Any organization can assess only from five kinds of capital to deliver its goods and services. They are: Natural capital, Human capital, social capital, manufactured capital and Financial capital.
While the two of these have been serving the humanity for long to calculate the prospects of economic growth, there are other kinds which have lesser been utilized yet.
Human capital, being the earning of a human’s lifetime, compose of factors like health, knowledge, talents, motivations etc. These are essential for a better productive work.
Whereas Natural capital, is an essential asset for productivity as well as life. It is a combination of economic value of both renewable (forests, lands etc.) as well as non-renewable assets (minerals, fossil fuels etc.) in life.
Social Capital, in turn, helps us to maintain that human capital created through various structural societal institutions like family, community, schools, trade unions etc.
Manufactured capital is a measure encompassing goods or fixed assets like infrastructure, machinery etc. Finally, it is the financial capital that represents all in terms of value and has no real price of its own.
Are we calculating the capital stocks of the country, right?
In similar light, World Bank has considered the gross domestic product (GDP) and other traditional growth rate methodologies to fall short of its purpose and it asserts Economic growth to be truly sustainable only in case human and natural capital are part of its calculation.
“A deeper and more nuanced understanding of the sustainability of wealth is crucial to a green, resilient, and inclusive future”, explains the managing director for development policy and partnerships at the World Bank.
“Wealth should be used alongside GDP to provide a means of monitoring the sustainability of economic development”.
Is sustainability in this sector, difficult to account for?
However, to attain sustainability in an organization, it will maintain and even, at times, enhance the stocks of these capital assets instead of depleting or degrading them.
Problem comes when we consume these confined stocks of natural, human and social capital faster than we can produce them. Sustainability can be achieved by controlling the rate of this consumption otherwise they will soon dwindle.
“It is essential that renewable natural capital and human capital are given the same importance as more traditional sources of economic growth, so that policymakers take steps to enable long-term prosperity”, explains an official at World Bank.
Better management of these stocks can help us survive on the income without reducing the stored capital value itself.
The onus for this lies on decision makers in every organization, business unit etc. to move and adapt to a sustainable environment.
The nation’s well-being and stability for long, has been depicted by GDP irrespective of its effect on every resident of that country.
But it can be criticized as it lacks the mechanism to include income inequality, pollution, quality of life, education etc., in this account or measure.
The new report values a wide scale of assets consisting of a country’s natural capital including minerals, forests, wetlands, fossil fuels and marine treasure etc.
Human, Natural Capital Key to Sustainable Growth, says @WorldBank:
'It's essential that natural capital & human capital are given the same importance as more traditional sources of capital, so that policymakers take steps to enable long-term prosperity.'https://t.co/ivGz7ElylC pic.twitter.com/kyYtDKr1Dk
— Capitals Coalition (@CapsCoalition) October 29, 2021
These, if efficiently used, can add to the power of developing countries striving to fulfil their needs.
The recently released “Changing Wealth of Nations 2021” has found wealth to have increased significantly between 1995 and 2018 across the globe with a registered increase in inequality among groups, something that is not conducive to long-term prosperity.
World growth and inequality:
A UN report has indicated that while the world moved towards increased prosperity in terms of growth rate, inequality has grown for more than 70 per cent of the global population.
The relationship between economic growth and inequality, still being undertaken by economists since the beginning of this century, has been a tricky one to understand.
Though some experts suggest inequality comes with higher growth, more investment is easily accessible to high-income groups who tend to save and invest more, leaving the least for others.
While some other Economists suggest that both high and low levels of inequality will diminish growth based on Gini curve. Or the OECD analysis that says reducing income inequality could boost economic growth.
As per sustainable development goal 10, reducing inequalities and consequently ensuring that no one is left behind are very intrinsic to the Sustainable Development Goals.
Covid-19 has undoubtedly exposed more vulnerable people and further increased inequalities.
UNSG Antonio Guterres, the Secretary general of UN said: “Within countries, illness and death from Covid-19 has been higher among people and communities that contend with poverty, unfavorable living and working conditions, discrimination and social exclusion“.
“It is exposing fallacies and falsehoods everywhere- The lie that free markets can deliver health care for all, the fiction that unpaid care work is not work, the delusion that we live in a post-racist world, the myth that we are all in the same boat.”
During Covid, when people plunged more into poverty, the world added 607 new billionaires or an average of three billionaires every two days, while India alone could add 55 new billionaires or one billionaire per week.