Wealth accounting—the balance sheet for a country—captures the value of all the assets that generate income and support human well-being. Gross domestic product (GDP) indicates how much monetary income or output a country creates in a year; wealth indicates the value of the underlying national assets and therefore the prospects for maintaining and increasing that income over the long term. GDP and wealth are complementary indicators for measuring economic performance and provide a fuller picture when evaluated together. By monitoring trends in wealth, it is possible to see whether GDP growth is achieved by building or maintaining capital assets, which is sustainable in the long run, or by liquidating assets, which is not. Wealth should be used alongside GDP to provide a means of monitoring the sustainability of economic development.
The Changing Wealth of Nations 2021 (CWON 2021) finds that our material well-being is under threat: from unsustainable exploitation of nature, from mismanagement and mispricing of the assets that make up national wealth, and from a lack of collective action at local, national, and regional levels.
In many countries, GDP is increasing at the expense of total wealth and future prosperity. If not properly informed, citizens might mistakenly expect their improving prosperity to continue indefinitely. If rising GDP today comes at the expense of declining wealth per capita, then prosperity will be unsustainable. Economic growth will erode its own base.
Despite a global expansion in total wealth per capita between 1995 and 2018, many countries are on an unsustainable development path because their natural, human, or produced capital is being run down in favor of short-term boosts in income or consumption. In countries where today’s GDP is achieved by consuming or degrading assets over time, for example by overfishing or soil degradation, total wealth is declining. This can happen even as GDP rises, but it undermines future prosperity.
CWON 2021 finds that while total wealth has increased everywhere, albeit with a widening gap between nations, per capita wealth has not. More than a third of low-income countries saw falling wealth when measured in per capita terms as wealth creation failed to keep pace with population. Declining wealth per capita breaks a core principle of sustainability: future generations should be left no worse off than current generations. Between 1995 and 2018, the share of low-income countries in global wealth hardly changed, remaining below 1 percent despite being home to about 8 percent of the world’s population.
Research shows that deforestation and land use change, habitat fragmentation, encroachment, rapid population growth and urbanization can also multiply the spread of pathogens and zoonotic diseases.
While nature can act as a buffer between humans and pathogens, it can also help in economic and social recovery efforts. Recovery packages announced in the aftermath of the COVID-19 pandemic provide an opportunity to integrate longer-term sustainability considerations, including solutions that can boost the economy and deliver positive environmental outcomes simultaneously. Some examples include reduction of carbon emissions, promoting nature-based solutions, and protection of ecosystem services that underpin a country’s prosperity and resilience to shocks like pandemics.
