Sustainable Development: Adjusted Net Saving

Adjusted net saving is a relatively new measure of economic sustainability. It monitors whether savings and investment in a country compensate for the depreciation and depletion of physical and natural capital and for pollution damages.

Measuring adjusted net saving

Gross national saving

(minus) consumption of fixed (physical and produced) capital.

equals Net national saving

Plus education expenditures (which adds to human capital)

Minus depletion of natural capital (e.g. value of fish stocks, forestry and mineral resources)

Minus pollution damages

= adjusted net national saving

Over-extraction of natural resources and the adjusted net savings gap.

Many lower and middle income countries that are heavily reliant on extracting and then exporting natural resources in order to achieve economic growth are not able successfully to translate their natural capital wealth into physical and human capital wealth that is crucial to lifting per capita incomes. Their national savings and investment in education are not enough to offset the running down of physical capital and depletion of natural resources and this they have a negative adjusted net savings rate.