HUMAN CAPITAL DEVELOPMENT AND ECONOMIC GROWTH

Real development

Duley Seers (1969) in Todarro (2000) posed the basic questions about the meaning of development, when he succinctly asserted “The questions to ask about a country’s development are…: what has been happening to poverty? What has been happening to unemployment? What has been happening to inequality?” If all three of these have declined from high levels, then beyond doubt, this has been a period of development for the country concerned. If one or two of these central problems have been growing worse, especially if all three have, it would be strange to call the result “development” even if per capita income doubled.

Three factors

Yet it goes without doubt that the great attention given to the ways to accelerate the growth rate of national incomes is not unfounded. All people have certain basic needs without which life would be impossible. These life-sustaining basic human needs include; food, shelter, health and protection. Three core values have been identified as representing common goals sought by all individuals and societies, and serve as a conceptual basis and practical guideline for understanding the inner meaning of development. They are, as enunciated by Goulet (1971) in Todarro (2000), Sustenance, self-esteem and freedom. Sustenance indicates the ability to meet basic needs (food, shelter, health and protection). It follows therefore, that essential to the definition of development is this aspect, which incorporates the means of satisfying man’s basic needs. Economic growth by way of definition is the steady process by which the productive capacity of the economy is increased over time to bring about rising levels of national output and income. 

Three factors or components of economic growth are of prime importance in any society: firstly, capital accumulation, including all near investments in land, physical equipment and human resources; secondly, growth in population and hence eventual growth in the labour-force; and thirdly, technological progress (Todarro, 2000).

Human capital accumulation

Capital accumulation results when some proportion of present income is saved and invested in order to augment future output and income. Investing in human capital is one way of accumulating inputs. The acquisition of knowledge and skills is an investment in the sense that people forego consumption of it in order to increase future income. Because workers have invested in themselves to different extents through education, one hour of labour input does not yield the same output across all workers. Education increases future labour productivity and future income and can thus be seen as an investment in human capital, which then is embodied in the human being.

This idea can already be found in Adam Smith (1776); “A man educated at the expense of much labour and time to any of those employments which require extraordinary dexterity and skills, may be compared to an expensive machine. The work which he learns to perform, it must be expected, over and above the usual wages of common labour, will replace to him the whole expense of education, with at lease the ordinary profits of an equally valuable capital. Also, Alfred Marshall (1890) stated that “the most valuable of all capital is that invested in human beings.” (Ludger, 2000)

Impact of human capital investment

It has been confirmed that no country has achieved sustained economic development without substantial investment in human capital. Several studies have evolved to analyse the channels through which human capital can affect growth (Surveys include Barro and Salai-Martin, 1995; and Temple, 1999). Much of this literature had emphasized the complementary relationship between human and physical capital, noting how imbalances in these two stocks, as well as human capital externalities, can affect growth in the economy. The scientists and technicians appear to have a comparative advantage in understanding and adopting new or existing ideas into production.

Human capital development (HCD) defined

Human capital development is an end, or objective of development. It is a way to fulfil the potential of people by enlarging their capabilities and this necessarily implies empowerment of people, enabling them to participate actively in their own development. Human capital development is also a means since it enhances the skills, knowledge productivity and inventiveness of people through a process of human capital formation broadly conceived. Thus, human capital development is a people centered strategy and not goods centred or production centered strategy of development. What really matters is the empowerment of people to identify their own priorities and to implement programmes and projects of direct benefit to them. This in turn implies the active participation of people in the development process and the consequent need to construct institutions that permit and indeed encourage that participation (Ogujiuba and Adeniyi, 2003). 

Relationship of HCD to education

However, human capital development can be seen as the accumulation of past investment in education. Education is an economic good because it is not easily obtainable and thus needs to be apportioned. Economists regard education as both consumer and capital goods because it offers utility to a consumer and also serves as an inpu
t into the production of other goods and services.

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