Measuring comprehensive wealth to promote inclusive and sustainable development

 

Gross domestic product (GDP), is one of the most frequently cited and influential economic tools of our time. However, GDP distorts or fails to capture the costs of economic growth and there is growing consensus that countries face unsustainable development choices if GDP alone guides their decisions.

GDP ignores a number of critical aspects of economic prosperity and well-being, such as environmental degradation that can worsen as the economy grows; production losses due to extreme weather caused by climate change; insufficient investments in human capital and the well-being of future generations; and increasing income inequality and stagnation of poverty.

In recent years, there have been significant efforts to develop new means of assessing progress beyond GDP. These efforts were spurred in part by target 19 of Sustainable Development Goal 17, which calls for alternative measures of progress on sustainable development to complement GDP.

This project will contribute to the development and implementation of comprehensive wealth measures to complement conventional measures of economic progress such as the GDP. It will assess the potential of comprehensive wealth measures to guide decision-makers aiming to increase national wealth and well-being through investments in green growth. The project will analyze and adjust to developing countries’ contexts following five major elements of a comprehensive wealth portfolio: produced capital (such as buildings, machinery and infrastructure owned by households, businesses and governments); natural capital (such as forests, lakes, minerals, fossil fuels, and land); human capital (the value of the skills and knowledge that make up the workforce as represented by lifetime earning potential); financial capital (stocks, bonds, bank deposits, etc.); and social capital (the degree of civic engagement and trust/cooperation among members of society).
By providing comprehensive wealth measures in three developing countries, the project will lay the groundwork for scaling up and mainstreaming alternative measures of progress into national decision-making systems.