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 with zero-interest, non-liability, soft-repayable and indefinitely recyclable properties; its political economy remains undertheorised. Using an institutional and public-choice framework, the paper analyses 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. By removing interest liabilities, eliminating enforceable repayment obligations, and enabling multi-cycle capital regeneration, PSC introduces an alternative political equilibrium in which frontline institutions gain long-horizon planning autonomy and donors shift from short-term reputational giving to long-horizon capital stewardship. The paper traces how treasuries, bureaucracies, philanthropic actors and institutional leaders respond when financial scarcity is partially displaced by regenerative cycles of capability. We argue that PSC functions not only as a financial innovation but as a governance technology: it redistributes power, transforms incentives, and attenuates political gatekeeping. Through comparative analysis of debt, grants and regenerative capital, we show that PSC reduces systemic fragility and shifts institutions toward stable multi-decade equilibria. 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.