Wealth, Capital, and Nations

Monday, December 19, 2005
Some 230 years after Adam Smith published An Inquiry Into the Nature and Causes of the Wealth of Nations, the World Bank has published Where is the Wealth of Nations? Measuring Capital for the 21st Century (via Reason Online via Instapundit).

The World Bank's report is 200+ pages which, from an initial scan, seems quite interesting. One of the interesting items is the attempt define "capital". Reason Online summarizes:

The World Bank study begins by defining natural capital as the sum of nonrenewable resources (including oil, natural gas, coal, and mineral resources), cropland, pastureland, forested areas, and protected areas. Produced capital is what many of us think of when we think of capital. It is the sum of machinery, equipment, and structures (including infrastructure) and urban land. The Bank then identifies intangible capital as the difference between total wealth and all produced and natural capital. Intangible capital encompasses raw labor; human capital, which includes the sum of the knowledge, skills, and know-how possessed by population; as well as the level of trust in a society and the quality of its formal and informal social institutions.
I'm no economist and I've only scanned the introductory sections of the report but Reason's summary seems an accurate reflection.

The United States ranks fourth among the 120 countries for which the report makes "estimates of the contribution of natural, produced, and intangible capital to the aggregate wealth."

The top ten nations, ranked by capital per capita (data are apparently as of 2000), are:

Nation/Population (millions)/Wealth

Switzerland/7.2/$648,241

Denmark/5.3/$575,138

Sweden/8.9/$513,424

United States/282.2/$512,612
Germany/82.2/$496,447

Japan/126.9/$493,241

Austria/8.0/$493,080

Norway/4.5/$473,708

France/58.9/$468,024

Belgium-Luxembourg/10.7/$451,714

Other nations over the $400,000 mark are the Netherlands (15.9, $421,389), Finland (5.2, $419,346), and the UK (58.9, $408, 753). The "$300K" nations are: Australia, Canada, Ireland, and Italy. "$200K" nations are Greece, Israel, New Zealand, Portugal, Singapore, and Spain. Once we get past the "Big 23" or so the wealth numbers drop rather drastically. (Notably missing from the table in Appendix 2 are some OPEC type nations such as Suadia Arabia, Kuwait, the UEA, and Oman.)

Only half of the top ten "wealthy" nations exceed 10 millions in population. With the exception of Japan and the US, no nations with 100+ millions population break the $100,000 per capita wealth number. Brazil comes closest (170.1, $86,922) with Mexico next among very large (population-wise) nations (98, $61,872). If I clickety-clacked my calculator correctly the total population of the top-ten, minus the US, is 312.6 millions. The total population of the top-ten is 594.8 millions.

The US and Indonesia are the only nations with more than 200 million population which break $10,000/capita (Indonesia; 206.2, $13,869).

I have no particular point here other than that, in terms of population, the US is the world's third largest nation. No other nation on earth brings so much wealth to so many people.

6 comments:

Doug said...

Don't miss Wretchard's Latest on the Election in Bolivia.

Doug said...
This comment has been removed by a blog administrator.
Jamie Irons said...

Knuck,

This is a very interesting study.

It's fascinating that the Swedes do so well, in spite of (partly because of?) their socialist political system.

And of course Switzerland's top position brings to mind Orson Wells' "Harry"'s comment to Joseph Cotton in "The Third Man"!



Jamie

Morgan said...

Well, Jamie, a cynic might say that this:

The financial support of the government of Sweden is acknowledged with gratitude.

has something to do with it.

More after my two-year-old climbs off the keyboard.

MeaninglessHotAir said...

Jamie,

You might want to take a look at P.J. O'Rourke's book "Eat the Rich". He has interesting chapters on what he calls good and bad capitalism, and good and bad socialism, with one illustrative country covered in each. Sweden is the example he chooses for good socialism.

He shows a chart which plots economic growth in Sweden during the Twentieth Century. There is clear exponential growth occurring until the exact instant that the socialists took control. From that point on growth was only linear. As he points out, the Swedes still have a good life. But they have lost what economists call "opportunity cost". Had their economic growth continued apace, there would now be Ikea and Volvo space stations orbiting the Earth, and Google would be a Swedish company. Opportunity cost is invisible but is very real. Sweden is successful; because of the socialists it is a lot poorer than it should have been.

Knucklehead said...

Jamie,

The Swedish system is pretty interesting.

The key to wealth for a nation, if I have scanned the report well, lies in it's intangible capital which is defined as:

Intangible capital encompasses raw labor; human capital, which includes the sum of the knowledge, skills, and know-how possessed by population; as well as the level of trust in a society and the quality of its formal and informal social institutions.

Sweden has a very well educated populace (knowledge, skill, and know-how) and a very high level of "trust" in their system and society. Interestingly their educational system and "trust" are under some severe pressure over the past decade or so. That's the sort of thing which, I expect, would take a generation or more to show up in a significant way in a study such as the one I pointed to.