A new report from the World Bank has shown that economic growth can only be considered truly sustainable if human and natural capital are part of the equation, as gross domestic product and other traditional measures fall short.
‘The Changing Wealth of Nations 2021’, World Bank’s report presented on October 27, 2021, has found that the wealth increased significantly across the globe between 1995 and 2018 but it has been done by worsening equality and risking future prosperity.
Managing Director for development policy and partnerships at the World Bank, Mari Pangestu has said that a deeper and more nuanced understanding of the sustainability of wealth is crucial to a resilient, green, and inclusive future.
She further added that it is essential that human capital and renewable natural capital are given the same importance as more traditional sources of economic growth. It will enable policymakers to take steps for long-term prosperity.
Global wealth has never been greater, nor has it even been more at risk. Want to know more? Find out in our feature story based on the new @WorldBank’s report on the Changing Wealth of Nations: https://t.co/wY20xNvkCr #CWON2021 pic.twitter.com/NTIYfMbhNG
— WBG Environment (@WBG_Environment) October 27, 2021
‘Changing Wealth of Nations 2021’ Report: 5 Key Points1. The report released by World Bank has defined human capital as the earnings over a person’s lifetime. On the other hand, natural capital was the economic value of both renewable resources, such as cropland and forests, and non-renewable resources such as fossil fuels and minerals. 2. The database of the World Bank’s report aims to be used by the policymakers who are seeking to improve the measures of economic progress. It means more accurately pricing natural assets or giving a fair value to human capital. 3. ‘Changing Wealth of Nations 2021’ report has also noted that many nations are on an unsustainable development path because their human, natural, or produced capital is being run down in favour of short-term boosts in income or consumption. 4. The report released by the World Bank also values a wide set of assets among forms of natural capital including fossil fuels, minerals, mangroves, forests and marine fisheries, which can be leveraged by the developed countries. 5. The World Bank Report has also come ahead of the United Nations COP26 Climate Summit which will be held in Glasgow in November 2021. |
It is essential that renewable #NaturalCapital & #HumanCapital are given the same importance as more traditional sources of #EconomicGrowth, so that policymakers take steps to enable long-term prosperity. More on policy – in the new #CWON2021 report: https://t.co/RXCvTI9uSp https://t.co/34Zx9dJA7o
— Mari Elka Pangestu (@Mari_Pangestu) October 27, 2021
Why GDP should not be a measure of a nation’s well-being?
Gross Domestic Product (GDP) has traditionally been the measure of a nation’s well-being, however, it has been long criticized for not accounting for the income inequality, pollution, and other measures that affect the quality of life.
For instance, the use of fossil fuels has been overvalued, as the negative effects of pollution and climate change have not always been considered.
As per Pangestu, wealth should be alongside GDP for providing a means of monitoring the sustainability of economic development.
Women affected due to imbalances in human capital
In terms of human capital, the imbalances have been disproportionately affecting women in all the regions and have improved only marginally during the period of study (1995 and 2018).
As per the report, the female share of the human capital is only about one-third of the total in sub-Saharan Africa, the same as in the Pacific and in East Asia, the regions with the largest share of wealth.
Around 80 percent of human capital in South Asia is attributed to men. The Caribbean and Latin America, where the participation of the female labour force is much higher than any other region at 44%, has still not yet reached gender parity in its human capital.
‘Changing Wealth of Nations 2021’ Report by the World Bank has shown that in 2018, globally, women accounted for only 37% of the human capital, which was only 2% points greater than the 1995 level.
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