It is about Wealth, not (only) Income: What the World Bank says and does not say

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1 Georgetown University From the SelectedWorks of Josep M. Colomer February 19, 2018 It is about Wealth, not (only) Income: What the World Bank says and does not say Josep M. Colomer Available at: 153/

2 Development is about per capita wealth, not only income: What the World Bank says and does not say JOSEP M. COLOMER 2018 The idea was floating for a while but it had not been operative until now. The paradox is that individuals and companies are evaluated by both their income and their wealth (for example, when asking for a loan or a mortgage). But regarding the economy, countries are usually evaluated only by their income (or GDP). Everybody can understand that wealth is an indicator of future sustainability of income growth. But the problem was with measuring wealth. Now the World Bank has published a much-improved report on wealth especially regarding estimates of human capital, which will surely be the starting point for new discussions, policy revisions and further research. The Changing Wealth of Nations 2018 (G-M Lange, Q Wodon, K Carey eds.) gives estimates of wealth for 141 countries. However, the data are given only by countries in alphabetical order, in contrast to other World Bank s data, including on per capita income, which are routinely published as sorted by values and are widely used and reproduced as rankings of countries. There might have been some political restraint to publish a new ranking of countries, this time for wealth, but you will find my own elaboration below.

3 For every country, the WB s report analyzes natural capital, human capital (which is the driver of development), and produced capital, to which foreign assets are also added. The mechanism for development is the investment of rents from natural resources into factors increasing human capital (infrastructures, education, health), which leads to increases in products and wealth. According to the WB: This shows that resources alone cannot guarantee development: strong institutions and good governance are needed to ensure that rents are invested and not used entirely for consumption. Some very interesting data are given for changes in wealth during the twenty-year period We can see that wealth has increased worldwide, especially un middle-income countries. Decreases in wealth, however, point out also to very interesting cases: the central African countries along the Equator, Mexico in the Americas, Greece, Portugal and Spain in Europe, and a couple of countries in turmoil, such as Turkey and Ukraine. After reading the printed report, I went to the World Bank website, and with copy and paste, and a little of Excel (while some people around were wasting their time watching the silliest Olympic sport ever: curling), I have been able to produce a Table of countries ordered by their per capita wealth and the annexed per capita income, and the two Graphs for countries above and below the world average, which show some intriguing results. It is not a surprise that high per capita wealth and income are strongly correlated for most rich countries, including Norway and Switzerland at the top, almost all the European Union members, the United States and Canada,

4 plus Japan and Korea. In contrast, the very wealthy oil producers do not make it as well regarding income, in relative terms to other countries, especially Qatar, Kuwait and Saudi Arabia. Some routinely repeated myths should also be revised: given their wealth, Singapore does it very well, but Malaysia not at all. Regarding the countries at lower levels of wealth than the world average, more surprises emerge. Some countries with bad fame, such as Argentina Mexico and Turkey (in spite of the two latter s losses during the last twenty years), appear as having relatively good levels of per capita income in relation to their poverty in wealth. The opposite lower income than wealth, always in comparative terms can be observed for countries in permanent chaos such as Turkmenistan and Congo, as well as, to some extent, Colombia after many years of violent conflict (now finally receding). China is wealthier than India, but the former does not transform its wealth into income as efficiently as the latter. The World Bank report acknowledges: The role of social capital, institutions, and governance is explored only tangentially in this volume, and could be the topic of further work. An invitation to follow.

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7 Table. Wealth and Income per capita, per countries, COUNTRY Code WEALTH INCOME Norway NOR Qatar QAT Switzerland CHE Luxembourg LUX Kuwait KWT Australia AUS Canada CAN United States USA Sweden SWE Denmark DNK Iceland ISL Netherlands NLD Singapore SGP Germany DEU Finland FIN Austria AUT United Kingdom GBR Belgium BEL France FRA Ireland IRL Japan JPN Saudi Arabia SAU Italy ITA Korea, Rep. KOR Slovenia SVN Spain ESP Malta MLT Oman OMN Portugal PRT Bahrain BHR Estonia EST Uruguay URY Malaysia MYS Chile CHL Latvia LVA Greece GRC Slovak Republic SVK Gabon GAB

8 Brazil BRA Russian Federation RUS Kazakhstan KAZ Lithuania LTU Costa Rica CRI Hungary HUN Suriname SUR Poland POL Croatia HRV WORLD Turkmenistan Panama Colombia TKM PAN COL Argentina ARG Mexico MEX China CHN Romania ROU Ecuador ECU Iraq IRQ Belarus BLR Dominican Republic DOM Mauritius MUS Botswana BWA Paraguay PRY Azerbaijan AZE Namibia NAM Peru PER Bulgaria BGR Mongolia MNG South Africa ZAF Jamaica JAM Guyana GUY Congo, Rep. COG Lebanon LBN Thailand THA Belize BLZ Ukraine UKR Albania ALB Armenia ARM Swaziland SWZ Macedonia, FYR MKD Papua New Guinea PNG Jordan JOR

9 Bolivia BOL Indonesia IDN Turkey TUR Tunisia TUN Maldives MDV Honduras HND Georgia GEO El Salvador SLV Guatemala GTM Tajikistan TJK Zambia ZMB Morocco MAR Bosnia Herzegovina BIH Lao PDR LAO Egypt, Arab Rep. EGY Nigeria NGA Nicaragua NIC Moldova MDA Cameroon CMR Solomon Islands SLB Philippines PHL West Bank and Gaza PSE Mauritania MRT Vietnam VNM Ghana GHA Cote d'ivoire CIV Kyrgyz Republic KGZ Yemen, Rep. YEM Pakistan PAK Rwanda RWA Central African Rep. CAF Chad TCD Kenya KEN Zimbabwe ZWE Togo TGO India IND Tanzania TZA Mali MLI Cambodia KHM Haiti HTI Sierra Leone SLE Nepal NPL Uganda UGA Ethiopia ETH

10 Senegal SEN Bangladesh BGD Burkina Faso BFA Congo, Dem. Rep. COD Niger NER Malawi MWI Liberia LBR Madagascar MDG Guinea GIN Comoros COM Mozambique MOZ Burundi BDI Gambia, The GMB Source: Josep M. Colomer, Wealth and Income per capita in the world With data from World Bank