Introduction:
It has been a long hiatus since the last issue of the blog. The topic for this issue has been one on my mind for quite a while, and one that I think today each one of us relate to and find common between us all it is our Human Capital. In today’s economy other than the different factors of production that play a role, the collective human capital of the societies we live in is equally a crucial determinant of our prosperity and our material growth. According to the World Bank’s data India’s per capita income in 2021 stood at 2,256.6 US $[1]. In contrast the developed and the advanced countries such as the UK stands at 46,510.3 US $ [2]. The per capita income while does not reflect the entire picture of the human development of a society, does provide as an indicator certain evidence of social development.
The Cambridge dictionary has defined Human capital as “employees, and all of the knowledge, skills, experience, etc. that they have, which makes them valuable to a company or economy.” [3]. The collective human capital of a society in that manner contributes to the rise or fall in its social development.
Since the Industrial Revolution that began in the 18th century, the role of social development and human capital formation has shaped the rise of the West. As we in India continue to industrialise in the 21st century, the reasons and the lessons of social development and its drivers can be something from which we can learn.
The Western Core and its Rise:
The historian and author Ian Morris in one of his defining works and books “Why the West rules – for now: The patterns of history and what they reveal about the future.” , provides us with an explanation. In the very beginning of his book, he makes us a clear distinction of defining what is the West and what is the East in his reference for the book. The western core according to him is that of all states on the European land mass and the Eastern core to bet that of East Asia.
The West and its rise neither had a lock-in or neither was it an accident. Rather it was a collection of larger forces such as that of geography, its social development and historical events that led to its rise is what Morris has argued. While in this blog I cannot entirely summarise the in-depth explanation of Morris and his arguments. However, a couple of useful graphs from his book on social development and other factors would add more context and nuance.
Figure 1: Social Development 1400-1800
Source: (Morris, 2011, p. 478)
Figure 2: Real wages across cities of the World
Source: (Morris, 2011, p. 482)[4]
The graph above also shows two cities in particular that dominated over the centuries, that are that of Amsterdam and London that even with a brief downfall rise again.
Another factor also has shaped the structural rise of the West, beyond social development, it also includes the role of geography and the advantages of its isolation. A great example of this development of port cities across Europe that fundamentally in its truest sense were cities that were plural, highly product, based on external engagement and trade. As a result of this, it created an environment of competition that eventually led to the process of industrialisation.
Even before the industrialisation of the West, in the case of “The Dutch Revolt”, as Geoffrey Parker has written and represented how against Hapsburg Spain throughout the eighty years’ war, the Dutch used their geography and their economic development to sustain the might and resources of Hapsburg Spain. To quote him directly he says “The physical and military geography of the north-west Netherlands was also of crucial importance. The area was, in the words of an English traveller writing in 1652, ‘The great Bog of Europe. There is not such another Marsh in the World, that’s flat. They are an universall Quag-mire. . . . Indeed, it is the buttock of the World, full of veines and bloud, but no bones in’t.” (Parker, 1976, p. 55)[5]. This was true for the use and development of trade as well.
The reason I am referring to the Dutch Revolt that is even before Industrial Revolution, here is because to highlight the role that the factors of geography as well as social development played in the formation of the Dutch republic in its war with Hapsburg Spain.
India and Social Development:
Moving from the past back to the present on the different indicators and parameters of human capital and social development since Independence India has come a long way. But the work still remains. According to the Human Capital Index of 2020, India ranked 116th amongst 174 countries on the based-on survival, health, and education (Suri, n.d.) [6]. This is based on the World Banks’s HCI, that is based on a scale of 0-1. India scored in 2018 and 2020 a 0.5. To take this further on other development metrics, currently as per latest data in 2018 the literacy rate nation-wide stood at 74%, for 2020 Government expenditure on education, total (% of government expenditure) stood at 16.5% that has seen a fall from a peak of 16.7 in 2019 [7], Learning-adjusted Years of School- Factoring in what children actually learn, expected years of school is only 7.1 years as per the HCI 2020, Gross tertiary education enrolment (%) has been at 29 % [8].The figures below will highlight the results of these indicators over many years.
Figure 3: Literacy rate in India from 1980-2020
Source: World Bank
Figure 4: Government expenditure on education, total (% of government expenditure) from 1997-2020
Source: World Bank
This highlights more than anything a fundamental focus on our social development and building our human capital. As for any long-term sustainable economic prosperity and India’s rise will be based on the level of our social development, and to borrow Ian Morris’s framework the role of leveraging our geography.
References and Citations:
[1] GDP per capita (current US$) – India – https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=IN
[2] GDP per capita (current US$) – United Kingdom – https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=GB
[3] Human capital. (n.d.). Cambridge Dictionary | English Dictionary, Translations & Thesaurus. https://dictionary.cambridge.org/dictionary/english/human-capital
[4] Morris, I. (2011). Why the West rules – for now: The patterns of history and what they reveal about the future. Profile Books.
[5] Parker, G. (1976). Why did the dutch revolt last eighty years? Transactions of the Royal Historical Society, 26, 53–72. https://doi.org/10.2307/3679072
[6] Suri, S. (n.d.). Improving India’s human capital by enhancing investment in the early years of children’s development. ORF. https://www.orfonline.org/expert-speak/improving-indias-human-capital-by-enhancing-investment-in-the-early-years-of-childrens-development/
[7] World bank open data. (n.d.). World Bank Open Data. Retrieved May 21, 2023, from https://data.worldbank.org
[8] Human Capital Index| India Brief – https://thedocs.worldbank.org/en/doc/7c9b64c34a8833378194a026ebe4e247-0140022022/related/HCI-AM22-IND.pdf
India and the World | Hritik Bhasin 