The World Bank has spearheaded work in this area for more than a decade, publishing “Where is the Wealth of Nations” in 2006, followed by a second volume in 2011. The Changing Wealth of Nations 2018 tracks the wealth of 141 countries between 1995 and 2014. This new book improves estimates for natural capital and for the first time provides estimates of human capital. The goal is to broaden the measures economists, policymakers, the private sector and civil society use to assess economic progress and sustainable development.
A country’s wealth includes produced capital (buildings, machinery, and infrastructure); natural capital such as agricultural land, forests, protected areas, minerals, oil, coal and gas reserves; human capital (broken down by gender and types of employment); and net foreign assets. Wealth accounting provides an estimate of the total wealth of nations by aggregating values of these different components of wealth. A change in wealth is an indicator to assess a country’s potential to grow in the future. A fall in wealth indicates that a country is depleting its assets and may not be able to sustain its future GDP growth.
It is useful to think of GDP as a `return on wealth’. GDP is calculated by looking back on the previous year’s economic activity and is considered a `flow’ measure. Wealth and its composition tells us if the portfolio of assets or `stocks’—produced, natural, human capital and net foreign assets—are balanced to support GDP growth in the long-term. Wealth provides information about the long-term health of an economy, its capacity to sustain growth, reflecting depreciation and depletion of assets, and whether investments and accumulation of assets are keeping pace with population growth.
This form of accounting should be viewed as a complement to GDP and not a replacement. Wealth complements GDP as it reflects the state of assets that produce GDP and whether investments in human, produced and natural capital are sufficient to keep pace with population growth and a country’s development aspirations. Policymakers need this information to design strategies to ensure that their GDP growth is sustained in the long run and make corrections when needed.
Generally, country trends are similar when looking at wealth and GDP. Part of the reason for this is that produced capital and human capital, which account for more than 90 percent of total wealth, are often correlated with GDP. Nevertheless, there can be situations in which trends in wealth do not follow trends in GDP. It helps to look at the composition of wealth and the balance among different assets (produced, human and natural capital in addition to net foreign assets).
The objective of this research is not to rank countries according to wealth, but to outline general trends, both in overall wealth and in wealth per capita. The top 10 countries in terms of per capita wealth starting from the wealthiest are as follows in 2014: Norway, Qatar, Switzerland, Luxembourg, Kuwait, Australia, Canada, and the United States. Countries with the least per capita wealth are: The Gambia, Burundi, Mozambique, Comoros, Guinea, Madagascar, Liberia, Malawi, Niger, and DRC. It is important to look at trends in wealth apart from levels to assess a country’s development path.
The value of natural capital assets doubled between 1995 and 2014. However, it is a mixed picture when you look at the breakdown of assets. Most of the growth in natural capital was in non-renewables (308 percent), largely because of changes in both the volume and prices of minerals and fossil fuels. The renewables—forests, protected areas, and agricultural land— did not decline in value overall, but increased far more slowly than total wealth (44 percent compared to 66 percent). In Latin America and Sub-Saharan Africa, about 7-9 percent of forest area gave way to agricultural land. The value of total forest assets (timber, non-timber forest products, recreation and watershed protection services) fell by 3 percent with timber assets falling 9 percent globally. In Latin America, total forest assets fell by 2 percent while in Sub Saharan Africa, they fell by 11 percent.
When calculating natural capital, we took into account fossil fuel energy (oil, gas, hard and soft coal) and minerals (bauxite, copper, gold, iron ore, lead, nickel, phosphate, silver, tin, and zinc), agricultural land (cropland and pastureland), forests (timber and some nontimber forest products, including some eco-system services), and protected areas (a proxy for bio-diversity). However, some natural assets were not included, such as water, fish, renewable energy sources, and several critical eco-system services. These may be included in later wealth accounting work.