- A new report from the World Bank has shown that economic growth is not sustainable unless renewable natural capital and human capital are treated with the same importance as traditional economic growth.
- For example, the use of fossil fuels has been overvalued because its environmental impact was not taken into account.
- These insights come before COP26, due to begin soon in Glasgow.
- In terms of human capital, women must also have greater equality if sustainability is to be achieved.
Economic growth can only be considered truly sustainable if human and natural capital are part of the equation, as gross domestic product and other traditional measures fall short, a new report from the World Bank showed.
“A deeper and more nuanced understanding of the sustainability of wealth is crucial to a green, resilient, and inclusive future,” said Mari Pangestu, managing director for development policy and partnerships at the World Bank.
The Changing Wealth of Nations 2021, a report presented on Wednesday, found that wealth increased significantly across the globe between 1995 and 2018 but it did so by worsening inequality and risking future prosperity.
Wealth increased across the globe from1995 to 2018 but it did so by worsening inequality.
Image: World Bank
“It is essential that renewable natural capital and human capital are given the same importance as more traditional sources of economic growth, so that policymakers take steps to enable long-term prosperity,” Pangestu said.
The report defined human capital as the earnings over a person’s lifetime, while natural capital was the economic value of both renewable resources, such as forests and cropland, and non-renewable resources such as minerals and fossil fuels.
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 quality of life.
The use of fossil fuels, for instance, has been overvalued, as the negative effects of pollution and climate change have not always been considered.
“Wealth should be used alongside GDP to provide a means of monitoring the sustainability of economic development,” Pangestu said.
The report’s database aims to be used by policymakers seeking to improve measures of economic progress, more accurately price natural assets or give a fair value to human capital.
It also notes that “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.”
The report values a wide set of assets among forms of natural capital including minerals, fossil fuels, forests, mangroves, and marine fisheries, which could …….