IWP - INCLUSIVE WEALTH

CONTENTS

Why Do We Need Inclusive Wealth?

Our world is in crisis, and inclusive wealth can be an important step to understanding and resolving them.

MANKIND IS IN CRISIS

In the effort to generate wealth and well-being for the Earth’s 7 billion human inhabitants, we have inadvertently created global crises. They involve every nation, and have the potential to affect every human life.

SOCIAL CRISIS
On the whole, mankind is richer (perhaps use different language: “more well-off”, “more capable of surviving”, “more well-to-do”) than ever before, yet humans still aren’t capable of spreading this evenly across society.
ECONOMIC CRISIS
Society has come to rely on money to create secure and comfortable lives for its people, but the currencies that we depend on are crumbling beneath our feet.
ENVIRONMENTAL CRISIS
In the mean time, humans are degrading the ecosystems and natural resources on which our lives truly depend. Without a change here, mankind will have little to no chance of survival.

INCLUSIVE WEALTH CAN HELP
Society is in desperate need of a change. Chasing after the wrong ideals has led us to the crises we are currently experiencing. The inclusive wealth index can act as a reset button for our priorities. An inclusive approach to calculating wealth opens the spectrum of how we measure success, and reflects our common desire for health and well-being across generations.

The Inclusive Wealth Approach

Inclusive wealth measures countries’ wealth in terms of progress, well-being and long-term sustainability.

1
In inclusive wealth sustainability is defined as positive change in human well-being.
2
A country’s inclusive wealth is the social value (not dollar price) of all its capital assets, including natural capital, human capital and produced capital.
3
If inclusive wealth is positive, then well-being across generations is positive.

WELL-BEING ACROSS GENERATIONS
The inclusive wealth index measures the wealth of nations by carrying out a comprehensive analysis of a country’s productive base. That is, it measures all of the assets from which human well-being is derived, including manufactured, human and natural capital. In this, it measures a nation’s capacity to create and maintain human well-being over time.

Calculating IW

Calculating Inclusive Wealth is as simple as adding up the social worth of each capital type in a country. But it’s not that simple.

While this math looks easy, defining the boundaries of each capital type, and assigning them social prices proves to be a much bigger challenge.
Below you can see how our researchers have defined each capital type, and the factors that have gone into calculating their social worth.

CAPITAL TYPES
MANUFACTURED CAPITAL
Investment
Depreciation rate
Assets lifetime
Output growth
Population
Productivity
NATURAL CAPITAL
Fossil fuels
Minerals
Forest resources
Agricultural land
Fisheries
HUMAN CAPITAL
Population by age and gender
Mortality probability by age and gender
Discount rate
Employment
Educational attainment
Employment compensation
Labour force by age and gender

The Better Indicator

The world wants to know how well it’s doing: how we can instigate development, how long we can maintain the well-being we already have. While other indicators show narrow perspectives on these questions, the Inclusive Wealth Index presents the big picture.

FILLING THE GAPS
Gross Domestic Project
GDP provides a snapshot of society’s productivity right now. But GDP can’t judge whether a country’s people are merely surviving or thriving. It has no idea what’s happening to a country’s ecosystem. And it has no idea how well off a society’s children, grandchildren or great-great-great-grandchildren will be. Inclusive Wealth can.
Human Development Index
HDI gives a wider view of human well-being, but it lacks the environmental dimension. A positive HDI rating says nothing about the natural ecosystems which long-term human development depends on. Inclusive wealth fills this gap.

WHAT INCLUSIVE WEALTH DOES BEST

Inclusive wealth knows that money is not synonymous with value

The Inclusive Wealth index is built on the understanding that goods and services are only of value because they contribute to human well-being. The index measures an asset’s wider value to society, and not the price for which it could be bought or sold.

Faucet, or reservoir? Rather than measuring flows of wealth, like the GDP, it measures the stock of wealth-inducing conditions.

Inspecting the stocks of produced capital, natural capital and human capital, it shows how much wealth a country can potentially create, not just how much is being made right now. You can’t tell how much water is available, just by measuring what’s coming out of a faucet.
The index’s transition from measuring flows to accounting stocks provides an intergenerational understanding of well-being and wealth.

Inclusive wealth shows sustainability

The Inclusive Wealth Index has the answers to today’s biggest question “But, can it be sustained?” One glance at the results suffices. If the number is positive, it’s sustainable; if it’s negative, it’s not. And the IWI doesn’t just show environmental sustainability, its reflects the longevity of peoples’ values and well-being too.

Inclusive wealth illuminates trade-offs and synergies

Because the index measures such a wide spectrum of wealth types, it provides unique insights about when one type of capital is being sacrificed to build up another (trade-offs), and how boosts in some capital types lead to simultaneous jumps in others (synergies).

Insights from Inclusive Wealth

Inclusive wealth helps to answer a number of policy questions, and can guide decision-makers into creating sustainable well-being for their countrymen.

Are we consuming too much?
Is our current level of well-being sustainable? Will the civic project being planned be sustainable?
How can we strengthen well-being? Where will our investments make the most impact?

GUIDING INFORMED DECISIONS
Inclusive wealth helps to answer a number of policy questions, and can guide decision-makers into creating sustainable well-being for their constituents.