10.36172/EKONOMISTI.2023.XIX.04.Merab.Julakidze 

Expanded Summary

The article discusses the main topics concerning the estimation of National Wealth of Georgia. Namely, it analyses the components of National Wealth: human and natural capital and produced assets, it studies the criteria of determining their optimal proportions and finally, it justifies the necessity of rapid rate of human capital development when dealing with new challenges in estimation of the country’s economic potential and implementation of economic safety program. 

National wealth, the measure of produced and accumulated well-being at a specific point in time, stands as a key indicator of a country’s economic power. It comprises the material well-being generated and amassed through the labor resources of previous and current generations, the natural resources engaged in production, and the value of capital minus depreciation. 

In national wealth accounting, national wealth is defined by the term “economic asset,” the primary characteristic of which is that owners gain economic benefits through ownership and utilization. According to the national accounting classification, national wealth encompasses not only material assets but also non-material values that are outside the realms of production or consumption. In economic practice, the assessment involves measuring national wealth dynamics, accumulation, and renewal. The calculation of these elements involves utilizing current statistical accounts, accounting data, sampling research, continuous inventory methods, and expert assessments. 

International economic institutions are working on inclusion of direct financial investment and long-term (over1 year) consumption goods in national wealth. The World Bank’s initiative in the past decade commenced the assessment of a country & 39-s human capital by demonstrating its quantitative parameters and aligning this demonstration with national account principles. This led to the derivation of an index for the development of human potential. According to this measure, based on 2022 data, Georgia ranks 73rd among 175 countries worldwide. 

The market economy significantly shapes a country’s national wealth by enriching it with new content. Within the framework of national accounting systems, the request for national accounts aligns traditional material and tangible assets with elements such as rights to information, knowledge, expertise, technological usage rights, and the overall human utilization of this resource and informational resource. The national wealth of any country is significantly influenced by human factors. Furthermore, human capital itself becomes a fundamental, objective, and pivotal element of national wealth for many countries. 

In Georgia’s national economy, a low percentage of human resources can be explained not by the abundance of natural resources but by difficulties in economy and intense drain of the most qualified and reproductive labor force from the country. In the last decade of 20^th century, Georgia’s national wealth reduced by 40% due to notable known events, whereas  natural wealth only decreased by 4%, but human capital decreased by 62%, which is 2.6 times. During this period, substantial economic migration occurred. Two-thirds of emigration from Georgia was related to employment. Among them, the most common were highly educated individuals, professional skills, and qualifications. The share of highly educated migrants among all labor migrants was 1.5 times higher and among the migrants aged 20-50 twice the share among the comparable population group in Georgia. Also, in the last 15 years, economic growth and relative stability are highlighted as positive tendencies: the share of human capital significantly increased. 

Renewed method for determination of the duration of the national wealth creation cycle is on the agenda, as the duration has been determined by repeated production cycle until now. Workforce in one lifecycle repeatedly contributes to regular updates, directly reflecting on its value and human capital, as an integrated indicator of labor force capitalization. World human capital constitutes 2/3 of national wealth, while in Georgia, it significantly correlates with its preceding growth in wealth elements other than income and capital. 

Therefore, the determination of the national wealth’s life cycle should emphasize its rapid growth and a high proportion of individual human capital’s life cycle, particularly reflecting population, demography, and other components; period. In Georgia, the average age of mothers of newborns is 25-27 years, indicating that the period of population growth is approximately 25 years. This signifies the first 25 years as an individual period, the second 25 years considering parenting with children, and the third 25 years - with grandchildren. In total, this amounts to 75 years, the average lifespan in Georgia. 

Economists should pay particular attention to aspects such as the prolonged lifespan of certain individual demographics (currently, it’s around 40-45 years in Georgia), the transition between traditional and new economies, the formation of national wealth structure, and the factual analysis of elements contributing to growth. This research doesn’t merely carry theoretical significance but uses acquired results to assess the country’s economic potential and implement economic security programs during challenging times.