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wealth and social welfare falls (Dasgupta and Maler, 2000). Wealth per capita is the correct
measure of social welfare if the population growth rate is constant, per capita consumption is
independent of population size, production has constant returns to scale, and current saving is
the present value of future changes in consumption (Dasgupta, 2001a).
Genuine saving estimates calculated by World Bank (2006), based on Atkinson and
Hamilton (2003), presented in fig. 4 show an alarming picture. Countries with a large
percentage of mineral and energy rents of GNI typically have lower genuine saving rates.
This means that many resource rich countries become poorer each year despite the presence
of large natural resources. They do not fully reinvest their resources at the expense of future
generations by not investing in intangible or productive wealth. For example, Venezuela
combines negative economic growth with negative genuine saving while Botswana, Ghana
and China with positive genuine rates enjoy substantial growth in the year 2003. Highly
resource dependent Nigeria and Angola have genuine saving rates of minus 30 percent, which
impoverishes future generations despite having some GDP growth. The oil/gas states of
Azerbaijan, Kazakhstan, Uzbekistan, Turkmenistan and the Russian Federation all have
negative genuine saving rates; they seem to be consuming or wasting rather than re-investing
their natural resource rents.
Fig. 5 calculates by how much productive capital would increase by 2000 if countries
would have invested their rents from crude oil, natural gas, coal, bauxite, copper, gold, iron,
lead, nickel, phosphate, silver and zinc in productive capital since 1970. The calculations
provide an upper bound, since they abstract from marginal extraction costs due to data
problems. High resource dependence is defined as minimally a 5 percent share of resource
rents in GDP. We see that resource rich countries with negative genuine saving such as
Nigeria or Venezuela could have boosted their non-resource capital stocks by a factor of five
or four if the Hartwick rule would have been followed. This is also true for oil/gas rich
Trinidad and Tobago and copper rich Zambia. All the countries in the top right quadrant
(except Trinidad and Tobago) have experienced declines in per capita income from 1970 to
2000. If the Hartwick rule would have been followed during the last few decades, these
economies would have been much less dependent on oil and other resources than they are.
The Solow-Swan neoclassical model of economic growth predicts that countries with
high population growth have lower capital intensities and thus lower income per capita.
Similarly, in countries with high population growth rates genuine saving can be positive while
wealth per capita declines (World Bank 2006, Table 5.2). Such countries are on a treadmill
and need to create new wealth to maintain existing levels of wealth per capita. They thus need
a closed economy.