Introduction

The accumulation of human capital and its increasing share in total wealth is widely considered an important component of achieving sustainable development and prosperity according to the 2018 edition of The Changing Wealth of Nations (Lange, Wodon, and Carey 2018). As discussed in chapter 9, nonrenewable natural capital wealth forms a large share of some countries’ wealth endowments: for example, 30 percent in high-income non-OECD countries. This can be as high as 65 percent of total wealth in fossil fuel–rich countries (Iraq, for example) and as high as 24 percent of total wealth in mineral-rich countries, such as Mongolia.

Converting nonrenewable natural assets into sustainable productive assets, such machines, infrastructure, and an educated, healthy population with quality jobs, is a challenging task. Nonetheless, economists identify this as an important requisite for sustainability (Hartwick 1977). Extensive research into the so-called resource curse has pointed to various ways in which nonrenewable natural resource wealth might derail sustainable development and undermine this conversion process (Sachs and Warner 2001; van der Ploeg 2011). At first glance, countries with abundant fossil fuel and/or mineral assets have, a priori, no reasons to fail in a strategy to promote the accumulation of human capital for sustainable development, thanks to economic booms and revenues generated by the production and export of resources.1 However, the risk of mismanaging commodity booms and busts is high. It has been shown that resource wealth might generate suboptimal economic outcomes, including slower economic growth and higher inequality, especially if countries are endowed with weak political institutions (van der Ploeg 2011; Venables 2016).2

Monetary measures of human capital can shed light on how resource wealth might distort an economy. Using data from the new Changing Wealth of Nations (CWON) wealth accounts, this chapter observes higher levels of human capital per capita in non-resource-rich (non-RR) countries compared with resource-rich (RR) countries.3,4 This pattern holds across all regions, with the notable exception of the Middle East and North Africa. Here RR countries have higher levels of human capital compared with other countries in the region.

There are numerous mechanisms that might undermine the process of diversification and economic development in RR countries and thus undermine human capital accumulation (de la Brière et al. 2017; Venables 2016). For instance, during the last major commodity price boom period of 2004–14, RR countries in Sub-Saharan Africa were found to become increasingly more dependent on nonrenewable natural resources, measured in terms of export concentration. Furthermore, most of them failed to use the proceeds on resource exports to invest in rapid accumulation of human and produced capital. This led to a failure to translate the boom into broad economic prosperity with an associated reduction in poverty headcount and inequality. Worse, some RR countries, particularly in SubSaharan Africa, have entered debt crises after the drop in commodity