The Political Economy of Regenerative Capital: Incentives, Power, and Institutional Behaviour under Perennial Social Capital

This paper examines how Perennial Social Capital (PSC) reshapes political and institutional incentives across public-good systems. Existing work formalises PSC as a fourth capital class — zero-interest, non-liability, soft-repayable, indefinitely recyclable — but its political economy remains undertheorised. Using an institutional and public-choice framework, we analyse how PSC alters the distribution of budgetary authority, weakens fragility-based mechanisms of control, reduces dependency on discretionary grant power, changes donor psychology and enlarges institutional autonomy. PSC functions not only as a financial innovation but as a governance technology. That funding form shapes recipient autonomy is not new, and the sharper claim is about which lever is removed. A substantial literature establishes that donor restrictions constrain autonomy and that flexible funding strengthens capacity. But multi-year unrestricted funding removes the conditions and leaves the renewal decision exactly where it was: someone still decides whether the next tranche arrives, and anticipatory conformity requires only that the threat be unresolved — which renewal discretion guarantees however unrestricted the grant. â–¶ The claim here is that PSC can remove the renewal decision itself, which is a different intervention on the same dependency. âš ï¸ The claim is conditional and the condition is not yet met. A recycling pool re-allocates every cycle, so removing the decision requires the pool's allocation to be rule-bound rather than discretionary — and no paper in this programme yet specifies that rule. Absent it the lever is relocated rather than removed, which by the same standard is the worst case: an allocation governed by no stated rule is maximally unresolved. Two qualifications are carried throughout rather than conceded at the end. PSC attenuates scarcity, it does not abolish it; and it leaves the initial allocation of capital as political as it found it.