The World Bank has been looking afresh at the issue of growth and has been seeking alternative ways to appraise why this situation exists and how it is changing:
I admit the FT show the results better than the FT do. This is their summary:
Remember, this is a measure of change. But, importantly it's a measure of changing capital rather than a measure of income. That is the difference in approach. And it's important.
Long ago accounting realised that three statements were need to offer a true and fair view of the state of affairs of an entity. These are the income statement (or profit and loss as some still think of it), the cash flow statement and the balance sheet. Each is necessary, with the cash flow reconciling movement in income with movement in balance sheet reserves.. Macroeconomics has for too long looked at just an income statement, and too little at balance sheets. When it has looked at the latter it's also usually only looked at finances.
This new work breaks ground by emphasising more than financial capital, and that is important because many forms of capital drive growth. In the process it also emphasises vulnerabilities: mineral resources don't last forever for example, whereas high human capital is associated with high growth:
That clearly indicates the requirement for progress.
Measures are useful for three reasons. The first is comparison. The second is comprehension. The third is as the basis for decision making. What this says is that the best investment in the world is in people. And questions immediately follow, not least as to why so many barriers to education now exist in the UK in the form of student debt, and why have we been so opposed to student migration?
I suspect the report will reward more study. I will be giving it some.