital”.

Those of us who are concerned with fairness in income and wealth generation and distribution, in work-life conditions, and with treating people with the dignity that is their right should drop the term human capital from our vocabulary and expose it for what it is: Orwellian speak meant to obscure reality. An oxymoron. Whether we want to fix capitalism or invent something better, we should start calling a spade a spade. The appropriate term is Inhuman Capital because that is the role capital has come to have in the current phase of financial capitalism.

Carlos Joly
Carlos Joly

Carlos Joly is a fellow at the Cambridge Institute for Sustainability Leadership, Cambridge University, where he founded the Investment Leaders Group. He was chair of the United Nations Environment Programme Finance Initiative.

You are here: Home / Politics / Why We Should Stop Talking About ‘Human Capital’

Most Popular Posts

Russian soldiers' mothers,war,Ukraine The Ukraine war and Russian soldiers’ mothersJennifer Mathers and Natasha Danilova
IGU,documents,International Gas Union,lobby,lobbying,sustainable finance taxonomy,green gas,EU,COP ‘Gaslighting’ Europe on fossil fuelsFaye Holder
Schengen,Fortress Europe,Romania,Bulgaria Romania and Bulgaria stuck in EU’s second tierMagdalena Ulceluse
income inequality,inequality,Gini,1 per cent,elephant chart,elephant Global income inequality: time to revise the elephantBranko Milanovic
Orbán,Hungary,Russia,Putin,sanctions,European Union,EU,European Parliament,commission,funds,funding Time to confront Europe’s rogue state—HungaryStephen Pogány

Most Recent Posts

reality check,EU foreign policy,Russia Russia’s invasion of Ukraine—a reality check for the EUHeidi Mauer, Richard Whitman and Nicholas Wright
permanent EU investment fund,Recovery and Resilience Facility,public investment,RRF Towards a permanent EU investment fundPhilipp Heimberger and Andreas Lichtenberger
sustainability,SDGs,Finland Embedding sustainability in a government programmeJohanna Juselius
social dialogue,social partners Social dialogue must be at the heart of Europe’s futureClaes-Mikael Ståhl
Jacinda Ardern,women,leadership,New Zealand What it means when Jacinda Ardern calls timePeter Davis

Other Social Europe Publications

front cover scaled Towards a social-democratic century?
Cover e1655225066994 National recovery and resilience plans
Untitled design The transatlantic relationship
Women Corona e1631700896969 500 Women and the coronavirus crisis
sere12 1 RE No. 12: Why No Economic Democracy in Sweden?

Hans Böckler Stiftung Advertisement

The macroeconomic effects of re-applying the EU fiscal rules

Against the background of the European Commission's reform plans for the Stability and Growth Pact (SGP), this policy brief uses the macroeconometric multi-country model NiGEM to simulate the macroeconomic implications of the most relevant reform options from 2024 onwards. Next to a return to the existing and unreformed rules, the most prominent options include an expenditure rule linked to a debt anchor.

Our results for the euro area and its four biggest economies—France, Italy, Germany and Spain—indicate that returning to the rules of the SGP would lead to severe cuts in public spending, particularly if the SGP rules were interpreted as in the past. A more flexible interpretation would only somewhat ease the fiscal-adjustment burden. An expenditure rule along the lines of the European Fiscal Board would, however, not necessarily alleviate that burden in and of itself.

Our simulations show great care must be taken to specify the expenditure rule, such that fiscal consolidation is achieved in a growth-friendly way. Raising the debt ceiling to 90 per cent of gross domestic product and applying less demanding fiscal adjustments, as proposed by the IMK, would go a long way.


DOWNLOAD HERE

ILO advertisement

Global Wage Report 2022-23: The impact of inflation and COVID-19 on wages and purchasing power

The International Labour Organization's Global Wage Report is a key reference on wages and wage inequality for the academic community and policy-makers around the world.

This eighth edition of the report, The Impact of inflation and COVID-19 on wages and purchasing power, examines the evolution of real wages, giving a unique picture of wage trends globally and by region. The report includes evidence on how wages have evolved through the COVID-19 crisis as well as how the current inflationary context is biting into real wage growth in most regions of the world. The report shows that for the first time in the 21st century real wage growth has fallen to negative values while, at the same time, the gap between real productivity growth and real wage growth continues to widen.

The report analysis the evolution of the real total wage bill from 2019 to 2022 to show how its different components—employment, nominal wages and inflation—have changed during the COVID-19 crisis and, more recently, during the cost-of-living crisis. The decomposition of the total wage bill, and its evolution, is shown for all wage employees and distinguishes between women and men. The report also looks at changes in wage inequality and the gender pay gap to reveal how COVID-19 may have contributed to increasing income inequality in different regions of the world. Together, the empirical evidence in the report becomes the backbone of a policy discussion that could play a key role in a human-centred recovery from the different ongoing crises.


DOWNLOAD HERE

ETUI advertisement

The EU recovery strategy: a blueprint for a more Social Europe or a house of cards?

This new ETUI paper explores the European Union recovery strategy, with a focus on its potentially transformative aspects vis-à-vis European integration and its implications for the social dimension of the EU’s socio-economic governance. In particular, it reflects on whether the agreed measures provide sufficient safeguards against the spectre of austerity and whether these constitute steps away from treating social and labour policies as mere ‘variables’ of economic growth.


DOWNLOAD HERE

Eurofound advertisement

Eurofound webinar: Making telework work for everyone

Since 2020 more European workers and managers have enjoyed greater flexibility and autonomy in work and are reporting their preference for hybrid working. Also driven by technological developments and structural changes in employment, organisations are now integrating telework more permanently into their workplace.

To reflect on these shifts, on 6 December Eurofound researchers Oscar Vargas and John Hurley explored the challenges and opportunities of the surge in telework, as well as the overall growth of telework and teleworkable jobs in the EU and what this means for workers, managers, companies and policymakers.


WATCH THE WEBINAR HERE

Foundation for European Progressive Studies Advertisement

The winter issue of the Progressive Post magazine from FEPS is out!

The sequence of recent catastrophes has thrust new words into our vocabulary—'polycrisis', for example, even 'permacrisis'. These challenges have multiple origins, reinforce each other and cannot be tackled individually. But could they also be opportunities for the EU?

This issue offers compelling analyses on the European health union, multilateralism and international co-operation, the state of the union, political alternatives to the narrative imposed by the right and much more!


DOWNLOAD HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us

RSS Feed

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube