World Bank: global wealth rises, but inequality prersists

Global wealth grew significantly over the past two decades but per capita wealth declined or stagnated in more than two dozen countries in various income brackets, says a new World Bank report. 

Titled “Changing Wealth of Nations 2018”, the report uses wealth as opposed to just GDP figures to monitor countries’ economic progress and sustainability, the World Bank said. 

The report tracked the wealth of 141 countries between 1995 and 2014 by aggregating natural capital, such as forests and minerals, human capital, namely earnings over a person’s lifetime, produced capital, such as infrastructure, and net foreign assets. It suggests human capital is the largest component of wealth overall while natural capital made up nearly half of wealth in low-income countries. 

“By building and fostering human and natural capital, countries around the world can bolster wealth and grow stronger,” Jim Yong Kim, World Bank Group president said in a statement. “There cannot be sustained and reliable development if we don’t consider human capital as the largest component of the wealth of nations.” 

According to the report, global wealth grew an estimated 66 percent (from $690 trillion to $1,143 trillion), but inequality was“substantial.” It claimed that wealth per capita in high-income OECD countries was 52 times greater than in low-income countries. 

Furthermore, the World Bank said it saw adecline in per capita wealth in 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. 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.

The report finds that more than two dozen low-income countries, where natural capital dominated overall wealth in 1995, moved to middle-income status over the last two decades, in part by investing earnings from natural capital into sectors such as infrastructure, as well as education and health which increase human capital.

While investments in human as well as produced capital are essential, getting rich is not about liquidating natural capital to build other assets, the report notes. Natural capital per person in OECD countries is three times higher than in low-income countries, even though the share of natural capital in total wealth is just 3 percent in OECD countries. 

“Growth will be short-term if it is based on depleting natural capital such as forests and fisheries. What our research has shown is that the value of natural capital per person tends to rise with income. This contradicts traditional wisdom that development necessarily entails depletion of natural resources,’’ said Karin Kemper,seniordirector, Environment and Natural Resources Global Practice at World Bank.