We’ve all heard of the adage, “Give a man a fish, and you’ll feed him for a day. Teach a man to fish (skill development) and you’ve fed him for a lifetime.”
If prosperity should be sustainable, it’s not enough to just teach someone how to fish, its imperative to ensure there’s enough fish for long enough time. It’s imperative to assess and monitor the amount of fish available.
Does GDP help us with such information? The answer is: it doesn’t.
GDP indicates the value of the fish harvested and sold; Whereas the amount of fish available (WEALTH) indicates the prospects for maintaining that income and its growth over the long term. They are complementary indicators. Economic performance is best evaluated by monitoring the growth of both GDP and wealth.
What comprises the wealth of a nation and how do we measure it?
The World Bank group in 2019 January, released the second comprehensive report – The Changing Wealth of Nations – that tracked the changing wealth of 141 nations – wealth measured comprehensively to include four components: Produced capital – machinery, buildings, equipment, and residential and nonresidential urban land, Natural capital – Non-renewables, Renewables, Human capital, and Net foreign assets.
Recognising that a significant amount of what we call development happens as a result of liquidating the finite natural capital (mostly non-renewable), the idea behind wealth monitoring shouldn’t just be to measure and monitor the depletion rates of wealth, but to scientifically establish limits on the quantity, rate and period of extraction of non-renewable resources, establish the right institutions with clear charters and sound governance to capture the revenues to make investments for sustainable wealth – by transitioning into other forms of capital (Renewables, Human capital and Produced capital) – maintaining the most optimum mix of wealth components to enable sustainable development.