The strategic foundation for PIF’s efforts is the Capital Analysis and Performance Strategy (CAPSSM). Traditional approaches often view problems through a single domain specific lens (e.g. health, political). CAPS, on the other hand:
- Analyzes problems and produces solutions using multiple lenses that correspond to seven capital forms (Political, Natural, Economic, Infrastructure, Cultural, Social, and Human).
- Recognizes the capital forms are related and interdependent where a change in one may dramatically influence others.
- Is a holistic approach focused on doing and responding to needs with sustainable solutions.
The goal of CAPS is four-fold:
- A disciplined analysis to clearly define the problem, root causes, and relationships among the seven capital forms—the as is state. The relationships among the capital forms in this as-is state guides recognition of root causes and solutions. This ensures solutions do not promote efforts in one capital form while producing negative impacts on others.
- Existing efforts are reviewed. Decisions to maintain them as best practices or divest them are informed by the analysis of the as-is state.
- Potential solutions are prioritized using a variety of metrics including direct and indirect return on investment. These metrics are derived from quantitative and qualitative variables with well established relationships to the capital forms.
- A locally led holistic approach with immediate implementation ensures the knowledge, skills, and associated capabilities are transitioned to the project country in a sustainable manner.
Although each has its own complexity and make-up, in general terms the capital forms used in CAPS are defined as:
For the CAPS, political capital is both instrumental and structured where instrumental political capital is defined as “in the actors’ perspective as the resources which actors can use to influence policy formation processes and realize outcomes in their interest” and structural political capital as “in the public perspective and refers to variables of the political system which condition the actors’ possibilities to accumulate instrumental political capital and to use it effectively.” Characteristics of Political Capital include community organization, a government’s ability to govern and garner resources for its people, the political system, freedom of press, influence of lobbyism, political relevance of regional and rural problems in national politics, participatory elements in political decision-making, international influence on national, politics, discretionary administrative authority, and a country’s standing in the community of nations. These can be positive or they can be negative.
Natural capital consists of natural resources and ecological processes that cannot be created or replenished by man (i.e. air, water, land, minerals, biodiversity, and other natural resources). As defined by Throsby: “The elements of natural capital comprise renewable and non-renewable resources, the ecosystems that support and maintain the quality of land, air and water, and the vast genetic library referred to as biodiversity.” World Bank now includes Natural Capital in its calculation of a country’s Genuine Net Savings. The inclusion of natural capital takes into account that both natural and human capital are assets on which the productivity and well-being of a nation rest. According to the World Bank: “Depletion of a non-renewable resource (or over-exploitation of a renewable one) decrease the value of that resource stock as an asset, such activity represents a disinvestment in future productivity and well-being.”
The term is often used interchangeably with Financial Capital, although in practice there is a subtle difference important to applying the CAPS. Financial capital is “any liquid medium or mechanism that represents wealth, i.e. other styles of capital” and “funds provided by lenders (and investors) to businesses to purchase real capital like equipment for producing goods/services.” CAPS uses the broader, more inclusive view that comes from economic capital defined as: “[A] Nation's current production of valued goods and services plus its capacity to produce them in future. It includes intellectual capital with financial capital to indicate the total productive capital of a society.” Key characteristics of economic capital for the CAPS include: personal property, philanthropy (giving and receiving), grants, contracts, investments, loans (business and micro credits), poverty rates, the business climate, internal and external social responsibility, and insurance (including health). It also encompasses liquid or fluid capital.
In addition to attracting capital for development and preparedness, the situation of Capital Flight must be mitigated or avoided. Instability in the other capital forms and the business environment affecting economic capital could cause investors to lower the value of the assets in a country and lose confidence in its economic strength. This causes capital to be moved out of the country and also impacts on capital flowing in. Donors who are uneasy about the stability of a country are even more reluctant to “invest” their resources.
Infrastructure Capital is also termed Built Capital, Manufactured Capital, Man-Made Capital or Physical Capital. All share the common characteristic of referring to “any non-human asset made by humans then used in production.” For the CAPS Infrastructural Capital is used, inclusive of the other terms, and defined as “any physical means of production or means of protection beyond that which can be gathered or found directly in nature.” Infrastructural capital is non-natural support systems that minimize need for new social trust, instruction, and natural resources. It may include tools, clothing, shelter, irrigation systems, dams, roads, boats, ports, housing, transportation, telecommunications, information technology, utilities (power, water, etc.), solid and liquid waste management, technology, new real property (industry and commercial), factories or any physical improvements made to nature. Included in infrastructure capital is real capital. Infrastructure capital relies on human capital and is highly influenced by political, social, natural and other capital forms.
As defined by Pierre Bourdieu (1986) Cultural Capital exists in three forms: “[In the] embodied state i.e. in the form of long-lasting dispositions of the mind and body; in the objectified state, in the form of cultural goods (pictures, books, dictionaries, instruments, machines, etc.), which are the trace or realization of theories or critiques of these theories, problematics, etc.; and in the institutionalized state, a form of objectification which must be set apart because, as will be seen in the case of educational qualifications, it confers entirely original properties on the cultural capital which it is presumed to guarantee.” Cultural capital, therefore, way may exist in tangible form (buildings, locations, sites, artworks, artifacts, etc.) or in intangible form (ideas, practices, beliefs, traditions etc.)
The CAPS uses the World Bank definition of social capital as: “the norms and networks that enable collective action. It encompasses institutions, relationships, and customs that shape the quality and quantity of a society's social interactions.” Of note, the inclusion of customs in the World Bank definition provides a linkage to cultural capital. Social capital is now a major area of interest for and an integral part of the World Bank’s development activities. For the purposes of the CAPS, social capital includes trust, reciprocity, networking, group membership, cooperation, common vision, leadership, depersonalization of politics, alternative points of view, diversity representation, information sharing, associations, and collective decision-making. It includes consideration of both micro-level and macro-level social capital as well as the linkage between human capital and social capital particularly through the significance and impact of education.
The CAPS uses human capital as originally invented by Nobel Prize economist Theodore Schultz (1960) defining human capital as the knowledge, skills and abilities of the individual to yield returns. In terms of human capital, investments are in the form of education and training to enhance benefits leading to an improvement in the quality and level of production and quality of society overall. In a health context, for example, training and education on aids, malaria, and other disease prevention are proven investments is disease prevention, control, mitigation and eradication. The return on investment (ROI) in this context is a cost savings realized in the reduction of interventions required and a cost avoidance realized by the reduction in short and long-term treatment required. Both show a return on eliminating the burden on other capital forms, particularly economic, cultural, social and infrastructure.