13 February 2018
World Bank Report Links Wealth to Natural Resource Management
Photo by Lynn Wagner
story highlights

The World Bank’s third volume on wealth accounting provides national wealth estimates to track whether 141 countries are on a sustainable growth path.

The report finds that global wealth increased 66% between 1995 and 2014, but inequality persists.

Other key findings highlight the importance of investing in people and leveraging natural capital.

30 January 2018: The World Bank’s third volume on wealth accounting underscores the role of a portfolio of produced, natural and human capital assets in sustaining long-term development. The report finds that natural capital accounts for nearly half of the wealth in low-income countries, and argues that natural resources management is critical to long-term sustainable development.

The report titled, ‘The Changing Wealth of Nations 2018,’ estimates the wealth of 141 countries between 1995 and 2014 by aggregating: produced capital (buildings, infrastructure, urban land); human capital (earnings over a person’s lifetime); natural capital (agricultural land, forests, fossil fuels, minerals and terrestrial protected areas); and net foreign assets (foreign assets minus liabilities). The report aims to help governments plan for a more sustainable economic growth path.

According to the report, middle-income countries (MICs) are closing the wealth gap with high-income countries, holding 28% of global wealth in 2014, compared to 19% in 1995. Over 20 low-income countries have moved to MIC status by investing in natural resources, education and infrastructure. Despite this progress, the report cautions that inequality persists, with high-income Organization for Economic Co-operation and Development (OECD) countries possessing more than 52 times more wealth per capita than low-income countries.

In 25 countries, per capita wealth declined or stagnated, which suggests that their assets for generating future income may be depleted. These countries include a few high-income OECD countries affected by the 2009 financial crisis, some carbon-rich countries in the Middle East and several large low-income countries. In Sub-Saharan Africa, wealth per capita has not changed significantly since 1995.

The report finds that human capital makes up about 70% of the wealth in high-income countries compared to 40% in low-income countries. Within this context, the report underscores the importance of investing in people to boost economic growth and wealth.

Low-income countries could increase their wealth through sustainable land management and increasing forests and other renewable resources.

On natural capital, the report finds that natural capital is the largest share of wealth for low-income countries, primarily because of their agricultural land and forests. Natural capital accounts for over 50% of the wealth in ten of 24 low-income countries, which the report suggests highlights the need to manage natural capital to increase its value for future generations. The report recommends low-income countries increase their wealth through sustainable land management and increasing their renewable resources, including forests. The report further suggests that countries can use rents from non-renewable resources, like fossil fuels and minerals, to build infrastructure and human capital assets that will generate income after these resources are exhausted.

Karin Kemper, World Bank, explained that the report’s research shows that the value of natural capital per person “tends to rise with income,” which “contradicts traditional wisdom” that development entails depleting natural resources. The research shows that depletion of natural resources, like forests and fisheries, only results in short-term growth.

The report does not include fish stocks, water, renewable energy resources and several ecosystem services in its estimates of natural capital because of a lack of data. The World Bank aims to fill this gap in future work on natural capital. In addition, the World Bank is conducting two follow-up studies on human capital: one on the cost of gender inequality; and a second report that will explore the benefits of human capital data on investing in education, reducing stunting and ending child marriage.

The World Bank published two earlier reports on wealth as an indicator of sustainability, in 2006 and 2011. The 2018 volume is the first to include estimates of human capital. [World Bank Press Release] [World Bank News Story] [Report Infographic] [Publication: The Changing Wealth of Nations 2018]

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