Social capability and the role of human capital

The Asian Miracle: Lessons for Policy makers. Part III The role of human capital in the development of African and Asian countries can be differentiated in many ways. For instance, with regard to human capital development through education one has to draw a line.

The Asian Miracle: Lessons for Policy makers. Part III

The role of human capital in the development of African and Asian countries can be differentiated in many ways. For instance, with regard to human capital development through education one has to draw a line.

The colonial administration in Africa did not emphasise the education of Africans and was indeed left to missionaries who also had their objectives in such training.

On the contrary, colonial administration in Africa had to rely solely on expatriate staff for its human capital needs, as it lacked the indigenous skills to replace them. In contrast, Asian countries were at an advantage with regard to human capital development.

British colonial administration (which colonised most of the Asian countries) left behind an educated elite that was able to assume responsibilities in both public and private sectors.

These countries also embarked on ambitious human capital development through the training of its people, both at home and abroad; and this human resource has contributed immensely to its economic development, this was not the case for African countries.

Human capital development in Asian counties mainly focused on a tertiary level, so as to improve the quality of graduates who could meet market demands.

This focus on human resource development has been outlined in most of their development plans as a top priority which highlights human capital development as a fundamental requirement for achieving the objective of sustained economic growth.

As such, East Asian countries experienced the greatest absolute increase in years of schooling between 1960 to 1994 ‘one may add on … and beyond 1994’, a factor that was one of the initial conditions for development.

The level of education as well as its growth is crucial for the development of human capital and, in turn, for capital accumulation and thus growth.

Barro (1991: 437) argues that “Given the initial level of capita GDP, the growth rate is substantially positively related to the starting amount of human capital.

Thus poor countries tend to catch up with rich countries if the poor countries have high human capital per person (in relation to their level of capita GDP), but not otherwise.

As a related matter, countries with high human capital have low rates and high ratios of physical investment to GDP.”

High levels of human capital development are important for increasing productivity, a consequence of which is higher earnings to the underlying labour, a part of which will be saved, thereby increasing capital formation. 

On the other hand, many African countries have not had consistent human development policies necessary to develop its human capital.

Thus Ryan (2001) observes with regard to Africa that, imaginative copying is the way forward and that originality is lacking. 

Such disparity is partly explained by the differences in the growth of output per-capita, which averaged 3.9% for Asian economies for the period 1960-1985 against 1.1% for Africa, and a corresponding annual growth of total factor productivity of 1% for African economies against 0.6% for Africa for the period 1970-1985.

Thus, in absolute terms, an Asian worker produced three times what an African worker produced for the same period.

Kim and Lau (1994:265) observe that “… the labour force in the East Asian NICs (Newly Industrialized Countries) are among the best educated in the world outside of the OECD countries and both the average level and the quality of education have been rising rapidly in the East-Asian NICs.”

This factor leads on to other factors responsible for the difference in the level of development, namely technological innovation and financial development.

Asian countries, by virtue of their educational standards, have succeeded in developing and using relevant and appropriate technology faster and more efficiently than most other LDCs.

This enabled such countries to become some of the world’s leading exporters of electronics components, highlighting its superiority in technological advancement.

Isoe (1997:7) observes that secondary and tertiary enrolments in Africa has been far below those of Asian economies for over two decades; and yet these are the levels of formal education which are important for industrialisation, as they are necessary for coping with the most complex and rapid changing technologies.

Percentage of age group enrolled in education in Africa and East Asia, 1970/1991. Source UN Statistical Yearbook (various). The disparity is seen to be most pronounced in higher institutions of learning which are crucial for development. Africa fared badly in terms of enrolment numbers.

In an empirical study by researchers in 2000 found that human capital accumulation contributed to a third of overall GDP in Spain for the period 1978-1997, with another third accounted for by physical capital accumulation.

In his study of macroeconomic performance in Sub-Saharan Africa, Njuguna (1998) asserts that the initial quality of human capital and infrastructure determines long-term growth through their influence on the marginal productivity of private investments.

This holds true in so far as the quality of human capital is crucial for the manipulation of the other factors of production, to the extent that this becomes a prime factor for the rest.

The importance of human development in economic development among the LDCs (Least Developed Countries) has attracted the attention of both bilateral and multi-lateral agencies, who now include in their development agendas, development loans and aid a condition that part of such financial resources should be utilised for human capital development programmes.

This realisation, coming late as it has done, is based on the realisation that massive loans and aid that have been disbursed to LDCs, and to Africa in particular have failed to make an impact on the living conditions of the mass population, as the human environment was not conducive.

Instead such programmes served only to create dependency conditions in the recipient countries. The new approach is, as it were, not to give the masses ‘fish but teach them how to fish’.

The writer is a Presidential Senior Advisor on Economic Affairs

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