Leonid NESTEROV, (c)
By Leonid NESTEROV, Dr. Sc. (Econ.), Leading Researcher, Economics Institute, Russian Academy of Sciences
Yes, how rich is Russia? This is a crackerjack question. First, we've got to compare our wealth with that of other countries. Yet our statistics furnishes no comparable data. The inferred estimates made by competent experts have not yet been duly covered in the literature. Let us try to fill in this gap. To begin with, we should find out what in particular is now understood by wealth and what its essential components are. Then, how all that is reflected in statistics. Next, how this evidence is evaluated in various countries. And last, we are going to draw relevant conclusions...
Articles in this rubric reflect the opinion of the author.- Ed.
The latter half of the twentieth century saw many dramatic developments-for one, cardinal changes in the political map of our planet and in the world economy under the impact of scientific and technological progress. The growing per capita output of industrial and farm products and the uptrend in the gross domestic products (GDP) are evidence of expanded reproduction being in the mainstream in most countries, despite some odds here and there. For instance, countries of the former socialist system, in the course of their transition to market relations in the last ten years, have moved into a stretch of protracted recession, and Russia is not on top of the doldrums yet.
Still, large volumes of fixed and circulating capital are being drawn into expanding production; and there is an ever growing demand for skilled labor capable of top performance on the job. However, humankind-let alone individual nations- have no open- ended resources at their disposal for further economic expansion. This is one of the problems that expanded reproduction has to deal with. Hence the re-awakening of interest in national wealth which is a generalized indicator of accumulation in this or that country-in other words, of the accumulated labor contribution of the present and preceding generations as a resource essential for sustained reproduction.
Fundamentals of the national wealth concept were formulated in Europe way back in the 17th century. That included valuation of the land (natural resources), material assets (fixed and circulating capital) and human capital (manpower). However, there was no single concept and no reliable information to make a comparison for particular countries. With the appearance of national statistical services in the 19th century it became possible to take a broader view of production and accumulation processes. Yet the systems of statistical indicators in various countries differed both in the basic principles of assessment and in the methods used thereby; there was no explicit concept of accumulated wealth, and the concepts of the product and accumulated resources were often confused.
Things changed for the better in the 20th century when various international organizations joined hands in most different fields of endeavor, be it efforts in settling political and economic conflicts (financial claims too) or work to design unified standards in metrology and statistics. An important landmark on this path was the establishment of the United Nations and its specialized bodies, the Statistical Commission in particular, which brings together and evaluates the experience gained by various countries and international organizations in calculating statistical indicators, and makes recommendations towards their unification. The UN Statistical Commission has devised a system of statistical aggregates for bookkeeping and accounting in various countries (at present a third variant of this system is effective; it is being assimilated by corresponding services, in Russia too). This system- known as the National Accounts System-allows to coordinate the work of national and international statistical organizations now using more than 150 international standards. Proceeding from them, the World Health Organization collects and evaluates data on the population's health; UNESCO does the same in what concerns education, vocational training, science and engineering; the UN Statistical Office prepares summary data on the development of individual countries. And so on and so forth. The circumstantial data amassed by the UN on a large number of indices since 1950- related to various facets of the socioeconomic development of 230 countries-make it possible to study key trends in a particular country and worldwide.
This system enables us to order data on the current state of affairs in a given country and identify indicators of "economic assets" as a sum total of accumulated resources, or national wealth (national capital). Now, national wealth includes these essential components:
fixed and circulating capital as well as nontangible assets and finances. The UN recommends assessing these components by their current cost minus wear and tear, i.e. as available resources which a country needs for its further advancement.
Besides, the UN Statistical Commission suggests methods for recalculating monetary indices in US dollars according to the purchasing power parity of corresponding domestic currencies. This approach is widespread now for direct comparison of the G DP of various countries with the aim of evaluating the level of current consumption. It thus has become possible to gain a deeper insight into accumulation trends in the world and in specific countries. Yet the absence of data on the human potential (human capital) has been hampering the implementation of UN development programs. That is why the concept of "national wealth" has been revised accordingly.
In 1997 the World Bank's experts suggested the following yardstick for assessing national wealth: assume that all its components may be accumulated within 25 years at an annual (end-of-the-year) wear rate of 4 percent. Taken as initial data for computations are expenditures
on the annual reproduction of each component of national wealth in this or that country, counting in the accumulation of economic assets and human capital.
Furthermore, human capital indices should be inferred from data on current consumption by the population and the state for the purpose of education, instruction, vocational training, health care and other expenses involved in skills formation, i.e. what is needed to form an aggregate worker. And last, the World Bank assesses indices of natural resources and reproduced capital.
The above data are collected on 92 countries; the results thus obtained are summed up for a period of twenty-five years and calculated in US dollars according to the purchasing power of respective currencies. The summary data on national wealth in per capita values are brought together for definite groups of countries (North America, Western Europe, Near East, East Asia, and so on) and then tabulated.
Unfortunately, the Soviet Union and other countries of the former socialist community started shifting to a system of statistical indicators within the UN National Accounts System only after 1990 and did not calculate indicators of economic assets. For a long period of time the World Bank did not have at its disposal detailed information on GDP consumption there. Therefore data on these and some other countries were not represented in national wealth indicators calculated by the new methods and were not compared with indices on 92 countries.
In Russia national wealth is still being assessed by the old system of methods adopted in the Soviet Union-balance of the national economy-and not by the National Accounts System of the United Nations. Even now official publications on Russia's national wealth do not take into account natural resources and the human factor evaluated in monetary terms. Meanwhile loan-wolf economists and organizations offer different assessments. If revised and amended, these data can well be used for calculation of per capita national wealth in keeping with the World Bank standards. The Economics Institute of the Russian Academy of Sciences has acted exactly like this. Here are its calculations collated with data on other countries for the middle of the 1990s: Countries
Ths US dollars
USA and Canada
Western Europe Near East
USA and Canada
Western Europe Near East
The above data enable us to draw important conclusions and pass judgement on some of the world tendencies. First, human capital is the chief resource of development in all the countries concerned. Coming second in significance in the United States and Canada as well as in Western Europe is reproduced capital (fixed and circulating assets).
Natural resources show the biggest differences in the absolute values of national wealth components. In the countries of the Near East they rank second in significance compared with the United States, Canada and Western Europe; but in Russia they are placed first. True, this value may be somewhat overstated, and so will be the total value of our national wealth. Thus further inquiry is needed into various kinds of natural resources to elucidate the problem.
Summing up the results of the study carried out at the RAS Economics Institute, we conclude:
Russia has more of the national wealth components per head of the population than the other countries. Indeed, our country is most rich in unique natural resources and in the accumulated wealth of nontangible assets-skills as well as the educational and professional levels. But we are far behind most of the advanced states in material resources. Yet another significant point: our data reflect this country's potential resources, but we are not among the world's leaders in their utilization, unfortunately.
On the world market we are selling our useful minerals, energy carriers, timber and other resources at prices much lower than those on the world market since, as a rule, we are realizing raws and semifinished products. And so it comes to pass that while possessing the world's richest timber resources, our country is buying abroad such products as cellulose, paper and lots of other items. A similar situation holds for ores and other minerals.
Furthermore, in the United States, Western Europe and other industrialized countries the level of monthly incomes drawn by wage- and salary-earners averaged 4 to 5 thousand US dollars in the mid-1990s, which is roughly consistent with the notion of prosperity in those countries (education, skills, higher living standards).
The situation is poles apart in Russia. Given similar educational and professional standards, our workers are drawing only a fraction in comparable world prices because of the perverse system of pay and prices.
The total expenses on the reproduction of human capital characterize its potential, while the payoff (in real terms) indicates the actual level of earnings. A comparison of the potential with the payoff shows the effectiveness of investments into human capital and its reproduction.
Consequently, the level of human potential along with other elements of national wealth forms a groundwork of productive forces which the government of a particular country regulates through the system of payroll payments and domestic prices as important factors of production relations; in these policies the government should not allow stark differences between the potential capabilities of the workers and their wage bills.
Our materials offer a new vision of the national wealth as an essential economic category of the reproduction process in the world. Human potential has now gained ascendancy as a key factor of societal development. The unified (standard) computation methods suggested by the World Bank enable a deeper analysis of the operating economic factors and their role; specifically, they allow to see how the aggregate worker's potential is used.
In the past ten years many of the industrialized countries have been out to boost the efficiency of using this potential through higher expenses of society as a whole and each family in particular on knowledge and skills acquisition, and on better health care, housing conditions and living standards.
The new principles of assessing national wealth elements enable a new vision of this category-we can see in particular how different countries are accumulating resources in real terms, and their significance in reproduction processes. All that compels us to rethink the correlation of the actual volumes of consumption and accumulation, and to improve Russia's national accounts statistics. This in broad terms is the purpose of the Federal Program of Statistical Works of the RF Statistical Board-bring Russian statistics into line with international standards.
Опубликовано на Порталусе 10 сентября 2018 года
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