The Changing Wealth of Nations 2024

Revisiting the Measurement of Comprehensive Wealth

While many countries across the globe have experienced strong economic growth and improvements in human development outcomes over the last quarter of a century, natural resources continue to be degraded and overexploited, calling the sustainability of that growth into question. Is today’s growth coming at the expense of the wellbeing of the next generation?

The main measure typically used to assess economic progress is gross domestic product (GDP), which measures goods and services produced. Yet the world needs a broader metric to assess the sustainability of economic development. The World Bank’s The Changing Wealth of Nations (CWON) program provides the most comprehensive wealth database currently available, which can provide insights on the sustainability of economic progress, complementing GDP. CWON’s wealth measure includes a broad portfolio of assets - including produced capital, human capital, renewable and nonrenewable natural capital, and financial assets. By monitoring per capita trends in real GDP and real wealth together, it is possible to assess whether GDP growth is achieved by growing or depleting the productive base of the economy. This fifth edition builds on CWON’s tradition of incremental improvements as each update of its global database improves the methodology and expands asset coverage.

FULL REPORT Executive Summary

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About The Changing Wealth of Nations (CWON)

Until now, gross domestic product (GDP) has been the headline indicator for tracking economic progress. Its widespread adoption is a testament to its utility in capturing key economic dimensions, particularly those related to the domestic production of market goods and services. However, using GDP is not without its limitations. It falls short in encompassing the full spectrum of productive activities, especially those “produced” by nature, such as breathable air, clean water, nutritious food, weather regulation, and recreation. It also fails to account for the costs associated with this production in terms of human health, resource degradation, and environmental pollution.

Another aggregate economic metric is thus needed that can measure the sustainability of economic progress—a nation’s wealth. The minimum condition for economic development to be sustainable is that real wealth per capita does not decline over time. This is because as long as real wealth per capita does not decline, future generations will inherit at least the same production and consumption opportunities as the current generation. Wealth in this context encompasses the value of all the assets of a nation that support economic production, such as factories, intellectual property, and roads (produced capital); forests, fish stocks, and fossil fuel reserves (natural capital); the dimensions of the labor force (human capital); and net foreign assets. Real wealth per capita will increase if more workers enter the labor force or if the same workers upgrade their skills, if forests grow, or new commercially recoverable minerals are discovered. However, it will decline if fish stocks are overfished, machinery degrades, or the reserves of fossil fuels are depleted or become commercially unexploitable.

All countries produce GDP estimates, but few measure wealth. The World Bank’s The Changing Wealth of Nations (CWON) program addresses this gap. The CWON program is one of the pioneering efforts in measuring wealth, producing the most comprehensive, publicly accessible, and reproducible wealth database currently available. These monetary estimates draw on internationally endorsed concepts and valuation principles from the System of National Accounts and System of Environmental Economic Accounting. This ensures that CWON’s wealth measure is methodologically rigorous and comparable to other metrics of economic progress like GDP.

Over the past two decades, the CWON program has updated and expanded its comprehensive wealth estimates with each new edition, as new data sources, measurement techniques, and guidance became available. This 5^th edition continues this tradition and implements an important methodological change in the way it estimates real wealth aligned with the goal of tracking the sustainability of economic development. The new approach better captures changes in asset relative prices, changes in asset relative (physical) volumes, and changing substitution patterns across assets, which are critical for sustainability as natural capital assets are becoming scarce and have limited substitutes.

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Wealth as an Indicator of Sustainability

The world seeks a headline indicator to help assess aggregate progress on the 17 Sustainable Development Goals (SDGs) and sustainability more broadly. To achieve such a measurement, a robust discussion is needed about expanding national economic statistics “beyond GDP” (gross domestic product). Despite GDP’s important role in measuring production and income, it is widely recognized to be an insufficient measure of progress and national sustainability.

Whether progress is sustainable, that is, whether future generations will have at least the same production and consumption opportunities as the current generation, can be assessed by looking

at changes in real wealth per capita. Constant or increasing wealth per capita—measured comprehensively to include produced, human, and natural capital, as well as net foreign assets—is thus an important indicator of sustainability.

While almost all countries measure GDP, few countries produce wealth measures. Those that do generally do not measure wealth comprehensively by including natural and human capital.

CWON aspires to measure wealth comprehensively, and its measurement has gradually expanded with each edition as new data and statistical standards have become available, and more sophisticated methodologies have been adopted. The current coverage includes key assets from the SNA balance sheet and critical ecosystem assets covered by the SEEA Ecosystem Accounts. CWON also goes beyond the current SNA standards to include human capital.

How the World Bank Measures Comprehensive Wealth

CWON wealth estimates align where possible with the internationally accepted statistical standards and guidelines of the System of National Accounts and the System of Environmental-Economic Accounting. CWON goes beyond these standards to include additional assets critical for sustainable development, such as human capital and key ecosystem assets.

This edition of CWON implements an important methodological innovation that affects how real wealth per capita and its changes over time are measured. Real wealth estimates are computed using a chained Törnqvist volume index, where the physical assets of a nation, such as the size of its fish stocks or the number of workers in the labor force, are weighted by their economic importance.

Changes in real comprehensive wealth per capita will be driven by the depletion or accumulation of assets, changes in the productivity or relative scarcity of assets, changing substitution patterns, and increasing or decreasing competition for available assets. All of these are important for analyzing the sustainability of economic progress.

Future efforts should build on the critical methodological innovations introduced with this edition, and improve the implementation of the volume index, especially the measurement of physical volumes.

Global and Regional Trends in Wealth, 1995—2020

A key measure of economic progress is how the real wealth per capita of a nation—consisting of produced capital, nonrenewable natural capital, renewable natural capital, human capital, and net foreign assets— changes over time.

Real wealth per capita grew by 21 percent globally between 1995 and 2020 due to significant increases in human and produced capital. However, while two thirds of countries in the CWON database saw an increase in their real wealth per capita, 27 countries experienced declines or saw little change. Most of these countries were low-income nations. Some were also fragile and affected by conflict.

Changes in the composition of the asset portfolio and population growth have driven changes in real

wealth per capita. While the accumulation of produced and—to a lesser extent—human capital has kept pace with population growth, renewable natural capital per capita has experienced dramatic declines across the world. Nonrenewable natural capital, on the other hand, has experienced more volatile trends, driven by changes in market conditions, new discoveries, and technological innovations.

GDP only tells a partial story of economic progress. While most countries are either getting richer and wealthier, or poorer and more impoverished, more than 25 percent of countries have experienced positive GDP per capita growth while their real wealth per capita has declined. To ensure their economic growth is sustainable, it will be critical for these countries to continue investing in a diversified asset base.

The Role of Limited Substitutability for Measuring Sustainability with CWON

The current CWON methodology implicitly assumes that all assets are highly substitutable. This means that a decline in, for example, natural capital can be compensated for through investments in other assets, such as produced or human capital. If overall wealth increases, development is considered weakly sustainable.

This assumption is unlikely to hold in the current context, where natural resources are in limited supply and experience widespread overexploitation and degradation. The degree of substitutability will likely vary as natural resources become scarcer and reach critical levels due to climate change, biodiversity loss, tipping points, and the crossing of planetary boundaries.

It is thus necessary to adjust standard economic models for limited substitutability between natural

capital and other assets. Simulations show that natural capital decline can have considerable implications for a country’s growth potential as well as its resilience and fragility to natural shocks.

Measuring Components of Comprehensive Wealth

a. The Nonrenewable Wealth of Nations

Nonrenewable natural capital wealth per capita, from assets such as oil, natural gas, and minerals, decreased by 1 percent globally between 1995 and 2020. The trend was volatile, with periods of fast growth caused by discoveries and technological innovations followed by sudden declines in wealth driven by increased extraction.

b. Valuation of Hydroelectric Resources

The estimated values of hydroelectric assets are globally consequential. In total, hydroelectric assets

were valued at $3.5 trillion (chained 2019 US dollars) in 2020, which is comparable to other renewable natural resource assets.

c. Forests and Agricultural Lands

Wealth per capita in land assets declined globally between 1995 and 2020. Declines were recorded in all land asset categories: agricultural lands (24 percent decline), forest recreation services (18 percent decline), non-wood forest products (27 percent decline), forest water services (26 percent decline), and timber (28 percent decline). This means that investments in land assets have not compensated for population growth.

d. Blue Natural Capital: Marine Fish Stocks, Aquaculture, and Mangrove Coastal Protection Services

Marine fish stocks play a key role in supporting local economies and food security. However, they have been overexploited over the last 25 years, leading to dramatic declines in the real asset value of marine fish stocks. The real value of marine fish stocks has dropped by more than 25 percent since 1995, equivalent to a $70 billion decline in chained 2019 US dollars.

Mangroves provide a range of ecosystem services, one of the most critical being that they protect people and assets along the coastline. While the nominal value of these protection benefits increased dramatically between 1995 and 2020, in real terms, mangrove wealth still declined due to the continued loss in mangrove cover.

e. Human Capital Wealth: Global Trends

Human capital—estimated as the present value of future earnings for the labor force, employed and self-employed— is the largest asset across all income groups, constituting 60 percent of total wealth in 2020, slightly lower than in 1995.

Main Messages

Measuring Comprehensive Wealth Helps Determine the Sustainability of Economic Progress

Economic progress cannot be measured by GDP alone. GDP does not tell us whether growth is achieved by accumulating or depleting the underlying assets that enable future growth. Nor does it account for the costs of growth on the health of people and the planet. This calls the sustainability of GDP growth into question, especially as natural assets such as land, water, and ecosystems, are degraded and overexploited. Countries need another way to assess the basis for future economic growth—their balance sheet or wealth.

Changes in real wealth per capita provide important insights into the sustainability of economic progress. The minimum condition for sustainable economic development is that real wealth per capita should not decline over time. Wealth in this context encompasses the value of all the assets of a nation that support economic production, such as factories, intellectual property, and roads (produced capital); forests, fish stocks, and fossil fuels (natural capital); the labor force (human capital); and net foreign assets. Real wealth per capita increases if more workers enter the labor force or if the same workers upgrade their skills, if forests grow, or new commercially recoverable minerals are discovered. However, it declines if fish stocks are overexploited, machinery degrades, or the reserves of fossil fuels are depleted or become commercially unusable. As long as real wealth per capita does not decline, future generations will inherit at least the same production and consumption opportunities as the current generation.

The World Bank’s The Changing Wealth of Nations (CWON) program is a pioneering effort in measuring wealth. Most countries do not produce wealth estimates, a data gap the CWON program has filled for nearly two decades. This 5th edition provides the most comprehensive, publicly accessible, and reproducible wealth database currently available. These monetary estimates draw on internationally endorsed statistical standards and guidelines of the System of National Accounts (SNA) and System of Environmental-Economic Accounting (SEEA), which ensures that the CWON’s wealth measure is comparable to other metrics of economic progress like GDP. These wealth estimates are also updated on a regular basis as new data sources, measurement techniques, and guidance become available. For example, this edition updates the computation of real wealth per capita to align with global best practice. Changes in real wealth per capita will now be driven by the depletion or accumulation of assets; changes in the productivity or relative scarcity of assets; changing substitution patterns; and population pressures.