Components of The National Wealth

observed that a business is always evaluated
by both its income statement and its balance sheet1 (assets and liabilities,
or wealth). Similarly, a prospective homeowner can obtain a
mortgage only by demonstrating both his or her income and net assets—
income in any given year can always be made to look good by selling off
assets, but liquidating assets undermines the ability to generate income in
the future; the true picture of economic health requires looking at both
income and wealth. The economic performance of countries, however, is
only evaluated based on national income; wealth has typically been
ignored. Indeed, one of the primary motivations for the early natural capital
accounting efforts in the mid-1980s was concern that rapid GDP
growth in resource-rich countries was achieved through liquidation of
natural capital—a temporary boost to consumption that created no basis
for sustained advances in wealth and human well-being (for example,
Repetto et al. 1989). Monitoring wealth, including natural capital, was
part of the solution to the challenge of long-term sustainability… Read More Components of The National Wealth