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The world produces roughly \$120trn of goods and services each year, but annual output is only one way to measure prosperity. A balance sheet asks a different question: what stock of wealth supports that income? The distinction matters because households can become much richer on paper even when the world adds relatively little to its productive capacity.

What counts as wealth for the whole planet

Measuring an individual’s wealth is straightforward in principle: add up property, investments and other assets, then subtract debts. The same method becomes more complicated at the global level. Every deposit, loan, bond and share is both an asset for its owner and a liability for a bank, borrower, government or company. When the entire planet is treated as one entity, these financial claims cancel one another out.

What remains is real wealth: homes and commercial property, minerals, machinery, infrastructure and intellectual property. Combined with human labour, these assets produce the goods and services that determine living standards.

The McKinsey Global Institute has tried to assemble this worldwide balance sheet since 2021. Its latest estimate puts global wealth above \$600trn in 2025, or 5.1 times annual world income. The total barely changed from 2024, even though household net wealth rose by \$40trn to \$570trn. That apparent contradiction reveals where most of the gains came from.

The rise of paper wealth

Only a small portion of the increase reflected new factories, infrastructure, technology or other real investment. Most resulted from existing assets becoming more expensive after inflation. McKinsey calls this “paper wealth”: it raises the value recorded in household portfolios without necessarily making the global economy more capable of producing useful things.

American shares provide the clearest example. Their market value now exceeds 3.7 times America’s annual GDP, compared with less than twice GDP during the dotcom bubble in 1999. Higher share prices enrich the households that own them, but shares are also claims on companies. From the perspective of the world’s consolidated balance sheet, the household asset and corporate liability offset each other. A soaring stockmarket can therefore redistribute and amplify perceived wealth without adding directly to global net wealth.

This does not mean financial markets are meaningless. Equity prices influence retirement savings, borrowing conditions, corporate decisions and confidence. They may also reflect expectations that companies will generate more income in the future. The narrower point is that a higher valuation is not the same thing as building another house, power grid or productive machine.

How the imbalance could end

McKinsey argues that asset values have become disconnected from the underlying economy. Faster real growth could close the gap by allowing income and productive capacity to catch up. Higher inflation could also reduce the imbalance in real terms, though at an obvious cost to purchasing power and financial stability.

Two less reassuring outcomes remain. Asset prices could stay elevated because households prefer saving to spending, keeping interest rates low, valuations high and economic growth weak. Alternatively, markets could fall sharply and erase much of the paper wealth. Although equities net to zero in the global accounts whether prices rise or fall, a crash still hurts investors and the companies whose shares lose value.

The balance-sheet view is a useful corrective to headline measures of prosperity. Rising portfolios can make individual households feel wealthier, yet society becomes durably richer only when it expands the real assets and productive knowledge behind future output. The world’s recent gains look impressive in brokerage accounts; the harder task is turning them into lasting economic capacity.