Measuring Wealth in Resource-Based Economies: Beyond GDP

For countries endowed with oil, gas, or mineral resources, the question is not whether resources generate value. It is whether or not that value translates into long-term wealth.

This distinction is oftentimes overlooked. Economic performance is still assessed through GDP growth, export revenues, or fiscal balances. A country can grow while simultaneously depleting its underlying asset base. At the core of this issue is an uncomfortable reality: natural resource extraction is the liquidation of natural capital, not income.

From flows to stocks

The ‘resource curse’ was a dominant idea in the early 2000s, giving rise to research and even the establishment of new institutions, such as the Extractive Industries Transparency Initiative (EITI), which was established in 2003.

However, what always held more importance to me was how to measure it properly. During my MSc (completed in 2014), I worked with the Genuine Savings (GS) framework developed by World Bank economists. The analytical foundations return to capital theory in ecological economics. Pearce and Atkinson (1993) proposed a simple rule: an economy is sustainable if its total capital stock does not decline over time. This translates into a practical condition: savings must exceed the depreciation of both produced and natural capital. While it does appear intuitive as of today, it marked an important shift – from measuring income to thinking in terms of wealth. Subsequently, what matters is not just output but whether an economy is maintaining or eroding its asset base.

From theory to resource economies

Later work by Atkinson and Hamilton (2003) extended this logic specifically to resource-rich economies. Using cross-country data, they showed that the ‘resource curse’ is oftena savings problem: nations that consume resource rents rather than reinvesting them end up gradually poorer in the long-term. Their key insight was straightforward: countries do not fail because they have resources; it is rather because they consume resource rents instead of transforming them into other forms of capital.

This idea was operationalized through the concept of Genuine Savings (GS):

Genuine Savings = Net savings – Resource Depletion

Once depletion is properly accounted for, the picture often changes. Many resource-rich economies show low or even negative genuine savings, meaning they are running down wealth rather than building it.

From measurement to policy

This is not only about low-income nations. A 2016 paper by Atkinson and Hamilton extended this framework into broader wealth accounting approaches, linking resource depletion to fiscal policy, sovereign wealth funds, and long-term asset management, demonstrating that even a high-income nation, the UK in particular, had missed a massive opportunity. They constructed and ran a simulation: if the UK had placed its North Sea oil revenues into a sovereign wealth fund starting in 1975, it could have been worth around £280 billion by 2010. Thus suggesting that any government which treats one-time resource income as recurring fiscal revenue risks the same outcome.

Why share this now?

I first explored and applied Genuine Savings in my MSc Thesis, conducting statistical analysis on extractives-dependent economies. But the framework is not new. The resource curse conversation has faded, replaced by climate discourse, energy transition, and critical minerals. Nevertheless, the measurement challenge has not vanished. As the world races to secure critical minerals for the energy transition, every resource-rich country will be forced to face the same dichotomy: consume the wealth or build long-term prosperity.

Genuine Savings is only one tool; nonetheless, it’s a very useful diagnostic. In essence, it verifies whether you are saving enough of what you take from the ground.

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