WB: Despite rising global wealth, inequality persists

31.01.2018,16:29


January 31, Fineko/abc.az. The World Bank has published the report assessing the economic growth of countries (The Changing Wealth of Nations 2018).

The book tracks the wealth of 141 countries between 1995 and 2014 by aggregating natural capital (such as forests and minerals); human capital (earnings over a person’s lifetime); produced capital (buildings, infrastructure, etc.); and net foreign assets.

The report says that human capital is the largest component of global wealth, pointing to the need to invest in people. Natural capital makes up nearly half of the wealth in low income countries. More efficient, long-term management of natural resources is key to sustainable development.

The report says that the wealth rate increased almost by 66% from $690 trillion up to $1.143 trillion (in constant market prices in US dollars for 2014).

The world is still unequal when seen through the lens of wealth. High-income OECD countries hold 52 times more wealth per capita, measured at market exchange rates, than low-income countries.

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. This included 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.

More than two dozen countries saw their per capita wealth decline or stagnate.

More than two dozen low-income countries, where natural capital dominates the composition of wealth, have moved to middle-income status, in part by investing prudently in natural resources, infrastructure, and education. However, not everything is rosy, including a decrease in the value of productive forests and declining or stagnating per capita wealth in more than two dozen countries.

This happened partly due to investment of income received from natural resources, in such sectors as infrastructure, education and health that contribute to the growth of human capital.

Investment in human and material capital is important, but achievement of prosperity is not in increasing the capital through the depletion of natural resources, the report says. Index of natural resources per capita in OECD countries is 3-fold higher than in countries with low income, despite the fact that in OECD countries the share of natural capital in total wealth is only 3%.

According to the report's estimates, for the period from 1995 to 2014, the cost of natural resources in the world has doubled. Among other factors it is linked with rising prices for raw materials, as well as the increase of economically proven reserves. On the contrary, cost of production forests fell by 9%, and in many regions the increase in agricultural land occurred because of deforestation.

The recent report, which was a continuation of similar assessments published by the WB in 2006 and 2011 provides estimates of the human capital for the first time. Human capital is measured as the amount of income received over the remaining term of the employment of life, therefore this indicator takes into account health and education. Women account for less than 40% of the rate of human capital in the world due to the lower level of income for life. Gender equality can lead to increased welfare through human capital by 18%.

The share of human capital accounts for two thirds of the world's wealth; the share of tangible capital accounts for a quarter of that figure. Natural resources account for one-tenth of global wealth, however, they remain the most significant component of wealth in countries with low income (47% in 2014), and in the countries with income below average it accounts for over a quarter of an indicator of wealth.

Indicators of wealth in the countries form on the basis of published data obtained from internationally recognized sources, using a single for all countries methodology. Some components of natural resources that create wealth, such as water supplies and fish and renewable energy sources, were not reflected in the report.