The Changing Wealth of Nations 2021 – UPSC GS2

The World Bank has released a report titled ‘The Changing Wealth of Nations 2021’. The report is a periodic evaluation of wealth generation and distribution beyond the traditional GDP matrix and includes natural resources as part of a country’s wealth.
What are the key findings of the report?
  • Increase in Wealth: Wealth has increased significantly across the globe between 1995 and 2018 but it did so by worsening inequality and risking future prosperity.
  • Report on GDP: GDP has traditionally been the measure of a nation’s well-being. But it has been long criticized for not accounting for income inequality, pollution or other measures that affect the quality of life. Hence, the report argues for considering natural and human capital to understand whether growth is sustainable.
  • Growing wealth Inequality: Low-income countries share of global wealth has changed little from 1995 to 2018, remaining below 1% of the world’s wealth, despite having around 8% of the world’s population.
  • Human Capital: Human capital(earnings over a person’s lifetime) is the largest source of worldwide wealth, comprising 64% of total global wealth in 2018.
  • Women’s wasted wealth: In terms of human capital, imbalances disproportionately affect women across most regions. Globally, women accounted for only 37% of human capital in 2018, which was only 2% points greater than the 1995 level. In South Asia, some 80% of human capital is attributed to men.
  • Renewable Natural Capital: Globally, the share of total wealth in renewable natural capital (forests, cropland, and ocean resources) is decreasing and being further threatened by climate change. At the same time, renewable natural capital is becoming more valuable as it provides crucial ecosystem services. For example, the value of mangroves for coastal flood protection has grown more than 2.5 times since 1995 to over $547 billion in 2018.
  • Non-Renewable natural capital wealth (minerals, fossil fuels) has declined since 2014 mainly due to falling commodity prices.
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