Social Europe

politics, economy and employment & labour

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

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.


Become part of our Community of Thought Leaders


Get fresh perspectives delivered straight to your inbox. Sign up for our newsletter to receive thought-provoking opinion articles and expert analysis on the most pressing political, economic and social issues of our time. Join our community of engaged readers and be a part of the conversation.

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

Belarus,Lithuania A tale of two countries: Belarus and LithuaniaThorvaldur Gylfason and Eduard Hochreiter
dissent,social critique,identity,politics,gender Delegitimising social critique and dissent on the leftEszter Kováts
retirement,Finland,ageing,pension,reform Late retirement: possible for many, not for allKati Kuitto
Credit Suisse,CS,UBS,regulation The failure of Credit Suisse—not just a one-offPeter Bofinger
Europe,transition,climate For a just and democratic climate transitionJulia Cagé, Lucas Chancel, Anne-Laure Delatte and 8 more

Most Recent Posts

work,labour market,pandemic,hours,Gen Z How much work is enough?Anne-Marie Slaughter and Autumn McDonald
poverty,Porto,Social Forum When life gives you lemons, make anti-poverty strategiesEstrella Durá Ferrandis and Alba Huertas Ruiz
LGBT+ rigthts,same-sex couples,civil unions,ECHR Landmark European ruling on LGBT+ rightsNausica Palazzo
boredom,work Rust out: boredom at work can be harmfulValerie van Mulukom
Kılıçdaroğlu,Turkey,Erdoğan Turkey: does Kılıçdaroğlu have a path to victory?Halil Karaveli

Other Social Europe Publications

Bildschirmfoto 2023 05 08 um 21.36.25 RE No. 13: Failed Market Approaches to Long-Term Care
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

ETUI advertisement

The four transitions and the missing one

Europe is at a crossroads, painfully navigating four transitions (green, digital, economic and geopolitical) at once but missing the transformative and ambitious social transition it needs. In other words, if the EU is to withstand the storm, we do not have the luxury of abstaining from reflecting on its social foundations, of which intermittent democratic discontent is only one expression. It is against this background that the ETUI/ETUC publishes its annual flagship publication Benchmarking Working Europe 2023, with the support of more than 70 graphs and a special contribution from two guest editors, Professors Kalypso Nikolaidïs and Albena Azmanova.


DOWNLOAD HERE

Eurofound advertisement

New Europe-wide survey on living and working conditions

Eurofound, in partnership with the European Training Foundation, has launched a new online survey to document living and working conditions in Europe and the evolving concerns of citizens, amid the cost-of-living crisis, the war in Ukraine and the broader post-Covid-19 context.

The survey is available in 33 languages and is open to everyone over the age of 16. It asks specific questions on perceptions of quality of life and quality of society, as well as working situation, housing and finances.

Add your voice and contribute to the research.


COMPLETE THE SURVEY HERE

Foundation for European Progressive Studies Advertisement

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

The Special Coverage of this new edition is dedicated to Feminist Foreign Policy, to try to gauge its potential but also the risk that it could be perceived as another attempt by the west to impose its vision on the global south.

In this issue, we also look at the human cost of the war in Ukraine, analyse the increasing connection between the centre right and the far right, and explore the difficulties, particularly for women, of finding a good work-life balance and living good working lives.


DOWNLOAD HERE

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

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