●   World Bank re­port pro­vides da­ta for a more com­pre­hen­sive view of eco­nom­ic growth and sus­tain­abil­i­ty; finds share of to­tal glob­al wealth in re­new­able nat­ur­al cap­i­tal is de­creas­ing and threat­ened by cli­mate change

●   The re­port shows that hu­man cap­i­tal, mea­sured as the pop­u­la­tion’s ex­pect­ed life­time earn­ings, is the largest source of world­wide wealth, com­pris­ing 64% of to­tal glob­al wealth in 2018.

●   Al­though to­tal wealth has near­ly dou­bled in Latin Amer­i­ca and the Caribbean over the past two decades, there are sig­nif­i­cant con­trasts in the trends of wealth per capi­ta. Some coun­tries have more than dou­bled their wealth since 1995, while in sev­er­al Caribbean coun­tries, to­tal wealth per capi­ta has de­clined.

(WASH­ING­TON, Oct. 27, 2021) — Glob­al wealth has grown over­all, but at the ex­pense of fu­ture pros­per­i­ty and by ex­ac­er­bat­ing in­equal­i­ties, ac­cord­ing to the World Bank’s new Chang­ing Wealth of Na­tions re­port re­leased to­day. 

Coun­tries that are de­plet­ing their re­sources in favour of short-term gains are putting their economies on an un­sus­tain­able de­vel­op­ment path. While in­di­ca­tors such as Gross Do­mes­tic Prod­uct (GDP) are tra­di­tion­al­ly used to mea­sure eco­nom­ic growth, the re­port ar­gues for the im­por­tance of con­sid­er­ing nat­ur­al, hu­man, and pro­duced cap­i­tal to un­der­stand whether growth is sus­tain­able.

The re­port, the Chang­ing Wealth of Na­tions 2021, tracks the wealth of 146 coun­tries be­tween 1995 and 2018, by mea­sur­ing the eco­nom­ic val­ue of re­new­able nat­ur­al cap­i­tal (such as forests, crop­land, and ocean re­sources), non-re­new­able nat­ur­al cap­i­tal (such as min­er­als and fos­sil fu­els), hu­man cap­i­tal (earn­ings over a per­son’s life­time), pro­duced cap­i­tal (such as build­ings and in­fra­struc­ture), and net for­eign as­sets. The re­port ac­counts for blue nat­ur­al cap­i­tal—in the form of man­groves and ocean fish­eries—for the first time.  

The re­port can be ac­cessed at The Chang­ing Wealth of Na­tions 2021 : Man­ag­ing As­sets for the Fu­ture (world­bank.org)

“A deep­er and more nu­anced un­der­stand­ing of the sus­tain­abil­i­ty of wealth is cru­cial to a green, re­silient, and in­clu­sive fu­ture,” said World Bank Man­ag­ing Di­rec­tor for De­vel­op­ment Pol­i­cy and Part­ner­ships, Mari Panges­tu. “It is es­sen­tial that re­new­able nat­ur­al cap­i­tal and hu­man cap­i­tal are giv­en the same im­por­tance as more tra­di­tion­al sources of eco­nom­ic growth, so that pol­i­cy­mak­ers take steps to en­able long-term pros­per­i­ty.”

Ac­cord­ing to the re­port, glob­al wealth grew sig­nif­i­cant­ly be­tween 1995 and 2018, and mid­dle-in­come coun­tries are catch­ing up to high-in­come coun­tries. How­ev­er, grow­ing pros­per­i­ty has been ac­com­pa­nied by un­sus­tain­able man­age­ment of some nat­ur­al as­sets. Low- and mid­dle-in­come coun­tries saw their for­est wealth per capi­ta de­cline 8% from 1995 to 2018, re­flect­ing sig­nif­i­cant de­for­esta­tion. Mean­while, the val­ue of glob­al ma­rine fish stocks col­lapsed by 83% due to poor man­age­ment and over­fish­ing over the same pe­ri­od. The pro­ject­ed im­pacts of cli­mate change may ex­ac­er­bate these trends. 

In ad­di­tion, mis­pric­ing of as­sets like car­bon-emit­ting fos­sil fu­els can lead to over­val­u­a­tion and over-con­sump­tion. De­vel­op­ment can be put on a more sus­tain­able path by tak­ing a com­pre­hen­sive view of wealth and putting in place pol­i­cy mea­sures in­clud­ing car­bon pric­ing to bet­ter val­ue and nur­ture as­sets such as forests, man­groves, and hu­man cap­i­tal.

Glob­al wealth in­equal­i­ty is grow­ing, the re­port in­di­cates. Low-in­come coun­tries’ share of glob­al wealth has changed lit­tle from 1995 to 2018, re­main­ing be­low 1% of the world’s wealth, de­spite hav­ing around 8% of the world’s pop­u­la­tion. Over one-third of low-in­come coun­tries saw de­clin­ing wealth per capi­ta. Coun­tries with de­clin­ing wealth tend al­so to be de­grad­ing their base of re­new­able nat­ur­al as­sets. For low-in­come coun­tries, ap­pro­pri­ate­ly man­ag­ing re­new­able nat­ur­al cap­i­tal, which ac­counts for 23% of their wealth, re­mains cru­cial.

Glob­al­ly, the share of to­tal wealth in re­new­able nat­ur­al cap­i­tal (forests, crop­land, and ocean re­sources) is de­creas­ing and be­ing fur­ther threat­ened by cli­mate change. At the same time, re­new­able nat­ur­al cap­i­tal is be­com­ing more valu­able as it pro­vides cru­cial ecosys­tem ser­vices. For ex­am­ple, the val­ue of man­groves for coastal flood pro­tec­tion has grown more than 2.5 times since 1995 to over $547 bil­lion in 2018. The val­ue of pro­tect­ed ar­eas per square kilo­me­tre has al­so rapid­ly in­creased.

“The Chang­ing Wealth of Na­tions pro­vides the da­ta and analy­sis to help gov­ern­ments get prices and poli­cies right for sus­tain­able de­vel­op­ment,” said World Bank Glob­al Di­rec­tor for En­vi­ron­ment, Nat­ur­al Re­sources, and the Blue Econ­o­my, Karin Kem­per. “By ig­nor­ing pol­lut­ing and cli­mate warm­ing im­pacts, fos­sil fu­el as­sets have his­tor­i­cal­ly been over­val­ued, while as­sets that con­tribute to cli­mate mit­i­ga­tion, like forests, are un­der­val­ued.”

The re­port shows that hu­man cap­i­tal, mea­sured as the pop­u­la­tion’s ex­pect­ed life­time earn­ings, is the largest source of world­wide wealth, com­pris­ing 64% of to­tal glob­al wealth in 2018. Mid­dle-in­come coun­tries in­creased their in­vest­ment in hu­man cap­i­tal and in turn saw sig­nif­i­cant in­creas­es in their share of glob­al hu­man cap­i­tal wealth. 

Al­though the long-last­ing ef­fects of the COVID-19 pan­dem­ic are still un­known, low-in­come coun­tries are like­ly to ex­pe­ri­ence the most se­vere im­pacts, with a pro­ject­ed loss of 14% of to­tal hu­man cap­i­tal. Hu­man cap­i­tal is ad­di­tion­al­ly con­strained by gen­der gaps across all re­gions and in­come groups, with lit­tle im­prove­ment since 1995. Air qual­i­ty al­so has se­ri­ous con­se­quences for both hu­man cap­i­tal and cli­mate change, and ac­counts for over 6 mil­lion pre­ma­ture deaths an­nu­al­ly.

Non-re­new­able nat­ur­al cap­i­tal wealth (min­er­als, fos­sil fu­els) has de­clined since 2014, main­ly due to falling com­mod­i­ty prices. The re­port looks at the pro­ject­ed im­pacts of a low-car­bon tran­si­tion and bor­der car­bon ad­just­ment tax­es on fos­sil fu­el wealth and pro­vides rec­om­men­da­tions for man­ag­ing the eco­nom­ic risks posed for re­source-de­pen­dent coun­tries. Coun­tries that are heav­i­ly de­pen­dent on fos­sil fu­el wealth were found to have low­er shares of wealth from hu­man cap­i­tal, de­spite their high in­come lev­els, with hu­man cap­i­tal on­ly com­pris­ing 34% of their wealth. 

The re­port out­lines sev­er­al pri­or­i­ties for pol­i­cy­mak­ers to di­ver­si­fy and re­bal­ance their na­tion­al port­fo­lios to be more re­silient and sus­tain­able. It rec­om­mends ac­tive­ly in­vest­ing in pub­lic goods like ed­u­ca­tion, health, and na­ture, to pre­vent un­sus­tain­able de­ple­tion, and man­age fu­ture risks. Rec­om­men­da­tions al­so in­clude pol­i­cy and pric­ing mea­sures that help re­flect the so­cial val­ue of as­sets and to steer pri­vate in­vest­ment to­ward bet­ter out­comes for all. This may in­clude, for ex­am­ple, ac­tions like re­pur­pos­ing fish­eries sub­si­dies, and tak­ing ac­tion to price car­bon and pro­mote re­new­able en­er­gy as­sets. 

Re­gion­al trends

In Sub-Sa­ha­ran Africa, wealth per capi­ta has in­creased over the past two decades, but at a low­er rate than oth­er re­gions. 11 coun­tries in Sub-Sa­ha­ran Africa saw stag­nat­ing or even de­clin­ing wealth per capi­ta be­tween 1995 and 2018 as pop­u­la­tion growth out­paced net growth in as­set val­ues. Hu­man cap­i­tal in Sub-Sa­ha­ran Africa has in­creased more rapid­ly than any oth­er as­set. How­ev­er, this growth has been un­equal, and the fe­male share of hu­man cap­i­tal is on­ly about one third of the to­tal. Wealth in nat­ur­al cap­i­tal has been de­clin­ing, and many coun­tries in the re­gion have a high de­pen­dence on non-re­new­able nat­ur­al re­source rev­enues, es­pe­cial­ly from fos­sil fu­els. 

As of 2018, the East Asia and the Pa­cif­ic re­gion has the largest share of wealth in the world, with an 188% in­crease since 1995. Hu­man cap­i­tal makes up over half of the re­gion’s wealth, how­ev­er, on­ly about one third of hu­man cap­i­tal was at­trib­uted to women. Nat­ur­al cap­i­tal comes in at 4% of re­gion­al wealth, with re­new­able nat­ur­al cap­i­tal de­clin­ing, led by the drop in ma­rine fish­eries. Crop­land wealth is pro­ject­ed to be es­pe­cial­ly hard hit by cli­mate change in East Asia and Pa­cif­ic coun­tries.

In South Asia, to­tal wealth has grown since 1995, but due to pop­u­la­tion growth in the same time pe­ri­od, per capi­ta wealth re­mains among the low­est in the world. Hu­man cap­i­tal makes up over half of the re­gion’s wealth, but is ex­treme­ly un­bal­anced, with over 80% at­trib­uted to men, with lit­tle change in the past two decades. If gen­der par­i­ty was achieved in South Asia, this could in­crease hu­man cap­i­tal na­tion­al­ly by rough­ly 42 per­cent­age points. As a re­gion, South Asia is al­so most se­vere­ly af­fect­ed by the es­ti­mat­ed loss of hu­man cap­i­tal due to air pol­lu­tion. Re­new­able nat­ur­al cap­i­tal, par­tic­u­lar­ly crop­land, is vi­tal for South Asia, and the val­ue of its blue nat­ur­al cap­i­tal al­so grew over the past two decades.

Wealth in Eu­rope and Cen­tral Asia, which in­cludes West­ern Eu­rope for the pur­pose of this re­port, has in­creased 45% since 1995. Wealth per capi­ta has grown slow­ly com­pared with many oth­er re­gions. Hu­man cap­i­tal ac­counts for over half of the re­gion’s wealth, with con­sis­tent growth com­pared to oth­er as­sets. Non-tim­ber for­est re­sources are be­com­ing the main re­new­able nat­ur­al cap­i­tal as­set in Eu­rope and Cen­tral Asia, due to the val­ue of ecosys­tem ser­vices they pro­vide, while the val­ue of ma­rine fish­eries as­sets has sig­nif­i­cant­ly dropped.

Al­though to­tal wealth has near­ly dou­bled in Latin Amer­i­ca and the Caribbean over the past two decades, there are sig­nif­i­cant con­trasts in the trends of wealth per capi­ta. Some coun­tries have more than dou­bled their wealth since 1995, while in sev­er­al Caribbean coun­tries, to­tal wealth per capi­ta has de­clined. Over time, wealth in non-re­new­able nat­ur­al cap­i­tal has be­gun to de­cline, due to price volatil­i­ty, but re­new­able wealth is in­creas­ing. Wealth in pro­tect­ed ar­eas has more than dou­bled, de­spite the fact that land area of forests has de­clined. Fe­male labour force par­tic­i­pa­tion is high­er than in any oth­er re­gion, but Latin Amer­i­ca and the Caribbean has still not reached gen­der par­i­ty in its hu­man cap­i­tal. 

Wealth has in­creased in the Mid­dle East and North Africa in the past two decades, but to a less­er ex­tent than the re­gion­al GDP over the same pe­ri­od. Hu­man cap­i­tal makes up the low­est share of to­tal wealth in this re­gion, com­pared to oth­er re­gions, with a sig­nif­i­cant gen­der im­bal­ance. Non-re­new­able nat­ur­al cap­i­tal makes up a large por­tion of the re­gion’s wealth, and has gen­er­at­ed is­sues for coun­tries fac­ing re­sources de­pen­dence and price volatil­i­ty. The coun­tries in the re­gion re­liant on fos­sil fu­el rev­enues face unique de­vel­op­ment chal­lenges in the face of glob­al ef­forts to shift to low-car­bon de­vel­op­ment. Al­though crop­land re­mains the main re­new­able nat­ur­al as­set in the re­gion, per capi­ta crop­land wealth has de­clined over the past two decades. The re­gion will need to pre­serve and re­store its re­new­able nat­ur­al as­sets to sup­port greater di­ver­si­fi­ca­tion of wealth.