Scottish economist Adam Smith described the complex relationship between man, knowledge and economic growth. According to Smith, education and training costs are a real expense, which is capital in a person, and the skills they possess constitute a fortune for both the individual and society.
Essentially Smith was referring to human capital, which is the education, training, skills, and health that individuals and their societies accumulate, enabling well-being and prosperity. While evidence shows that human capital drives economic growth, data from the World Bank shows that investment in human capital is too low in low- and middle-income countries.
For example, only 1.5 per cent and 1.9 per cent of World Bank concessional grants are spent on health and education, respectively. This is because for politicians, returns on roads and railways might appear to have more impact on economic growth in one election cycle, sooner than one can show returns on investing in nutrition for children, healthcare or education.
In 2017, World Bank President Jim Yong Kim announced that the human capital would be included in the measurement of wealth of nations. In collaboration with the World Bank, the University of Washington’s Institute for Health Metrics and Evaluation has developed a measure of human capital that incorporates data on educational attainment, learning, functional health and survival between 1990 and 2016 for 195 countries.
Thanks to elegant data analysis, we have for the first time a Human Capital Index for 195 countries. Kenya is ranked 139th. Moreover, 39 of 50 countries with the lowest Human Capital Index are in Africa. Mali, Burkina Faso, Chad, South Sudan and Niger are in the bottom five. Finland, Iceland, Denmark, Canada and Netherlands are in the top five.
This means that educational attainment, learning outcomes (measured by standardised test scores), functional health and survival were highest in Finland and Iceland, lowest in Niger and South Sudan.
Finland’s education attainment is 14 compared to just four in Niger and South Sudan. Education attainment is measured by the number of years of schooling a child can expect by their 18th birthday, given national enrolment rates at all grades. This is based on the assumption that kids enrol in early childhood education programmes at the age of four years.
Data shows that there is a significant correlation between learning outcomes and GDP per capita. For example Singapore, with the best learning outcomes, also has very high per capita GDP. Similarly, countries with poor learning outcomes such as Malawi also have low per capita GDP. Moreover, the high proportion stunted children was also strongly associated with low per capita GDP. This might sound like a chicken and egg problem. What comes first?
The Human Capital Index, measured by national data on learning outcomes, health, survival and educational attainment, demonstrates that it is possible to provide, periodically, a basis for evaluating the impact of investments in health and education.
While Africa will have the largest workforce on the planet, low levels of investment in education and health will undermine its productivity and economies competitiveness. Now is the time to invest.
Alex O Awiti is the director of the East Africa Institute at Aga Khan University