Measuring the Wealth of Nations

Escrito el 19 Septiembre 2012 por Gonzalo Garland en Diccionario de Economía, Economía Global, Economía Mundial

When we think about a family we can always distinguish between its income and its wealth. Income is what the family will receive in any given year, usually from work, dividends, or other income sources, and once income taxes are paid, the net income can be either spent or saved. Wealth, on the other hand, is the accumulation of savings over time plus any capital gains or losses, and any further addition to the wealth that can come, for example, in the form of an inheritance.

 We could think in similar terms when we consider a country. Gross Domestic Product (GDP) refers to the value of what is produced in the country during a specific year. Hence, it is similar to income, which is also for one specific year. However, we can also talk about a country’s wealth, which would include the accumulated savings of its citizens minus its debts, and that would also include the value of the natural resources the country has, such as its agricultural, forestry, mineral or fishing resources, or the value of its human capital.

Clearly, measuring a country’s wealth is more difficult than measuring the production of one year, despite the methodological difficulties involved in measuring GDP. Nevertheless the World Bank has managed to do it. In the report “The Changing Wealth of Nations” published in 2011 it measures the wealth of countries for years 1995, 2000 and 2005. Interestingly enough, although some may think that by incorporating this new variable the relative position of countries would change significantly, the truth is that it doesn’t.

The average wealth per capita of the world was of US $ 120,475 in year 2005, and the highest values are found in Luxembourg, with US $ 917,530  per capita, Iceland with US $ 902,960 (note that this was before the crisis), Norway with US $ 861,797, Denmark, with US $ 742,954, Switzerland with US $ 736,795 and the United States with US $ 734,195. The UK, with US $ 662,624, has a larger per capita wealth than France (US $ 586,448), Japan (US $ 548,751), Germany (US $ 547,201), Italy (US $ 498,277) or Spain (US $ 408,385). Latin American countries have, on average, US  $ 79,194 per person, and Sub-Saharan Africa, as is the case with per capita income, is also at the bottom of the table with US $ 13,888 per capita.

So despite some minor changes in relative positions, overall the pattern is similar in both income and wealth at the global level.


GOYO DE FRUTOS 20 Septiembre 2012 - 07:53

Dear friends first of all , thank you very much for this interesting post. In my opinion the wealth of nations depens on three important factors

1 low rate of general corruption, and good maners
2 a very good enviropment for making business, i mean good facilities and a generous policy tax , above all on saving and invesment
3 freedom for moving your money.
The great goal of nations must be attract money from citticens of any part of the world.
And i finish with a reflection ” if i am a rich man in Kenya. Why i prefer put my money in Switzerland ?

best regads form Segovia ( Spain)

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