1. Is this the first time the World Bank has published a book on accounting for national wealth?

The World Bank has been working in this field for over a decade, publishing the material 'Where is the Wealth of Nations?' in 2006 and its second volume in 2011. The book 'The Changing Wealth of Nations 2018' analyses the wealth of 141 countries between 1995 and 2014. The new book changes estimates for natural capital and, for the first time, provides calculations for human capital as well. Its goal is to broaden the range of criteria that economists, policy makers, the private sector and civil society use to evaluate economic progress and sustainable development.

2. How is wealth calculated, and how does it help countries?

National wealth includes produced capital (buildings, equipment and infrastructure), natural capital such as agricultural land, forests, protected areas, minerals, oil, coal and gas reserves, human capital (broken down by gender and type of employment), and net foreign assets. Wealth accounting offers estimates of total national wealth by determining the total value of the various (distinct) components of wealth. Changes in national wealth are an indicator used to determine a country's growth potential. A decrease in wealth indicates that a country is spending its assets and may not be able to sustain GDP growth in the future.

3. What can we learn from wealth relative to GDP?

It is valuable to consider GDP as the 'return on wealth'. GDP is calculated based on the previous year's economic activity and is considered a 'flow' metric. Wealth and its composition show whether the portfolio of assets or 'stock'—produced, natural, and human capital, and net foreign assets—is balanced to support GDP growth in the long term. Wealth indicators provide information on the state of the economy in the long term, its ability to provide growth, by reflecting asset depreciation and depletion, and answering the question: is investment and asset accumulation keeping pace with population growth?

4. Should wealth accounting replace GDP (as a metric)?

This form of accounting should be viewed as a supplement to GDP, not a replacement. Wealth supplements GDP; it shows the state of the assets that make up GDP, and whether investments in human, produced and natural capital are sufficient to keep up with population growth and the country's development goals. Policy makers need this information to develop strategies that ensure GDP growth is maintained over a longer period and to make necessary changes.

5. Are trends in GDP and wealth across countries similar or different?

If we look at wealth and GDP, national trends are similar. This is partly because produced and human capital, which account for more than 90% of total wealth, often correlate with GDP. However, there can be situations where wealth trends do not align with GDP trends. It is worth looking into the composition of wealth and the balance between different assets (produced, human and natural capital in addition to net foreign assets).

6. Which countries are wealthier per capita, and which are at the bottom of the 'list'?

The goal of the study is not to rank countries according to their wealth, but to highlight key trends in total wealth and wealth per capita. The 10 leading countries in terms of wealth per capita in 2014, starting from the wealthiest, are: Norway, Qatar, Switzerland, Luxembourg, Kuwait, Australia, Canada and the United States. Countries with the lowest amount of wealth per capita are: The Gambia, Burundi, Mozambique, Comoros, Guinea, Madagascar, Liberia, Malawi, Niger and the DRC. It is important to look at wealth trends separately from their levels to assess a country's development path.

7. What has happened to natural capital over the last 20 years?

The value of natural capital assets doubled between 1995 and 2014. However, the situation is different when looking at the breakdown of assets. The largest growth in natural capital is seen in non-renewable resources (308%), mainly as a result of changes in the volume and prices of minerals and fossil fuels. Overall, the value of renewable resources—forests, protected zones and agricultural land—did not decrease, but it grew much more slowly than total wealth (44% compared to 66%). In Latin America and Sub-Saharan Africa (the territory of Africa south of the Sahara Desert), approximately 7-9% of forest areas were converted into agricultural land. The total value of forest assets (timber, non-timber forest products, recreation and watershed protection services) decreased by 3%, with timber assets globally decreasing by 9%. In Latin America, total forest assets decreased by 2%, while in Sub-Saharan Africa, they fell by 11%.

8. What was included in the natural capital calculation? Was anything left out?

When calculating natural capital, they took into account fossil fuel energy (oil, gas, coal) and minerals (bauxite, copper, gold, iron ore, lead, nickel, phosphates, silver, tin and zinc), agricultural land (crop areas and pasture land), forests (timber and some non-timber forest products, including ecosystem services) and protected areas (as a proxy for biodiversity). Some natural assets were not included, such as water, fish, renewable energy resources and some essential ecosystem services. These may be included in future wealth accounting calculations.

9. What are the interesting trends in this analysis?

• The report found that global wealth has increased by 66% (from 690 trillion to 1,143 trillion US dollars in 2014, based on market prices).
• The 20 countries with the fastest-growing wealth per capita were developing countries, including two of the largest—China and India, which the World Bank classified as low-income countries in 1995, and currently their incomes are considered middle-tier.
• Countries with large gains in wealth per capita also include Chile, Peru, Vietnam; countries recovering rapidly from civil unrest—Bosnia and Herzegovina, Ethiopia, Rwanda and Sri Lanka; and resource-rich countries in the former USSR, such as Azerbaijan.
• Wealth per capita decreased or remained unchanged in more than twenty countries with different income levels. These include several low-income countries, some countries with large coal reserves in the Middle East, and high-income OECD countries that were affected by the 2009 financial crisis. A decrease in wealth per capita indicates that assets essential to future income generation may have been spent, and funds obtained from natural resource exploitation are not being invested properly. This fact is often not correctly reflected in a country's GDP growth figures.
• Human capital is the largest component of global wealth, making up two-thirds of total world wealth. This points to the need to invest in people to generate wealth and create future income.
• Although natural capital accounts for 9% of global wealth, it makes up almost half (47%) of wealth in low-income countries. More effective long-term management of natural resources is essential for sustainable development while these countries build their infrastructure and human capital.

10. How was human capital calculated in the studies?

Human capital is calculated as the present value of future earnings for the labour force. This includes education and skills, as well as experience and the probability of labour force participation at different ages. Estimates are made based on the approach developed by Jorgenson and Fraumeni. Estimates are based on household survey data in the World Bank's International Income Distribution Database and rely on several assumptions, as well as regression analysis to calculate projected labour income. This means that errors in estimates are possible. The same applies to a certain extent to other types of wealth estimates in the report, in addition to human capital. Finally, due to the lack of publicly available household surveys for most Persian Gulf countries, human capital was calculated based on GDP per capita and educational attainment.

11. Is the report missing 'intangible' capital that is not included in current wealth calculations?

The true value of institutions, management and policy was not calculated, nor was their impact on the value of other assets. For example, 'social capital' often means trust, which promotes shared behaviour and can stimulate economic activity and improve welfare. In this context, some forms of 'intangible' capital were not assessed.

12. How was it decided which data to include?

Information on wealth was compiled based on publicly available data obtained from internationally recognised data sources, using a uniform methodology across all countries. As a result, the information on wealth may not be as accurate as the information a country can prepare using its own data sources. The methodology is being improved, and new categories will be added over time.

13. What is the difference between the human capital estimates in this report and the recently conducted World Bank Human Capital Project?

The report is a component of the key evidence that forms the basis of human capital research. Human capital accounts for approximately 70% of wealth in high-income countries and only 40% in low-income countries. To help countries bridge this gap, the World Bank, together with its partners, is developing the Human Capital Project with comprehensive components based on broader analysis, results-based investments, catalytic financial platforms and partnerships. Country progress indicators regarding human capital will be developed as part of these efforts to promote investment in people, which is essential for improving overall economic growth and ending extreme poverty.

14. Is any country currently carrying out wealth accounting?

There is no information about countries that are carrying out their own wealth calculations in a similar way to what is shown in the report. However, some countries calculate their own wealth components—especially produced capital, portions of natural capital and some net foreign assets. According to information available to the United Nations, 23 countries calculate their natural capital. For example, Zambia evaluates forests and water, which will help the government in political decision-making on how to best use natural resources now and in the future. Colombia is one of the first countries in the world to have a special chapter in its statistics for calculating the value of forests, water and minerals. Progress in natural capital accounting was achieved by introducing the System of Environmental-Economic Accounting (SEEA), which is a UN-approved standard for calculating natural capital.

15. What is the impact of the report on policy?

The report shows how to calculate wealth to evaluate a country's long-term growth potential. The report does not provide specific policy recommendations, but it provides data for further analytical work and cost-benefit analysis, for example: does natural capital contribute to productivity, and what are the economic costs of gender inequality? Policy makers can use this information to develop strategies that ensure economic growth is maintained over a longer period and to make necessary changes.

16. What policy and methodology issues could be examined in the future?

• Expand the examination of the issue of missing natural capital: in the current work, natural capital includes fossil fuels and minerals, agricultural land (crops and pasture land), forests (timber and some non-timber forest products) and protected land areas. As we continue the work, we want to include renewable energy resources (water, wind, solar), water, fisheries and essential ecosystem services.
• Human capital estimates: for the first time, the report included human capital. The breakdown by gender is based on household survey data. The breakdown according to employment (employment versus self-employment) is based on Penn World Table data, except for China, where middle-income group figures were used. We are constantly working to improve the methodology for obtaining all data, including human capital. We are conducting a more detailed human capital analysis based on gender and type of employment, and will compile these calculations for future publications.
• Gender equality and work with sectors: Based on the book 'The Changing Wealth of Nations 2018', the World Bank is preparing an analysis of the costs of gender inequality and the benefits of gender equality globally. The World Bank is also preparing an additional volume to analyse some of the drivers of human capital. In addition, the volume will offer estimates of wealth gains from policies aimed at improving outcomes in several areas, such as: (i) reducing stunted growth for children under five; (ii) improving educational attainment opportunities for young people; or (iii) ending child marriage.
• Using Purchasing Power Parity (PPP) assessment of wealth: We offer a metric for determining wealth that can be compared across all countries using a common parameter system, market rates (based on the US dollar exchange rate). It has long been established that market rates do not reflect relative purchasing power in different countries. PPP is often applied to GDP figures to gain a better understanding of countries' relative prosperity than market rates can provide. However, the application and interpretation of PPP rates are not straightforward and remain on the list of future work to be done.