What is Human Capital?
Dictionary defines human capital as "the collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community".
The Lancet study says it "provides a new measure of expected human capital for 195 countries, consisting of four components: educational attainment, learning, health, and survival, based on a systematic analysis of all available data. This measure, in units of health, education, and learning-adjusted expected years lived between age 20 and 64 years, is estimated each year from 1990 to 2016 and can be updated annually." Learning is based on average student scores on internationally comparable tests.
|Human Capital Growth in South Asia. Source: The Lancet|
Both Pakistan and India have seen their human capital double from three years of learning in 1990 to six years of learning in 2016 but both still rank low with significantly less than 10 years of learning, according to a human capital study of 195 countries recently published in the journal The Lancet.
In fact, the entire South Asia region continues to rank low in terms of human capital. Among South Asian nations, Sri Lanka ranks the highest at 102 (13 years), Maldives 116 (12 years), Bhutan 133 (9 years), Nepal 156 (7 years), India 158 (7 years), Bangladesh 161 (6 years), Pakistan 164 (6 years) and Afghanistan 188 (4 years). Countries with less than 10 years of learning are considered having "low human capital" by the authors of the study.
In 2016, the Lancet study shows that 44 countries achieved more than 20 years of expected human capital while 68 countries had expected human capital of less than 10 years. Bangladesh, India and Pakistan have less than 10 years of learning, putting them in the category of low human capital countries.
|Change in Global Human Capital Maps. Top 1990, Bottom 2016. Source: Lancet|
Global Human Capital Rankings:
Finland tops the human capital charts with 28.4 years of learning, United States ranks 27th with 23 years of learning and Turkey and China rank 43rd and 44th respectively, each with 20 years of learning. The countries with the least human capital are those in sub-Saharan Africa. Mali ranks 191st (3 years), Burkina Faso 192nd (3 years), Chad 193rd (2 years), South Sudan 194th (2 years) and Niger (2 years) at the very bottom ranked 195th.
Impact of Human Capital on Economic Growth:
The Lancet report says that "human capital is characterized as the aggregate levels of education, training, skills, and health in a population, affecting the rate at which technologies can be developed, adopted, and employed to increase productivity".
Growth in human capital is associated with faster economic growth. The top quartile of countries in terms of absolute change in human capital from 1990 to 2016 had a median annualized growth in gross domestic product of 2·60% (IQR 1·85–3·69) compared with 1·45% (0·18–2·19) for countries in the bottom quartile, according to the Lancet report.
Human Development in Pakistan:
In addition to the human capital report by The Lancet, UNDP’s Human Development Index (HDI) is another indicator of human progress that combines information on people’s health, education and income. The latest Human Development Report (HDR) shows Pakistan's HDI ranking sank to a new low of 150 in 2018.
|Pakistan's Human Development Growth Rate By Decades. Source: HDR 2018|
Pakistan saw average annual HDI (Human Development Index) growth rate of 1.08% in 1990-2000, 1.57% in 2000-2010 and 0.95% in 2010-2017, according to Human Development Indices and Indicators 2018 Statistical Update. The fastest growth in Pakistan human development was seen in 2000-2010, a decade dominated by President Musharraf's rule, according to the latest Human Development Report 2018.
The Human Development Index (HDI) is a composite index focusing on three basic dimensions of human development: the ability to lead a long and healthy life, measured by life expectancy at birth; the ability to acquire knowledge, measured by mean years of schooling and expected years of schooling; and the ability to achieve a decent standard of living, measured by gross national income per capita.
Not only has Pakistan's economy slowed since 2008 but its progress in education sector has seen a dramatic slowdown. Data shows that Pakistan's literacy and enrollment rates are not rising in spite of significantly increased education spending over the last several years. Education budgets at federal and provincial levels have seen double digit increase of 17.5% a year on average since 2010. And yet, school enrollment and literacy rate have remained essentially flat during this period. This lack of progress in education stands in sharp contrast to the significant improvements in outcomes seen from increase education spending during Musharraf years in 2001-2008. Why is it?
Is the money not being spent honestly and wisely? Is the education budget being used by the ruling politicians to create teacher jobs solely for political patronage? Are the teachers not showing up for work? Is the money being siphoned off by bureaucrats and politicians by hiring "ghost teachers" in "ghost schools"? Let's try and examine the data and the causes of lack of tangible results from education spending.
Pakistan Education Budget:
The total money budgeted for education by the governments at the federal and provincial levels has increased from Rs. 304 billion in 2010-11 to Rs. 790 billion in 2016-17, representing an average of 17.5% increase per year since 2010.
Education and Literacy Rates:
Pakistan's net primary enrollment rose from 42% in 2001-2002 to 57% in 2008-9 during Musharraf years. It has been essentially flat at 57% since 2009 under PPP and PML(N) governments.
|Source: Economic Survey of Pakistan 2015-16|
Similarly, the literacy rate for Pakistan 10 years or older rose from 45% in 2001-2002 to 56% in 2007-2008 during Musharraf years. It has increased just 4% to 60% since 2009-2010 under PPP and PML(N) governments.
|Source: Economic Survey of Pakistan 2015-16|
Four Levels of Development:
The extensive data compilation and research by Professor Hans Rosling of Sweden has shown that the binary categorization of nations into developed and developing is no longer useful. Instead, he has proposed using 4 levels of development based on health and wealth indicators, a proposal that has now been accepted by the United Nations and the World Bank. Here's how Rosling and the United Nations define these 4 levels:
1. Level 1: One billion people live on level 1. This is what we think of as extreme poverty. If you’re on level 1, you survive on less than $2 a day and get around by walking barefoot. Your food is cooked over an open fire, and you spend most of your day traveling to fetch water. At night, you and your children sleep on a dirt floor.
2. Level 2: Three billion people live on level 2, between $2 and $8 a day. Level 2 means that you can buy shoes and maybe a bike, so it doesn’t take so long to get water. Your kids go to school instead of working all day. Dinner is made over a gas stove, and your family sleeps on mattresses instead of the floor.
Level 3: Two billion people live on level 3, between $8 and $32 a day. You have running water and a fridge in your home. You can also afford a motorbike to make getting around easier. Some of your kids start (and even finish) high school.
Level 4: One billion people live on level 4. If you spend more than $32 a day, you’re on level 4. You have at least a high school education and can probably afford to buy a car and take a vacation once in a while.
Imran Khan's Ambitious Agenda:
Imran Khan laid out his agenda in his first speech to the nation after taking the office of the prime minister. It was more like a fireside chat in which he spoke directly to the people to explain his priorities that emphasize education, health care and human development. These are the keys to leading Pakistan from level 2 to level 3. In order to pursue his priorities, Mr. Khan needs to first address the more urgent economic crisis which he acknowledged. Pakistan needs to deal with excessive public debt and pay for the necessary imports to move forward. He must also deal with financial corruption and mismanagement to free up the resources for his ambitious agenda of economic and human development of the nation.
Mr. Khan will almost certainly face stiff opposition from the status quo forces which stand to lose from the changes he seeks. They will fight to preserve their patronage networks and their power and privilege. They will try to bring down his coalition government with all they have got. They might even threaten his personal safety and security.
Professor Hans Rosling has compiled extensive socioeconomic data and done serious research to understand how nations develop. He has shared his work in "Factfulness" that he co-wrote with his son Ola Rosling and daughter Anna Rosling Ronnlund. Here's an except on democracy and development from Factfulness:
"This is risky but I am going to argue it anyway. I strongly believe that liberal democracy is the best way to run a country. People like me, who believe this, are often tempted to argue that democracy leads to, or its even a requirement for, other good things, like peace, social progress, health improvement, and economic growth. But here's the thing, and it is hard to accept: the evidence does not support this stance.
Most countries that make great economic and social progress are not democracies. South Korea moved from Level 1 to Level 3 faster than any other country had ever done (without finding oil), all the time as a military dictatorship. Of the ten countries with the fastest economic growth, nine of them score low on democracy.
Anyone who claims that democracy is a necessity for economic growth and health improvements will risk getting contradicted by reality. It's better to argue for democracy as a goal in itself instead of as a superior means to other goals we like."
Pakistan's human capital has doubled from three years of learning in 1990 to six years of learning in 2016, according to a human capital study of 195 countries recently published in the journal The Lancet. However, Pakistan still ranks a poor 164th in the first-ever scientific study ranking countries for their levels of human capital. India has also doubled its human capital from 3 years to 6 years but Bangladesh stands out by tripling its human capital from two years to six years of learning since 1990. Learning is based on average student scores on internationally comparable tests.
Pakistan saw average annual HDI (Human Development Index) growth rate of 1.08% in 1990-2000, 1.57% in 2000-2010 and 0.95% in 2010-2017, according to Human Development Indices and Indicators 2018 Statistical Update. The fastest growth in Pakistan human development was seen in 2000-2010, a decade dominated by President Musharraf's rule, according to the latest Human Development Report 2018. Pakistan's newly elected Prime Minister Mr. Imran Khan has laid out an ambitious agenda that could accelerate Pakistan's human development progress to take his country from level 2 to level 3 of socioeconomic development. It is achievable but the odds are against him because he faces stiff opposition from the status quo forces. The powerful dynastic duopoly of PPP and PMLN still dominates Pakistan's Senate whose support will be required for major reforms. The research by Professor Hans Rosling shows: "Of the ten countries with the fastest economic growth, nine of them score low on democracy." It's also supported by Pakistan's economic history where pace of development has consistently been faster under military governments than during civilian democratic rule. Can Prime Minister Imran Khan's leadership change the course of history and deliver faster human progress under democratic rule? Let's wait and see.
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