Beyond GDP: The Wealth Perspective of Sustainability

Abstract

The capital approach, or the wealth economy framework of sustainability broadens the conventional measure of economic performance “beyond GDP”, with a long-term view. The totality of capital assets, or wealth, is composed of produced, human, natural and social capital, and is seen as the source of income, benefits, and wellbeing of present and future generations. Shrinkage in this production base signals unsustainable development. While the weak criterion of sustainability allows substitution between all capital elements, the strong criterion does not allow reductions in the renewable component of natural capital. Using World Bank data, we found that during the 1995-2018 period, 14% and 58% of the countries globally did not meet the weak and the strong criteria of sustainability, respectively. Also, a comparative analysis of wealth and its components is provided for selected OECD countries. It is found that human capital is proportionally the most significant among the capital elements, followed by produced capital. Natural capital, both renewable and non-renewable, lags far behind. Our findings raise questions regarding the rationale of economic convergence, as well as confirm the necessity of further methodological improvements regarding data generation and statistics, including the valuation of assets.