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By Caroline Grady 06-03-2020
In: podcasts | Economics

How Wealth Has Changed (The Indicator – Planet Money)

(10 min listen)
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Summary (You can listen to the podcast by clicking here)

• Charles Kenny from Centre for Global Development contextualises the structural shift in global wealth by highlighting that the economy of California is currently bigger than the entire global economy in 1870 despite having only 0.5% of the world’s population.

• Nearly two-thirds of wealth is now generated through human capital (or intangibles), capital goods account for just over one quarter and the rest natural capital (e.g. land, oil).  In contrast to the latter two, human capital is not zero sum and it is more valuable with wider use.

• Given this shift to wealth creation through ideas the world now needs greater co-operation across countries, not less. The US tightening of IP rights has been a mistake and a cost to the world. Given around 70% of global R&D is done outside the US it will also mean the US becomes a smaller share of global economy. The move backwards in global integration is foolish.

 

Why does this matter? Another potential downside to de-globalisation is that new ideas and technologies could become less integrated. This could reduce the opportunities for less developed economies to shift up the value chain.