30 October 2018: A report by the International Institute for Sustainable Development (IISD) urges countries to look beyond GDP when measuring progress and sustainability. Titled ‘Comprehensive Wealth in Canada 2018 – Measuring What Matters in the Long Run’, the report draws on reports from Statistics Canada to measure the value of wealth assets that form the basis of well-being.The report measures:

• produced capital, made up of buildings, machinery and infrastructure;
• natural capital, which includes the forests, minerals, fossil fuels and other natural assets;
• human capital, which incorporates the value of the skills and knowledge bound up in the workforce;
• financial capital, which includes stocks, bonds, bank deposits and other financial assets; and
• social capital, which measures the degree of civic engagement and cooperation in society.

By examining the value changes of these comprehensive wealth assets from 1980 to 2015 and comparing them to GDP growth, the report concludes the foundations of Canadians’ levels of well-being show deep cracks and may be unsustainable.

“Since 1980, Canada’s GDP grew more than five times faster than the wealth foundation on which it rests. That’s not sustainable,” says Robert Smith, the report’s lead author. “We need to measure both – GDP and comprehensive wealth – to know where any country is headed. Right now, decision-making scales are tipped in favour of short-term thinking.”

While the report analyzes comprehensive wealth in a Canadian setting, the framework is applicable to any country. IISD notes that comprehensive wealth provides an additional number for consideration on top of GDP, offering policy makers and citizens a tool to understand the sustainability implications of their actions.

The analysis points to areas of concern in Canada’s comprehensive wealth portfolio, each of which is a threat to long-term prosperity and well-being. These areas of concern include:

• The value of Canada’s comprehensive wealth portfolio grew very slowly over the study period, rising from $647,000 per capita in 1980 to just $701,000 in 2015, an annual average growth rate of 0.23 per cent. In contrast, GDP grew at an annual average rate of 1.31 per cent over the same period. According to the UN, Canada’s comprehensive wealth performance has been the worst among G7 countries in recent decades.
• Canadian households have taken on unprecedented levels of debt since 1980, shifting their investments toward housing and away from financial assets, inflating house prices and leaving the rest of the economy reliant on foreign lenders for nearly three-quarters of investment flows after 2012. The last time the Canadian economy relied on foreign sources for such a large share of investment was in the mid-1960s.
• Investment in produced capital has become increasingly concentrated in just two areas: housing and oil and gas extraction infrastructure. By 2015, 25 per cent of all business-sector produced capital was invested in oil and gas extraction assets – up from 9 per cent in 1980.
• Zero growth in human capital since 1980 despite an innovative global economy
• Substantial depletion of market natural capital like minerals and fossil fuels
• Growing encroachment of human development on Canada’s ecosystems
• Weak investment in financial assets
• Climate change has emerged as a major threat to Canada’s comprehensive wealth portfolio. Damages caused by flooding, wildfires and tornadoes are all on the rise.

All figures in the report are quoted in real (that is, inflation-adjusted) per capita terms using chained 2007 dollars as the unit of measure unless otherwise specified. [Comprehensive Wealth in Canada 2018 – Measuring What Matters in the Long Run][IISD’s Comprehensive Wealth project]