Is Wealth a Fat Wallet Or School Full of Girls? World Bank Says: Both
Which is richer, the United States or the tiny South American nation of Suriname?
The answer is not simple. The usual measure is per-capita income. On that scale, Suriname, with barely one-quarter the per-capita income of the US, is extremely poor.
But there's a new way of defining wealth that factors in things like Suriname's forests, iron-ore deposits, factories, and human resources. By this measure, it is nearly as prosperous per capita as the US.
The World Bank released a report yesterday showing that a nation's wealth includes much more than income and that providing for a sustainable future requires using all the elements of a nation's wealth - economic, social, and environmental.
The 83-page study redefines the concept of "sustainable development," arguing that it has less to do with meeting present and future "needs" than with making sure that future generations have as much or more capital to create jobs and income as they have now.
"This new system challenges conventional thinking by looking at wealth and not just income in determining the growth strategies of countries," says Ismail Serageldin, the World Bank's vice president for environmentally sustainable development.
In addition to "natural capital" (the economic value of land, water, forests, and mineral resources) and "human resources" (the productive capacity of a nation's population), a nation's wealth derives from "produced assets" (factories and infrastructure) and "social capital" (the still-unmeasured value of collective organizations like families and communities), according to the report.
Based on this definition, Australia and Canada, with vast natural capital and small populations, are the world's wealthiest nations. But countries like Switzerland and Japan, which have only modest endowments of natural capital, are also high in the wealth rankings because they invest far more than most countries in human resources and produced assets.
Countries that neglect things like education or factories - including Suriname, with its rich natural endowments - usually have low per-capita incomes.
Ethiopia is the poorest nation on the World Bank's list, followed by Nepal and a string of sub-Saharan African nations where the shrinkage of total wealth is endangering their future.
The report challenges the view of strict conservationists who say nations must preserve their natural resources at all costs. It argues that a prudent swapping of natural resources for revenues to invest in human resources and produced assets may increase the wealth of some nations. "The drawing down of some natural resources is neither a positive or negative phenomenon," explains John O'Conner, the principal author of the report, entitled "Monitoring Environmental Progress." "It depends on what the money from such sales is used for, buying imported luxury cars or educating girls."
Mr. O'Conner says the key to sustainable development is managing the four components of national wealth with long-term growth in mind. That means being less concerned with cash flow at any given moment and more concerned with sustaining and increasing a country's net worth.