Intangible Wealth

The greatest source of a country's wealth is intangible concludes the World Bank. 

Ronald Bailey dove deeply into the World Bank's publication entitled  Where is the Wealth of Nations?  Measuring Capital for the 21st Century to deliver The Secrets of Intangible Wealth in the Wall St. Journal.

We are all familiar with natural capital those nonrenewable resources such as oil and gas,  farmlands and forests.  Produced capital is what we have made or built - infrastructure, machinery and equipment, buildings and other structures.

But once the value of all these are added up, the economists found something big was still missing: the vast majority of world's wealth!
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The rest is the result of "intangible" factors -- such as the trust among people in a society, an efficient judicial system, clear property rights and effective government.
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In fact, the World Bank finds, "Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries."

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Once one takes into account all of the world's natural resources and produced capital, 80% of the wealth of rich countries and 60% of the wealth of poor countries is of this intangible type. The bottom line: "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity."

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In the U.S., according to the World Bank study, natural capital is $15,000 per person, produced capital is $80,000 and intangible capital is $418,000. And thus, considering common measure used to compare countries, its annual purchasing power parity GDP per capita is $43,800. By contrast, oil-rich Mexico's total natural capital per person is $8,500 ($6,000 due to oil), produced capital is $19,000 and intangible capita is $34,500 -- a total of $62,000 per person. Yet its GDP per capita is $10,700. When a Mexican, or for that matter, a South Asian or African, walks across our border, they gain immediate access to intangible capital worth $418,000 per person. Who wouldn't walk across the border in such circumstances?

Methinks again how often people assume wealth consists only of their material assets when the far greater portion of our lives is intangible.