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World Bank Urges "Green Accounting"

Harmonie Toros

UNITED NATIONS, Sep 14 (IPS) - Who is rich and who is poor? Answering that question is no longer only about Gross Domestic Product and other traditional economic indicators, the World Bank said Tuesday, proposing a new accounting method that includes natural and human wealth.

"Millennium Development Goals are about creating wealth. If we don't measure it right, we won't manage it right," warned World Bank Vice President for Sustainable Development Ian Johnson, at the launch of "Where is the Wealth of Nations? Measuring Capital in the 21st Century" on the eve of the 2005 World Summit.

The original objective of the Summit, which runs Wednesday through Friday, was to review progress made by the world's poorer nations on the Millennium Development Goals (MDGs) set in 2000. A pledge to halve extreme poverty and hunger by 2015 was a high priority on the agenda.

According to the report, governments and international organisations must begin to calculate resource depletion and population growth, among other factors, if a more complete vision of a country's wealth is to be established and if the environmental costs of development decisions are to be fully understood.

Without these indicators, leaders risk "knowing the cost of everything and the value of nothing", Johnson said, quoting the sharp-tongued English writer Oscar Wilde.

The new formula changes little of what is already known about the distribution of the world's wealth: The top 10 countries, led by Switzerland, are all highly developed, including the United States, Japan and seven others in Western Europe; the bottom 10 are all in sub-Saharan Africa, with the exception of Nepal.

Furthermore, low-income countries are losing overall wealth while high-income countries are gaining, said the World Bank's Kirk Hamilton, the lead author of the report.

The divide is already phenomenal. Per capita wealth for the 10 richest countries ranges from 648,241 dollars to 451,714 dollars, while per capita wealth for the 10 poorest ranges from 5,020 dollars for Madagascar to 1,965 for Ethiopia, the poorest of the 120 countries studied by the World Bank working with 2000 figures.

The broader understanding of wealth is composed of produced capital, natural capital such as natural resources and crop and pasture land, and intangible capital - such as skills, know-how and governance.

The three are closely linked, argued Wangari Maathai, 2004 Nobel peace laureate and Kenya's assistant minister for Environment and Natural Resources.

"People without skills, beliefs and values are people who don't believe in themselves. So they are very dependent on natural resources because it is the only wealth they have," she said.

Maathai stressed that most governments still fail to see that development cannot be separated from environmental policy.

"It is a pity that the most important ministries are the foreign ministry and the defence ministry, yet the new enemy is the destruction of our environment," she said.

But what has in the past been dubbed "green accounting" has strengthened the role of the environment ministries, said Carlos Manuel Rodriguez, Costa Rica's energy and environment minister.

Formulas like those presented in the World Bank report help environment ministers convince their heads of state and government that environmental policies can be "economically sound", he said.

"We are able to compete with the other ministers" for resources, said Rodriguez, whose country has been praised for its innovative environmental policies, including charging for some ecological services.

These indicators also help to measure progress toward the MDG 7 -- ensuring environmental sustainability -- which was left without a numerical goal in 2000, said Hamilton.

While welcoming the initiative, Achim Steiner of the World Conservation Union appealed to the World Bank itself to take into account its findings when dealing with developing countries.

"I appeal to (World Bank President) Paul Wolfowitz to not only publish this, but also to take it back and make it influence development," said Steiner during the one-hour panel discussion.

Steiner, director general of a conservation network linking states, government agencies and NGOs, said the World Bank should include the new parameters in Poverty Reduction Strategy Papers (PRSP), national accounts and sectoral policies the Bank is proposing.

Johnson acknowledged that more could be done incorporate environmental sustainability in Bank projects.

"Can we do more? Yes. Should we do more? Yes," Johnson said. But, he added, the challenge lies in convincing national leaders of the importance of taking into account natural wealth in their economic and development planning.

"We could have all the right words in the PRSPs but no one who believes in them," said Johnson.

Streamlining the accounting of resource depletion is also an aim of the United Nations, which is setting up a commission on environmental accounting and aims to have a universally accepted statistical standard by 2010, said Alessandra Alfieri of the U.N.'s statistics division.

Meanwhile, Peter Seligmann, head of the U.S.-based NGO Conservation International, was left wondering why such quantification was necessary at all.

"Why do we have to go through the intellectual exercise (of explaining) why we need to protect the only place we can live on?" he asked, adding that such an exercise proved the need to "build within society a passionate commitment to protect our natural resources".

Seligmann also suggested that the next World Bank report go a step further and answer another question: "How expensive is it for future generations to spend what we have now?"

*This story was produced for the TerraViva Millennium Development Goals Journal. ***** +World Bank report ( +DEVELOPMENT: Poverty Fight May Be Subverted at U.N. Summit (