Consider this: Although most countries are on a sustainable path, nearly 45 percent of the 136 countries analyzed by the World Bank Group in its annual Little Green Data Book are depleting their "wealth" even as they show growth in annual income. As these countries grow, they are not compensating for depletion of natural resources with the risk that in the long term, growth will decline, as the wealth on which it is based erodes.
What do we mean by "wealth"? Broadly defined, a country’s total wealth includes the stocks of produced capital, natural capital, and human and social capital—all of which underpins the generation of national income. Natural capital in analysis presented in the Little Green Data Book includes minerals and energy, agricultural land, forests and protected areas. Our most commonly used indicator of country economic performance, GDP, only measures income, not wealth or how wealth is changing.
To help countries plan for more sustainable growth, a new indicator change in wealth per capita is now available for more than 200 countries in the World Development Indicators and Little Green Data Book. Change in wealth per capita measures whether countries are saving enough to offset depreciation of manufactured capital and depletion of natural capital while sustaining future economic growth for their (growing) populations.
Negative changes in wealth per capita—particularly over several years—imply that a country is becoming poorer by leaving behind fewer resources for future generations.
A new indicator for the World Bank Group
Building on this work, the World Bank Group took a decision to use the concept of Wealth Accounting more widely in its operations. This year, the International Development Association (IDA), the World Bank’s fund for the poorest countries, adopted change in wealth per capita for its Results Measurement System. The Results Measurement System measures progress on more than 20 indicators capturing economic growth as well as the human development priorities of ongoing IDA programs. The World Bank Group’s annual Corporate Scorecard, providing a snapshot of its performance will also include this sustainability indicator. The Systematic Country Diagnostic, a new tool to inform the partnership strategies of World Bank Group client countries, will also build on this wealth accounting framework.
"This measurement will allow both the World Bank and policymakers in our client countries to identify some of the threats to the sustainability of economic growth and poverty before it is too late to reverse the trend," said Juergen Voegele, World Bank Director, Agriculture and Environmental Services.