Professional Documents
Culture Documents
Report 2014
Measuring progress toward sustainability
CONTRIBUTORS
Science Advisory Group
Partha Dasgupta, Chair University of Cambridge,
United Kingdom
Mame Baba Cisse Ambassador of Senegal in Malaysia,
Malaysia
Ligia Costa Fundao Getulio Vargas, Brazil/Institut
dtudes politiques de Paris
(Sciences Po), France
Justin Lin Peking University, China
Jane Lubchenco Oregon State University, United
States
Harold Mooney Stanford University, United States
Hamid Zakri Science Advisor to the Prime Minister of
Malaysia, Malaysia
Authors
Adnan Alsaati Massachusetts Institute of Technology,
United States
Kenneth Arrow Stanford University, United States
Giles Atkinson London School of Economics and
Political Science, United Kingdom
Edward Barbier University of Wyoming, United States
Ross Collins Massachusetts Institute of Technology,
United States
Elorm Darkey University of Milan, Italy/Universit
catholique de Louvain, Belgium
Partha Dasgupta University of Cambridge, United
Kingdom
Anantha Duraiappah United Nations Educational,
Scientific and Cultural Organization - Mahatma Gandhi
Institute of Education for Peace and Sustainable
Development, India
Ceclia Fernandes United Nations University
International Human Dimensions Programme on
Global Environmental Change, Germany
Barbara Fraumeni Central University for Finance and
Economics, China
Haripriya Gundimeda Indian Institute of Technology
Bombay, India
Nabila Jamshed United Nations Educational, Scientific
and Cultural Organization - Mahatma Gandhi Institute
of Education for Peace and Sustainable Development,
India
Pushpam Kumar United Nations Environment
Programme, Kenya
Gang Liu Statistics Norway, Norway
Shunsuke Managi Tohoku University, Japan
Kevin Mumford Purdue University, United States
Pablo Muoz United Nations University International
Human Dimensions Programme on Global
Environmental Change, Germany
Kira Petters University of Bonn, Germany
Vivek Sakhrani Massachusetts Institute of Technology,
United States
Noelle Selin Massachusetts Institute of Technology,
United States
Rodney Smith University of Minnesota, United States
Kenneth Strzepek United Nations University, Finland/
University of Colorado, United States/Massachusetts
Institute of Technology, United States
Report Director
Anantha Duraiappah United Nations Educational,
Scientific and Cultural
Organization Mahatma Gandhi Institute of Education
for Peace and
Sustainable Development, India
Science Director
Pablo Muoz United Nations University International
Human Dimensions Programme on Global
Environmental Change, Germany
Review Board
Katharine Abraham University of Maryland, United
States
Francisco Alpzar University of Gothenburg, Sweden/
Environment and Development initiative, Costa Rica
Paul Chinowsky University of Colorado, United States
Kanchan Chopra Institute of Economic Growth, India
Amrita Ghatak Gujarat Institute of Development
Research, India
Dolf de Groot Wageningen University, Netherlands
George Halkos University of Thessaly, Greece
Nick Hanley University of St. Andrews, United Kingdom
Dale Jorgenson Harvard University, United States
Gopal Kadekodi Center for Multidisciplinary
Development Research, India
Chris Kennedy George Mason University, United States
Jeremy Lauer World Health Organization, Switzerland
Ramanan Laxminarayan Environmental Institute
Center for Disease Dynamics, United States/Princeton
University, United States
Andreas Lschel University of Munster, Germany
Linwood Pendleton Duke University, United States
Bob Scholes Council for Scientific and Industrial
Research, South Africa
Mesfin Tilahun Mekelle University, Ethiopia
Hui Wei Australian Bureau of Statistics, Australia
vi
Inclusive Wealth
Report 2014
Measuring progress toward sustainability
Copyright
United Nations University International Human Dimensions
Programme on Global Environmental Change 2014
United Nations Campus
Platz der Vereinten Nationen 1
53113 Bonn, Germany
Tel: +49 228 815 0600
Email: secretariat@ihdp.unu.edu
URL: www.ihdp.unu.edu
Editors:
John Tkacik
Carmen Scherkenbach
Cover Illustration:
Katja Cloud - INKeye, Bonn
The Inclusive Wealth Report 2014 is a joint initiative of the UN University International
Human Dimensions Programme on Global Environmental Change (UNU-IHDP) and the
UN Environment Programme (UNEP), in collaboration with the UNESCO Mahatma Gandhi
Institute of Education for Peace and Sustainable Development (UNESCO-MGIEP), ASCENT
Africa Sustainability Centre, the Malaysian Industry-Government Group for High Technology
(MIGHT), Science to Action (S2A), the Ministry of Environment Government of Japan, the
UN University Institute for the Advanced Study of Sustainability (UNU-IAS), and endorsed by
the Science and Technology Alliance for Global Sustainability.
Project assistants:
Elorm Darkey
Ceclia Fernandes
Kira Petters
The views expressed in this publication are those of the authors and do not necessarily
represent or reflect those of the institutions they belong to.
Suggested Citation:
UNU-IHDP and UNEP. (2014). Inclusive Wealth Report 2014. Measuring progress toward
sustainability. Summary for Decision-Makers. Delhi: UNU-IHDP.
CONTENTS
8
The IWR 2012
9
The IWR 2014
9
Audience and structure of the report
11
11
Accounting for the inclusive wealth of nations:
11
The contribution of human, produced, and natural capital
16
Wealth compositions
19
Adjusted Inclusive Wealth Index (
adj)
22
Measuring economic performance: a comparison of
24
24
Revising the present System of National Accounts
24
Investment in education
25
Investment in agriculture
27
Investment in energy
28
31
Conclusion
32
References
32
Abbreviations
FOREWORD
Health capital
Health is a capital asset and should be seen
as a component of a persons human capital.
In order to compare the relative significance
of an economys various capital assets with
one another, they must be expressed in a
common currency. That common currency
is typically monetary, say, dollars. But the
currency could be any chosen commodity,
or a basket of commodities; for example, a
basket of consumption goods. Health capital
is health status expressed in that common
currency.
Good health brings three benefits to a
person:
1. It adds directly to the persons well-being
(she feels good);
2. It enables the person to be productive
(a healthy person works better and can
work for longer hours than an unhealthy
person);
3. It contributes to her longevity (a healthy
person can be expected to live longer
than an unhealthy person).
Items (1) and (3) are direct benefits (they
constitute aspects of a good life), while item
(2) is an indirect benefit (a means to a better life). It is humanitys good fortune that
good health offers the three benefits jointly
(they are not in competition!). Economists
have developed elaborate methods for estimating the value of each type of benefit.
Some involve asking people to report their
willingness to pay for the benefits (reported
Partha Dasgupta
Chair of the IWR science advisory group and
Frank Ramsey Professor Emeritus of Economics
at the University of Cambridge, United Kingdom
PREFACE
The case against GDP as a metric for economic success and socioeconomic wellbeing can be distilled into three main points:
The first relates to the extent to which
income alone is conflated with well-being.
Although it is undoubtedly a necessary condition for well-being, it is not a sufficient
one. As the World Banks Voices of the Poor
study found, poor people themselves define
well-being not only in terms of income, but
as peace of mind, belonging to a community, safety, [and] good health, among
others.
Meanwhile, these gains have come at a massive cost to ecosystem health, biodiversity,
air quality, and climate resiliency. One of
the welcome key outcomes of the Rio+20
Conference on Sustainable Development
was the agreement by countries to focus
explicitly on sustainability in crafting the
post-2015 development agenda. It is thus
Third, GDP represents flows only for a specified, generally short, time period. It does not
provide information on the state of those
capital stocks necessary to generate the
income measured. Equally important, it provides no insight into whether those capital
stocks what we call inclusive wealth are
sufficient to generate consumption flows for
future generations.
The Sustainable Development Goals are
thus destined for only limited success as
long as we are missing an adequate framework to measure progress, and do so in an
integrated and holistic manner.
The Inclusive Wealth Report (IWR) aims to
provide a comprehensive overview of the
status of capital stocks of three key assets for
nations. These assets are tracked over the
past 21 years, and the sustainability implications of trends and changes in these assets
are appraised. The report does not attempt
to provide a comprehensive overview of
human well-being. Instead, it provides guidance and insight for policy-makers on how
their economies are generating income, how
depreciation and reinvestment are affecting
capital stocks, and whether system trajectories are sustainable.
Anantha Duraiappah
Report Director to the Inclusive Wealth Report
Project, and Director of United Nations
Educational, Scientific and Cultural Organization
Mahatma Gandhi Institute of Education for
Peace and Sustainable Development, India
Inclusive Wealth
Report:
An Introduction
10
What the
data says
11
Figure 1
Natural capital
Adjusted
Factors
affecting
Fossil Fuels
Oil
Natural gas
Coal
Human capital
Education
Health*
Produced capital
Equipments
Machineries
Roads
others
Minerals
Bauxite, Nickel,
Copper, Phosphate,
Gold, Silver, Iron, Tin,
Lead & Zinc
Forest resources
Timber
Non-timber forest resources
Agricultural land
Cropland
Pastureland
(1)
Carbon damages
12
wealth. There are several possible explanations for this: some of these countries had
already achieved high levels of education
across their populations, thus leaving them
with less room to improve from already
high levels of human capital. In some areas,
high rates of migration likely resulted in low
growth in human capital. In other areas,
natural capital makes up a relatively small
part of growth in total wealth. See Table 1
for further information.
Per capita, 138 of the 140 countries assessed
experienced positive contribution in human
capital to inclusive wealth; 117 of 140 exhibit
Figure 2
Figure 2 b:
Figure 2 c:
Key
>1
< -1
0 to 1
no data
-1 to 0
13
Bahrain
Maldives
Singapore
United Arab Emirates
Jordan
Afghanistan
Israel
Viet Nam
Bangladesh
Yemen
Mauritania
Gambia
Kenya
Luxembourg
Republic of Korea
Costa Rica
Uganda
Qatar
Pakistan
Cyprus
Rwanda
Spain
China
Ireland
Guatemala
Malaysia
Haiti
Dominican Republic
Philippines
Panama
India
Egypt
Chile
Niger
Mexico
Turkey
Morocco
Tunisia
El Salvador
Lesotho
Mauritius
Malta
Syrian Arab Republic
Thailand
Sri Lanka
Swaziland
Burundi
Togo
Benin
Ghana
Cte d'Ivoire
New Zealand
Senegal
Botswana
Germany
Australia
South Africa
Namibia
United States of America
Slovenia
France
Honduras
Austria
Colombia
Greece
Fiji
Netherlands
Brazil
Jamaica
Belgium
Argentina
Portugal
Czech Republic
Saudi Arabia
Canada
Indonesia
Slovakia
Mali
United Kingdom
Iceland
Poland
Uruguay
-2
-1
Percentage
3
Figure 3
growth rates before per capita adjustment disaggregated by capital form, annual average for 1990-2010.
14
Australia
South Africa
Namibia
United States of America
Slovenia
France
Honduras
Austria
Colombia
Greece
Fiji
Netherlands
Brazil
Jamaica
Belgium
Argentina
Portugal
Czech Republic
Saudi Arabia
Canada
Indonesia
Slovakia
Mali
United Kingdom
Iceland
Poland
Uruguay
Switzerland
Kyrgyzstan
Italy
Belize
Hungary
Sweden
Nicaragua
Sierra Leone
Japan
Finland
Malawi
Norway
Paraguay
Algeria
Estonia
Sudan (former)
Peru
Serbia
Barbados
Latvia
Denmark
Venezuela
Iran
Ecuador
Croatia
Lithuania
Gabon
Nepal
Romania
Cambodia
Albania
Cameroon
Nigeria
United Republic of Tanzania
Lao People's Democratic Republic
Cuba
Armenia
Mozambique
Trinidad and Tobago
Democratic Republic of the Congo
Zambia
Tajikistan
Kazakhstan
Bulgaria
Guyana
Iraq
Kuwait
Congo
Central African Republic
Mongolia
Russian Federation
Bolivia
Liberia
Zimbabwe
Papua New Guinea
Ukraine
Myanmar
Republic of Moldova
-1
Percentage
-2
Key
Produced Capital average
contribution
contribution
contribution
15
Table 1
Produced
capital
Natural
capital
Africa
62
20
19
Eastern Africa
56
24
20
Middle Africa
Northern Africa
Southern Africa
Western Africa
Asia
Eastern Asia
South-Central Asia
South-Eastern Asia
Western Asia
47
57
66
72
54
29
60
46
61
13
29
27
12
32
56
27
37
26
40
14
7
15
14
15
12
17
13
Europe
44
50
Eastern Europe
Northern Europe
Southern Europe
Western Europe
Latin America and the Caribbean
Caribbean
Central America
South America
Northern America
Northern America
Oceania
Australia/New Zealand
Melanesia
Total World Average
36
38
50
55
61
67
64
56
54
54
49
48
49
55
51
55
48
45
26
23
26
28
41
41
31
43
18
32
14
7
2
1
13
10
10
16
5
5
21
8
33
13
Note: The figures represent the average relative contribution by asset category of those countries comprising the (sub-)region to growth in
Contributions with negative sign as in the case of natural capital are taken in
absolute numbers.
Wealth compositions
In this section we explore the sources of
nations wealth by looking at the composition of individual countries productive bases
valued at their shadow price. Composition
is shown for our three capital asset stock
groups at a country, sub-regional, regional,
16
Figure 4
Percentage of human, produced, and natural capital in total wealth, annual average for 1990-2010.
Figure 4 a:
Figure 4 b:
Figure 4 c:
Key
> 80
20 to 40
60 to 80
< 20
Note: It is worth remarking that the maps do not aim at describing where natural capital is in the world, but
40 to 60
no data
rather to measure the relative importance of each capital asset in the total wealth for every country.
17
Table 2
Produced capital
47
47
16
56
59
52
51
47
54
46
53
66
57
67
70
70
52
68
58
39
62
62
45
53
37
54
Natural capital
13
12
7
18
18
12
18
22
19
16
16
26
28
24
24
28
17
22
18
13
19
19
17
24
9
18
40
41
77
26
23
37
31
31
26
39
31
8
15
9
6
2
31
10
25
48
19
19
38
23
53
28
Figure 5
Percentage shares of human capital and natural capital in total wealth, average
1990-2010
100%
Key
Low Income
Lower Middle Income
Upper Middle Income
75%
Human Capital
High Income
50%
25%
0%
0%
25%
50%
Natural Capital
18
75%
100%
3 This group is comprised by the following oilextractive economies: Kuwait, Iraq, Saudi Arabia,
Iran, Kazakhstan, Venezuela, Canada, Norway,
Nigeria, Russia, Algeria, Ecuador, Trinidad and
Tobago, United Arab Emirates, Qatar, Yemen,
Gabon, Cameroon, and Congo.
19
20
Kuwait
Maldives
Serbia
Latvia
Haiti
Ukraine
Spain
Republic of Moldova
Saudi Arabia
Estonia
Lithuania
Viet Nam
Malta
Hungary
Germany
Gambia
Portugal
Croatia
Rwanda
France
Slovenia
Belgium
Kyrgyzstan
Bangladesh
Republic of Korea
Canada
Tajikistan
Jamaica
Mexico
Romania
El Salvador
Mauritius
Armenia
Turkey
Morocco
Venezuela
United States of America
Denmark
Italy
Fiji
Switzerland
Ireland
Afghanistan
Austria
Netherlands
Lesotho
Barbados
Burundi
Japan
Bahrain
United Arab Emirates
Chile
Luxembourg
Poland
Zimbabwe
United Kingdom
Kenya
Sweden
Israel
Iran
Sierra Leone
Greece
Bulgaria
Cyprus
Russian Federation
Finland
Costa Rica
New Zealand
South Africa
Kazakhstan
Australia
Iceland
Egypt
Czech Republic
Sri Lanka
Algeria
Norway
Lao People's Democratic Republic
Democratic Republic of the Congo
Uruguay
Liberia
-8
-7
-6
-5
-4
-3
-2
-1
Percentage
2
10
11
12
Figure 6
Zimbabwe
United Kingdom
Kenya
Sweden
Israel
Iran
Sierra Leone
Greece
Bulgaria
Cyprus
Russian Federation
Finland
Costa Rica
New Zealand
South Africa
Kazakhstan
Australia
Iceland
Egypt
Czech Republic
Sri Lanka
Algeria
Norway
Lao People's Democratic Republic
Democratic Republic of the Congo
Uruguay
Liberia
Pakistan
Gabon
Colombia
Tunisia
Guatemala
Philippines
Dominican Republic
Cte d'Ivoire
Malaysia
Brazil
Mauritania
Sudan (former)
India
Guyana
Togo
Honduras
Mongolia
Swaziland
Indonesia
Ecuador
Panama
Thailand
Senegal
Slovakia
Jordan
Argentina
Albania
Zambia
Cuba
Singapore
Central African Republic
Yemen
Nicaragua
Paraguay
Myanmar
Namibia
Cameroon
Bolivia
Botswana
Uganda
Syrian Arab Republic
Nigeria
Niger
Congo
Benin
Malawi
Peru
Belize
Qatar
Ghana
Nepal
Trinidad and Tobago
China
Mali
Papua New Guinea
Cambodia
Mozambique
United Republic of Tanzania
-7
-6
-5
-4
-3
-2
-1
10
11
12
per capita
Carbon Damage
Oil Capital Gains
TFP
Adjusted
-8
Key
21
the initial
estimates, because the positive
changes in wealth for the above three countries were not the result of improved management of the countries asset portfolios,
but rather by rises in oil prices.
22
Figure 7
Figure 7 a:
per capita
Figure 7 b:
Figure 7 c:
HDI
Key
>3
0 to 1
2 to 3
<0
1 to 2
no data
23
Investment in education
Revising the present System of
National Accounts
The System of National Accounts (SNA)
of the United Nations attempts, among
24
The initial results from the IWR 2014 suggest a quick win for most countries in education investment, the component with the
highest weighting, yet with relatively low
investment rates among the countries measured (see Figure 8 ).
Figure 8
Growth rates of investment in education per capita across countries (in percentage), 2010/2009
Key
Investment in agriculture
Food security is a central policy priority for
many countries today. While food security
is a complex issue, one critical factor is the
availability of suitable arable land. It is estimated that an additional 3 to 5 million hectares of cropland might be required to feed
the growing world population over the next
30 years (Wirsenius et al. 2010).
>2
-4 to 1
1.5 to 2
< -4
1 to 1.5
no data
25
Figure 9
Key
12 to 14
0 to 6
6 to 12
no data
Figure 10
Key
26
>5
-25 to -15
0 to 5
< -25
-15 to 0
no data
Investment in energy
A sustainable and secure supply of energy
is essential for any countrys development
aspirations. Energy is not only important for
supporting activities that lead to economic
growth, but also for key aspects of human
development and social transformation,
such as education, health, and infrastructure.
The link between energy and wealth is
straightforward. In the IWR 2014, natural
capital captures changes in fossil fuel stocks,
which currently account for approximately
81 percent of energy supply. Therefore,
energy is empirically related to wealth.
Increases in energy demand directly translate to negative impacts on natural capital
through the depletion of finite fossil fuel
deposits, and thus negative impact on the
overall inclusive wealth of a country.
Energy, while an essential factor for improving well-being, imposes a policy trade-off
(in the current energy mix) by generating
negative externalities, mainly to the environment. A major driving force in declining
wealth per capita (after population growth)
is depreciation of natural capital. Adjusted
Inclusive Wealth also shows that most
Figure 11
120
Reserves-to-production ratio
100
113
80
60
55
40
53
20
0
Coal
Natural Gas
Crude Oil
27
Key messages of
the IWR 2014
28
Health capital
Most health capital services influence
human well-being directly rather than
through the production of goods and
services that are counted in GDP.
In the absence of better estimates of the
direct and productivity effects, gains in
life expectancy should be used as the primary measure of health capital.
29
30
Conclusion
The key information the IWR offers policymakers is an overview of changes in the
productive base of a country. It provides
insights into trends within the individual
capital asset groups, particularly human and
natural capital central pillars of inclusive
wealth that remain under served by current
statistical col- lection, analysis, and economic policy-making. For natural capital in
particular, the IWR gives insight into how
subcomponents have changed, for instance
changes in land use and cover, or fossil fuel
reserves.
The Inclusive Wealth Index (2 years, still in
an early essentially experimental stage.
However, it fills a crucial gap among the
indicators of well-being and sustainability
available today, giving information on the
state of the productive base of an economy,
as well as insights into relationships and
trade-offs among the capital components of
the productive base.
31
REFERENCES
ABBREVIATIONS
of
Ecosystems
and
Gandhi
Peace an
32
The Inclusive Wealth Report 2014 (IWR 2014) is the second edition
of the biennial IWR series, which presents an indicator for measuring the inclusive wealth of nations. The IWR 2014 provides an
overview of how the capital asset components of inclusive wealth
evolved between 1990 and 2010 for 140 countries, and analyzes the
meaning of these trends for sustainability. While the asset base
studied is largely unchanged from 2012 covering natural capital,
human capital, and produced capital the country sample was
expanded from 20 to 140 nations. While the IWR 2012 focused on
natural capital, the IWR 2014 takes a closer look at human capital.
As in 2012, the IWR 2014 includes a comparative analysis of
country performance against two traditional indicators of progress, gross domestic product (GDP) and the Human Development
Index (HDI). The IWR 2014 also explores how the findings can be
used to inform macroeconomic policy and sectoral investment
decisions. The report outlines an approach for managing national
asset portfolios through the prism of sustainability, and introduces
an inclusive wealth framework for scenario analysis that can help
guide strategic investment at local, regional, and national levels.
The IWR 2014 offers a wealth of information for the research
and policy communities, identifying key gaps in data and knowledge, and suggesting specific needs for future research, including
in the areas of national accounting practices, education and health
economics, ecosystem services valuation, and economic inequality.
Africa Sustainability Centre
ASCENT
Endorsed by:
Collaborating institutions:
yx2
yx2
Logomark
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x
z
Logotype
The Inclusive Wealth Report 2014 is a joint initiative of the UN University International Human Dimensions
Programme (UNU-IHDP) and the UN Environment Programme (UNEP), in collaboration with the UNESCOMahatma Gandhi Institute of Education for Peace and Sustainable Development (UNESCO-MGIEP), ASCENT
Africa Sustainability Centre, the Malaysian Industry-Government Group for High Technology (MIGHT), Science to
Action (S2A), the Ministry of Environment Government of Japan, the UN University Institute for the Advanced
Study of Sustainability (UNU-IAS), and endorsed by the Science and Technology Alliance for Global Sustainability.