World Wealth: Human, Physical, and Natural

The wealth of a society is so much more than the value of houses, or the stock market, or retirement accounts.

Wealth broadly understood should also include endowments of nature, ranging from wilderness to oil wells, as well as the human capital embodied in the education and skills of its people. Every few years, the World Bank takes on the task of measuring the world’s wealth in these broader ways. The most recent set of estimates appear in The Changing Wealth of Nations 2021 : Managing Assets for the Future.

Just to be clear, wealth represents an accumulation over time. This is different from GDP, which is the amount produced in a given year. Thus, world GDP in 2018 was about $86 trillion, but world wealth as estimated in this report was 13 times bigger at $1,152 trillion. Here are some estimates from “Chapter 3: Global and Regional Trends in
Wealth, 1995–2018,” by Glenn-Marie Lange, Diego Herrera, and Esther Naikal.

Here is how wealth was distributed around the world between countries of different income levels (I have left out some intermediate years in the table):

High-income countries like the US have about four times the per capita wealth of upper-middle income countries like Brazil, China, and India; about eight times the per capita wealth of lower middle-income countries like Nigeria, Indonesia, and Egypt; and 18 times the per capita wealth of lower-income countries like Uganda, Syria, and Ethiopia.

Again, the wealth being discussed here is not just financial or in the form of machinery and buildings, but includes the value embodied in natural and human resources.

However, countries with different income levels also tend to differ on the form of their wealth. The low-income countries in the top row have 23% of their wealth in the form of natural capital. The high-income non-OECD countries, who tend to be big oil producers and exporters, have almost one-third of their wealth in the form of nonrenewable natural capital. The high-income and upper-middle income countries (this second category driven largely by China) has about two-thirds of its wealth in human capital.

There are of course roughly a jillion ways to quarrel with these kinds of calculations: for those who wish to do so, I commend the detailed discussion of the World Bank volume and the underlying working papers to your attention. Here, I’ll just emphasize a few points.

1. A nation’s wealth does not gain by using up nonrenewable natural resources. It’s like spending money from a savings account. Thus, a goal for countries rich in natural resources should be to make sure the renewable resources (say, forests) do actually get renewed, and to move the economy gradually away from depending on production of nonrenewable resources.
   
   
2. For every group of countries, the wealth embodied in the education and skills (and health) of people is much more important than the wealth from produced capital–which includes everything physical from houses to business equipment. I sometimes think that from an economic point of view, pretty much everything cycles back to human capital sooner or later.
   
   
3. In an important way, the wealth calculations here are likely to understate the wealth difference across countries, broadly understood. Economic production is heavily influenced by knowledge capital, by which I mean to include not just technology from research but all the ways in which private firms and public institutions support the functioning of an economy. These kinds of knowledge and institutional capital are probably just as important in considering a broad definition of wealth than “produced capital”–but much harder to estimate.