Since ancient times education has been recognized as an important factor for the amelioration of human conditions in a societal setting. Greek thinkers like Socrates, Plato, and Aristotle were all aware of the role of education in society. Plato, in fact, had a very comprehensive scheme of education for his contemplated ideal state. He clearly understood that the philosopher king should have sufficient education to conduct the affairs of the state. In other civilizations also education was accorded an important place in their scheme of things, especially in their objective of attaining a good society.
Although education has been recognized as something important, it is in recent times that there have been theorizations about the causal link between education and development. Economists like Theodore Schultz, Gary Becker, and Amartya Sen have written extensively on the contribution of human capital to economic growth. They theorize that education through providing skills can make people more productive and this give them chances to earn higher wages in the lob our market.
Human capital has been defined as the stock of useful, valuable and relevant knowledge built up in the process of education and training. Investment in human capital, through schooling, increased the productivity of labor. Education not only increases productivity, it has many spill over effects also. Several World Bank studies show strong support in favor of this school. The World Bank concludes from their analysis of the experiences of 192 countries that human and social capital comprises two-thirds of the wealth of nations. Social capital has been understood to mean sound institutions and good governance. Theorists cite the case of Japan as a glaring example in support of the human capital thesis. It is said in the case of Japan that human and social capital contributed 85% to the total national wealth while physical capital (machinery, building, and physical infrastructure) 14% and natural capital only 1%.
It can be inferred from this phenomenon that the dearth of the natural capital may be easily compensated through the development of the human capital but the reverse may not be true.
Empirical evidence also shows further that there is no industrial society today with an adult literacy rate less than 80%. No illiterate society has ever become an industrial tiger of any stripe or color.
From the foregoing discussion it is evident that education is crucial for economic development in the modern world. In fact, higher education can transform human beings into human capital, which ultimately becomes one of the vital ingredients of nation-building itself. We see that only those societies that have acquired the basic tools of essential knowledge and skill can successfully compete in today’s global markets. This fact has been borne out by the experiences of Japan and other East Asian industrializing countries such as South Korea, Hong Kong, Singapore, Malaysia and China. These countries have abundant human labor. But this factor alone could not raise them to their present height of market leadership. They could scale to this pinnacle of prosperity and massive labor productivity only when they combined knowledge and skill with abundance of low-wage labor through education.
