By Rodrigo Campos

NEW YORK (Reuters] – The only way to truly sustain economic growth is if it includes human and natural capital, as the gross domestic product, and all other measures, fall short of this new World Bank report.

Mari Pangestu (Managing Director for Development Policy and Partnerships at the World Bank) stated, “A deeper, more nuanced understanding about the sustainability wealth is essential to a green and resilient future.”

On Wednesday, the Changing Wealth of Nations 2021 report was presented. The report found that while wealth has increased in many countries between 1995-2018, it also caused inequality to worsen and posed a threat to future prosperity.

Pangestu stated, “It’s essential that both renewable natural capital (and human capital) are given equal importance as traditional sources of economic development so that policymakers take measures to promote long-term prosperity.”

Human capital refers to an individual’s total earnings in a lifetime. While natural capital represents the combined economic value of renewable resources (such as crops and forests) and non-renewable resource such as minerals, fossil fuels, or other resources.

Although GDP is traditionally a measure of nation’s wellbeing, it has long been criticized for failing to account for income inequality and pollution, as well as other factors that impact quality of life.

For example, the use of fossil fuels has been undervalued because of their negative impacts on climate change and pollution.

Pangestu stated that wealth should be used in conjunction with GDP for a way to monitor the sustainability of economic growth.

Policymakers can use the report’s database to help them improve economic progress measures, price natural resources more accurately and give fair value to their human capital.

This report notes, “Many countries are going down an unsustainable growth path, because their natural, produced, and human capital is being used to generate short-term incomes or consume more.”

This report estimates a range of assets, including fossil fuels and minerals as well as marine fisheries. These could all be used by emerging countries.

This report is ahead of this weekend’s United Nations COP26 Climate Summit in Glasgow.

WASTE WEALTH FOR WOMEN

Human capital imbalances are disproportionately affecting women in most areas and have only marginally improved during study.

Only about one third of sub-Saharan Africa’s total human capital goes to women, as is the case in East Asia, which has the most wealth, and in the Pacific.

Men account for around 80% in South Asia’s total human capital. Latin America and Caribbean where women are more active than ever (44%), have not reached gender parity with respect to their human capital.

The report revealed that women only accounted for 37% of global human capital in 2018 (which was just 2 percentage points higher than 1995).