Azerbaijan Human Capital Forum

THE CHANGING WEALTH OF

NATIONS 2018Building a Sustainable Future

December 19-21, 2018

Outline

▪Wealth Accounting and its Importance

▪ Main Components of Wealth: Human Capital as the Largest

Component of Global Wealth

▪ Human Capital as the Most Important Driver of Development

▪ Key Messages

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Numbers to remember!

The Changing Wealth of Nations 2018 – Building a Sustainable Future

•5

•14

•60

•70

Measuring wealth and its changes are essential

to monitor the long-term economic well-being of nations

The Changing Wealth of Nations 2018 – Building a Sustainable Future

2006 2011 2018

The Changing Wealth of Nations 2018:

Building a Sustainable Future

▪Wealth accounts

available for 141

countries, 1995 to 2014

(market exchange) rates,

(in 2014 US$)

▪Wealth underpins

income and well-being

▪Human capital –

explicit estimates

possible for the first time, drawing from more

than 1,500 household

surveys maintained by the

World Bank

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Long Term Prosperity and Well-Being

National Income / GDP

Total Wealth

Produced Capital

Machinery Equipment Structure

Urban Land

Natural Capital

Energy/Minerals

Agricultural Land

ForestsProtected

Areas

HumanCapital

Male/Female and Employed/Self-

employed

Net Foreign

Assets

Total Assets-

Total Liabilities

Global Wealth Grew 66% from 1995 to 2014

Changing shares:

▪East Asia’s share

grew from 20% to 26%

▪Sub-Saharan Africa’s

share did not change

▪Europe & Central Asia

and N.America declined

from 75% to 65%

The Changing Wealth of Nations 2018 – Building a Sustainable Future

% change in wealth per capita

▪Global wealth

per capita grew

31% from

$128,921 (1995)

to $168,580 (2014)

▪Azerbaijan’s

wealth grew

by over 100%,

from about

40,638 (1995)

to $85,341

(2014)

50%5%-5% 100%

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Wealth Accounting: Development as portfolio management

▪Is current GDP sustainable, or are we liquidating capital?

▪How much to save vs. consume?

▪What assets to invest in?

Low and middle-income countries: leverage natural capital to build infrastructure, human capital, etc.

Percent Shares of Wealth by Asset Type

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Human capital as a driver of development

▪ Human capital is the largest component of global wealth, 64%

▪ Human capital increases rapidly as economies grow

▪ Women account for less than 40% of human capital wealth

▪ Achieving gender parity in earnings could generate an 18% increase in human capital wealth.

The Changing Wealth of Nations 2018 – Building a Sustainable Future

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

0%

10%

20%

30%

40%

50%

60%

70%

Low income Lower middleincome

Upper middleincome

High income:OECD

Human capital, US$ per capita

Human capital, share of total wealth

Human Capital: Share of Wealth vs Per Capita Value in 2014

Natural capital remains important

▪ Natural capital

remains important

even as countries

grow and develop

▪ Growing an

economy is not

about liquidating

natural capital to

build other assets

▪ Natural capital per

capita is highest in

upper middle and

high income OECD

countries

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Azerbaijan is an outlier, with less human capital wealth than

even low income countries

Percent Shares of Wealth by Asset Type

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Azerbaijan human capital’s contributions

to national wealth considerably low

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Do you know what these numbers are?

The Changing Wealth of Nations 2018 – Building a Sustainable Future

•5

•14

•60

•70

What the numbers stand for

• 5 – Azerbaijan is 5th from bottom among the 141 countries for which we have measured wealth and its components

• 14 – the share of human capital in Azerbaijan’s wealth (%)

• 60 – Azerbaijan’s human capital index (%)

• 70 – The share of human capital in high income OECD countries’ wealth (%)

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Key messages

▪ Development is about building and managing a diverse portfolio of assets• Growth is in part about more efficient use of natural capital and investing the

earnings from natural capital sources into human capital and infrastructure. These investments then result in growth of total wealth.

• Human capital is the single biggest component of global wealth• Azerbaijan’s human capital wealth is lower than even the average for low income

countries

To ensure economic growth and the sustainability of that growth, accelerate investments in human capital and manage the natural asset base sustainably.

▪ Wealth should be used as an indicator of sustainability to complement GDP, which measures only current income

Important to implement full wealth accounting to better inform sustainability assessments

▪ Important to link to other factors for assessing sustainability, such as strong institutions and good governance

The Changing Wealth of Nations 2018 – Building a Sustainable Future

Thank you!

The Changing Wealth of Nations 2018 – Building a Sustainable Future