The Changing Wealth of The Changing Wealth of NationsNations

Measuring Sustainable DevelopmentMeasuring Sustainable Developmentin the New Millenniumin the New Millennium

Kirk HamiltonDevelopment Research Group

The World Bank

OutlineOutline

The wealth of nations in 2005What changed? 1995-2005Saving for the futureSpecial topics: Intangible wealth

and CO2

Policy messages

The Wealth of Nations in 2005

Where is the wealth of Ghana?Where is the wealth of Ghana?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Intangible

Natural

Produced

78%

21%

1%0%

Agricultural land

Forests

Protected area

Subsoil assets

Shares of total wealth, 2005

Shares of natural wealth, 2005

Total wealth / capita:$9,500

Where is the wealth of the UK?Where is the wealth of the UK?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Intangible

Natural

Produced

35%

3%

13%

49%

Agricultural land

Forests

Protected area

Subsoil assets

Shares of total wealth, 2005

Shares of natural wealth, 2005

Total wealth / capita:$663,000

Composition of total wealth Composition of total wealth

Natural capital is most important in low income countries—more than twice as large as produced capital

In middle income countries natural capital and produced capital are roughly equal

Intangible wealth dominates in all countries, especially in high income countries

Shares of comprehensive wealth, by income class, 2005

50%

14%

36%Low IncomeCountries

59%20%

21%

Middle IncomeCountries

80%

17%3%

High IncomeCountries

Intangible Capital Produced Capital Natural Capital

Composition of natural wealthComposition of natural wealth

Crop Land

Pasture Land

Forest and Protected Areas

Subsoil Assets

East Asia-Pacific 55 6 16 23

E. Europe-Central Asia 14 11 13 62

Latin America-Carib 33 10 27 30

Middle East-N. Africa 20 8 2 69

South Asia 49 25 13 13

Sub-Saharan Africa 35 13 17 36

Percentage shares of natural wealth, by developing region, 2005

What changed? 1995-2005

How did wealth change from 1995 How did wealth change from 1995 to 2005?to 2005?

Growth in total and per capita wealth by region

0

10

20

30

40

50

60

70

80

90

100

East Asia & Pacific

Europe & Central Asia

Latin America & Caribbean

Middle East & North Africa

South Asia Sub-Saharan Africa

Perc

ent c

hang

e in

wea

lth

Wealth

Per capita wealth

Globally, wealth grew 34% in total and 17% per capita

Development & changing composition of Development & changing composition of wealthwealthLower-middle income countries: shares of total wealth 1995-2005

0%

10%

20%

30%

40%

50%

60%

1995 2000 2005

Perc

ent o

f tot

al w

ealt

h

Produced Capital

Natural Capital

Intangible Capital

Change in total wealth by type of Change in total wealth by type of assetasset $ billion, 1995-2005 $ billion, 1995-2005

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

East Asia & Pacific Europe & Central Asia

Latin America & Caribbean

Middle East & North Africa

South Asia Sub-Saharan Africa

Intangible Capital Produced Capital Natural Capital

Saving for the future

Extending our measures of wealth Extending our measures of wealth creationcreation

-10

-5

0

5

10

15

20

Gross Saving Net Saving Net Saving plus Educational Expeditures

Depletion Adjusted Saving

Genuine Saving

perc

ent o

f GN

ICalculating Adjusted Net Saving for Sub-Saharan Africa, 2008

- Depreciation of Fixed Capital

+ Educational Expenditures

- Depletion of Natural Resources

- Pollution Damages

Long-run trends in genuine Long-run trends in genuine savingsaving

0

5

10

15

20

25

30

3519

75

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

perc

ent o

f GN

IGenuine Saving Rates in EAP, ECA and SAR

East Asia & Pacific

Europe & Central Asia

South Asia

-20

-15

-10

-5

0

5

10

15

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

perc

ent o

f GN

I

Genuine Saving Rates in LCR, MNA and SSA

Latin America & Caribbean

Sub-Saharan Africa

Middle East & North Africa

Many resource-rich countries are Many resource-rich countries are consuming their wealthconsuming their wealth

Angola

BotswanaChina

Congo, Rep.

Equatorial Guinea

Uzbekistan

-60

-40

-20

02

04

0a

djus

ted

net

sa

vin

g as

% o

f GN

I

0 20 40 60 80 100energy and mineral rents as % GNI

Adjusted Net Saving in Resource-Rich Countries, 2008

How rich would countries be in 2005 How rich would countries be in 2005 if they had invested rents from if they had invested rents from resource extraction?resource extraction?

20,021 12,793

18,885

1,369 3,741

66,359

45,246

67,994

5,349

16,088

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Trinidad and Tobago

Venezuela, RB

Gabon Nigeria Congo, Rep.

2005

US$

per

capi

ta

Actual Produced Capital Hypothetical Produced Capital (Hartwick Rule)

Above 2% population growth, net Above 2% population growth, net saving per capita was largely saving per capita was largely negative in 2005negative in 2005

Cape VerdeMaldives

Angola

ArmeniaBelarus

Belize

Botswana

Burundi

Chad

China

Congo, Dem. Rep.

Congo, Rep.

DjiboutiGeorgia

Mauritania

MoldovaMorocco

Nigeria

Sri Lanka

Syrian Arab RepublicUganda

Ukraine

-100

-50

05

0P

opu

latio

n-a

dju

ste

d A

NS

, % o

f GN

I pe

r ca

pita

-1 0 1 2 3 4Population growth rate (%)

Developing countries

Special topics:Intangible wealth and CO2

Intangible capital consists of more Intangible capital consists of more than human capitalthan human capital

All countries All countries Developingcountries

OECDcountries

Produced capital

0.398 0.320 0.313 n/s

Natural capital n/s 0.068 0.072 n/s

Human capital index

n/s

Intangible capital

0.176 0.169 0.502

Elasticities of output with respect to production factors

n/s – not statistically significant

Value of the net stock of historical Value of the net stock of historical emissions of COemissions of CO22, 2005, 2005

$0$500

$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500

CO2

sto

ck v

alue

, $ /

cap

ita

COCO22 efficiency is low in efficiency is low in developing countries – scope developing countries – scope for green growth?for green growth?

0%

10%

20%

30%

40%

50%

60%

CO2

sto

ck v

alue

%G

NI

Value of net historical stock of CO2 as %of GNI, 2005

“How we measure developmentwill drive how we do development”

Policy implicationsPolicy implications

Strengthen natural resource management

Invest resource rents in other assets

Lower carbon footprints – ‘green growth’

Invest in peopleBuild institutions

Thank you!

http://data.worldbank.org