Thursday, October 11, 2007

Where a country's wealth comes from

One of the assumptions made about rich and powerful countries is that they’re rich/powerful because of their inherent wealth – natural resources, capital, and so on. But a great article in Reason quotes a World Bank study that shows that by far, the biggest part of a country’s wealth can be its “intangible wealth” – wealth that arises because of the people, and the institutions that support them.

In the US for example, natural capital is $15,000 per person, produced capital is $80,000 and intangible capital a whopping $418,000 – so intangible wealth is over 80% of the country’s total wealth.

Some countries even have a negative intangible wealth – that simply means the intangible stuff actually destroys wealth. Countries such as Nigeria, Algeria and Syria have negative intangible wealth; countries such as Russia, Venezuela and Congo have very low positive intangible wealth figures.

The top ten countries in terms of intangible wealth are Switzerland, Denmark, Sweden, the United States, Germany, Japan, Austria, Norway, France, Belgium-Luxembourg.

What’s the main difference the countries with high intangible wealth figures and those with low or negative intangible wealth figures? In a word, freedom.

In my book, I make the point that freedom results in health. From the World Bank study, it appears that freedom results in wealth too.

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