Moving beyond GDP to look at the world through the lens of wealth


  • Global wealth grew significantly over the past two decades with middle-income countries catching up to high-income countries.
  • New World Bank report includes estimates of human capital for the first time. Human capital is the largest component of global wealth, pointing to the need to invest in people.
  • Natural capital makes up nearly half of the wealth in low income countries. More efficient, long-term management of natural resources is key to sustainable development.

Following the Rio Earth Summit in 1992, a group of environmental economists at the World Bank began working on ways to measure sustainability. Driving them was the concern that GDP gave no indication of the state of natural assets such as forests, water and minerals, that were key to generating sustainable economic growth for so many resource-rich countries. They believed that it was possible to systematically track `assets’ like forests and minerals, just as we do for produced assets like buildings, machinery, roads and bridges. They called it `wealth’ to distinguish it from `income’ recorded as GDP in most countries.

Two decades later, the World Bank has released the third volume on wealth accounting. Called The Changing Wealth of Nations 2018, the report covers a broader set of assets that constitute the wealth of countries and strengthens the methodology.  While the motivation to track natural assets is still key, the work now shows that long-term development is about managing a portfolio of assets – produced, natural, and human capital.

The book tracks the wealth of 141 countries between 1995 and 2014 by aggregating natural capital (such as forests and minerals); human capital (earnings over a person’s lifetime); produced capital (buildings, infrastructure, etc.); and net foreign assets. Human capital is being measured for the first time and there are improved estimates for natural capital which include forests and agricultural land, as well as fossil fuels and minerals.

The good news is that overall wealth is growing. Middle-income countries are closing the gap with high-income countries and now have a greater share of wealth. More than two dozen low-income countries, where natural capital dominates the composition of wealth, have moved to middle-income status, in part by investing prudently in natural resources, infrastructure, and education. However, not everything is rosy, including a decrease in the value of productive forests and declining or stagnating per capita wealth in more than two dozen countries.

Top three findings from the report:

Despite rising global wealth, inequality persists

The world is still unequal when seen through the lens of wealth. High-income OECD countries hold 52 times more wealth per capita, measured at market exchange rates, than low-income countries.

More than two dozen countries saw their per capita wealth decline or stagnate. Declining per capita wealth implies that assets critical for generating future income may be depleted, a fact not often reflected in national GDP growth figures. This included several large low-income countries, some carbon-rich countries in the Middle East, and a few high-income OECD countries affected by the 2009 financial crisis.

In low-income countries, wealth almost doubled, a larger increase than the global average of a 66% rise.  But higher population growth in many low-income countries means that, in those countries, per capita wealth often grew at a slower pace than the global average. This is particularly true for Sub-Saharan Africa, where the needle on wealth per capita did not move much since 1995.

Importance of investing in people

Human capital accounts for two thirds of global wealth, the largest chunk of wealth. The report shows that human capital is about 70% of the wealth in high-income countries and only 40% in low-income countries. Human capital is computed as the present value of future earnings for the labor force, factoring in education and skills as well as experience and the likelihood of labor force participation at various ages. This report makes a clear economic case for investing in human capital to boost wealth and future economic growth.

Leveraging Natural capital but not liquidating it

Natural capital remains the largest share of wealth for low-income countries. In 10 of the 24 low-income countries, natural capital accounts for more than 50% of their wealth, mostly because of agricultural land and forests. The fact that the share of natural capital in total wealth decreases in higher-income groups means that countries do not have to liquidate natural assets to grow. Instead, it points to the need to manage natural capital so that it increases in value for future generations. This is reflected in the wealth composition of high-income countries, where the value of natural capital is three times that of low-income countries.

Low-income countries have the opportunity to grow by building their renewable resources like forests and sustainable management of land, which often make up a larger share of their assets. Rents from non-renewables like minerals and fossil fuels can be used to build other assets like infrastructure and human capital, that can continue to generate income even after minerals are exhausted.

Way forward

While this book pushes the boundaries on wealth accounts, there is widespread recognition that the scope and the scale of this research can be further expanded. The next frontier on natural capital includes looking at resources currently missing due to lack of data: water, fish stocks, renewable energy sources, and several critical ecosystem services. The World Bank is also working on two follow-up studies building on the estimates of human capital. The first will look at the cost of gender inequality globally, and the second will use the human capital data to look at the benefits, among others, of reducing stunting, investing in education, or ending child marriage.

The hope is that thinking about wealth will become more mainstream and help countries to better balance their portfolio of assets for long-term sustainable growth and prosperity.

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