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Unit 4 Macro: Inclusive Wealth and Sustainable Development
24th June 2012
To mark the 2012 Rio Summit, the United Nations has started to publish an Inclusive Wealth Index which builds into an evaluation of a country’s wealth the impact of economic growth and development on the stock of a country’s natural capital. This chart from the Economist would be an excellent starting point for discussion of changes in natural wealth for a range of countries.
Scientists and environment groups have been pressuring governments to include the value of their countries’ natural resources (or natural capital) - and use or loss of them - into future measurements of economic activity to show their true future growth prospects.
According to the Economist
“Comprised of human, natural and produced capital, the index covers 20 countries between 1990 and 2008. Between them they account for 58% of the world’s population and 73% of its GDP. As GDP does not consider natural-resource depletion or environmental degradation, the UN’s index records lower annual average growth in wealth compared with GDP, of 1.7 percentage points.”
When measured solely by GDP, the economies of China, the United States, Brazil and South Africa grew by 422 percent, 37 percent, 31 percent and 24 percent respectively between 1990 and 2008.
When their performance was assessed by the IWI, China’s economy grew by 45 percent, the United States by 13 percent, Brazil by 18 percent and South Africa decreased by 1 percent, mainly due to the depletion of natural resources
Six nations - Russia, Venezuela, Saudi Arabia, Colombia, South Africa and Nigeria - experienced negative growth under the IWI, whereas it was positive under GDP measurements
More here from the Guardian on inclusive wealth or - as many are now starting to call it - measures of GDP+ - UNDP reveals template for human sustainability index at Rio+20 See also: Green growth: is there such a thing?
Globe and Mail: The case for scrapping GDP
Key note: Inclusive Wealth Index (IWI)
The Inclusive Wealth Index (IWI) assesses changes in a country’s productive base, including produced, human, and natural capital over time. By taking a more holistic approach, the IWI shows governments the true state of their nation’s wealth and the sustainability of its growth.
Charcoal harvesting killing off Ivory Coast’s rainforests (July 2012)
June 2014 - OECD - Managing natural resources: making more with less
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.