By Xue Lan, Professor and Vice-president of School of Public Policy Management, Tsinghua University
The "World Economic Development Declaration" (The Zhuhai Declaration) points out: Education and skill development must be promoted for all people, no matter where they come from and regardless of their race, sex and income level, to eradicate illiteracy and ignorance. Human resources should be vigorously developed to facilitate economic development.
At present, education has become one of the most important social activities, while the world economy is entering the intellectual economy era from the agricultural and industrial economy era. The intellectual economy is an economic formation based on the production, distribution and utilization of the knowledge and information. In the era of intellectual economy the key elements for economic growth has shifted from labor to capital and from capital to knowledge. As the most important production factor, knowledge is imbued with different characteristics from that of capital and labor. It is both the production factor and the consuming object, while education is the precondition of the intellectual production, dissemination and application. Education will be the eternal theme for people to survive and develop in the intellectual society.
In the condition of the intellectual economy, education is the most important way for the forming of human resources. Education plays an important basic role in the respects of HR training, intellectual innovation and dissemination and promotion of the intellectual application, as a result human resources plays a driving force to the economic increase. In today's world, almost all the nations regard the development of educational and human resources as the key supporting system and integral part of the nations social economic sustainable development, and the core issue and important strategic policy to strengthen the overall national power and the international competing capability. International institutions also cooperate with the countries in the world paying full attention to the educational and economic development in their respective annual development reports, special research reports and annual statistical reports.
As a matter of fact, the discussion on the educational and economic development has lasted for a long time. Since the educational activities came into being, they have inseparably linked up with the social economic development. Particularly in the modern times, the role played by education in respect of the reforming production technology and the promoting production development has become more and more obvious following development of capitalist large-scale industrial production. Adam Smith stated concretely the capital value of education that although you have to pay fees while learning, the fees will be rewarded with profit. David Ricardo pointed out that education is a tool to train good customs and habit, enterprising spirit, sense of obligation and responsibilities, and people will become poor without education.
John Mill also stressed the importance of receiving education for the labor force.
Since the end of 1950s and the beginning of 1960s, with a view to promoting fast economic growth, the western countries has been searching for, analyzing and discussing the various factors that promote the economic growth. Schultz, the founder of human capital theory, indicated that education is a productive investment and in consequence it can be regarded as a form of capital. He held that the decisive production factor to improve the well being of the poor are not space, resources and lands, but the quality of the population and knowledge augment. The human capital that laborers possess---knowledge and skills, is both the result of the economic growth and the cause of the economic growth. In 1961 economist made a research in his essay of Education and Economic Growth to the US economic growth between 1929 and 1957 stating that 33 percent of the contribution in the complete US GDP growth is made by education investment. According to the estimate in Dennison's book of 1929-1969 the Assessment of US Economic Growth published in 1974, the contribution to the economic growth made by human capital reached a average rate of 23.83 percent in the 40 years from 1929 to 1969. The UN report on human resource development in 1996 pointed out that, according to the investigation to over 100 nations, the wealth resources (fund and physical capital) occupied 12 percent in these nations' total national resources, the natural resources (lands, mines and water resources) 24 percent while the human resources and social resources 64 percent.
Since the founding of the human capital theory, as the important production factor, it has increasingly drawn close attention of the people and each nation has made positive efforts in the theoretical cognation and research or in the actual investment of human capital. Each nation actively carried out educational reform, increased educational investment and improved educational quality with a view to enabling labors to adapt to the need of economic reform and development and expediting the economic growth rate. For example, compulsory education was universally well received in Asian countries. In east Asia, secondary and elementary education has already been popularized. The south Asia is striving for this objective. The fast economic growth of postwar Japan and the Asian Four Little Dragons have become successful model of educational investment (or human capital investment) and the promotion of the economic growth. According to Sun Honglie's research in 1996, in the nearly 20 years from 1960 to 1978, the actual increase of GDP was 4.68 percent for the countries and regions who paid attention to the concentrated strategy of human capital, while only 3.68 percent for the countries and regions who carried out the strategy of physical capital, and the gap became more and more wider in the 1980s. [2] The increase of output and economy is much faster for the enterprises, countries and regions where human capital's stock standard is higher and accumulation is faster. Reverse outcome will occurs if acted to the contrary. In the same way the human capital will accumulate much faster for an enterprise, a region or a country where the economic growth increases faster.
At the same time education has become the important channel and means to increase personal economic income. A senior specialist of the World Bank has made large scale transnational research to benefits of the educational investment, and came to the conclusion that the world average personal benefits of the elementary, secondary and advanced education in 1994 was 30.7 percent, 17.7 percent and 19 percent respectively, and pointed out that the trend of benefits for the personal education of the 3 layers worldwide would be 18.4 percent, 13.1 percent and 10.9 percent respectively.
In the intellectual economic society human capital of high quality can gather great quantity of physical capital and knowledge has the unprecedented important decisive power to the fate of both individual person and country. Intellectual innovation has become the important driving force of a country's economic development and one of the important yardsticks of measuring its economic development. In allusion to the challenge for the advanced education in the construction of intellectual society, the World Bank emphasized in a report of 2002 that developing advanced education is very essential for intellectual innovation, dissemination and application. At the same time, the construction of intellectual society through the improvement of the educational quality and innovation of the educational system is one of the two themes of the UNESCO's medium-term strategy in the years from 2002 to 2007.
As for the transitional economy and developing countries, the key issue for the economic development lies in the change of the economic growing method and the increase of the proportion of the intellectual industry in the economic structure. Economy can't develop without the input of the production essential factors, and the production system can be of high efficiency only when the production factors meet the most efficient combination with the investment. The human capital, as the dynamic input factor in the production process, plays an undeniable role to the increase of productivity and economy. The result of the spot check to the 1 percent population nationwide in 1987 shows that education has a very close relation with the productivity of the physical production sectors. In the composition of the agricultural laborers the population of elementary school graduates, illiterates and semi-illiterates occupied a big proportion, and their average schooling years of education was only 3.7 years with a corresponding productivity of RMB1474 per capita which is the lowest in the five physical production sectors. The average years of the education for the industrial laborers is 8.6 years with the labor productivity of RMB14784 per capita, about 10 times of the agricultural productivity. The average years of the education for the laborers in the architectural, transportation and posts and telecommunications' industries were around 6.6-8.7 years and their productivity was also 3-7 times of the agricultural industry.
Education can not only increase the productivity of the laborers, but also promote the continuous optimization of the industrial structures from low to high levels. The process of the economic growth is, in fact, the process of the constant adjustment of the industrial structure. While the new intellectual industries emerge constantly with a constantly rising proportion in the national economy, the old traditional industries continued to shrink with a constantly declining proportion in the national economy. The smooth materialization of this kind of transformation must take the sustained improvement of the human capital as its prerequisite. According to the theory of economic development by the well-known economist，the economic development goes through several stages from the traditional society before flight to the realization of the economic development. In the traditional society, agriculture occupies the biggest proportion and the contribution to economy of human capital is the smallest while the economic development mainly depends on the input of the number of laborers. In the stage of taking off and industrialization, the proportion of the industry in the national economy become bigger step by step, and the demand for the human capital increase gradually, and as a result the contribution of the human capital to the economic also increase gradually. In the stage of post-industrial stage, the service industry holds the biggest proportion in the national economy and the demand for the human capital is the highest, and the contribution of the human capital to the economic development is the biggest. Taking the post-war Japanese development as example: Japan experienced after the World War II the taking off stage (1950-1970) and the industrialization stage (1970-1979), in which the economic growth was respectively 10.2 percent and 5.4 percent, and the increase of the human capital was respectively 0.50 percent and 0.60 percent, and the contribution of the human capital to the economic growth increased from 4.90 percent in the taking off stage to 11.11 percent in the industrialization stage, and the change was huge.
At present the educational development standards of the developing countries and transitional countries in economy is distinctively lower than the developed countries. Taking China as an example, Report on the Issues of Chinese Education and Human Resources, published in February 2003, pointed out: The population who has received advanced and secondary education occupies a higher proportion in the developed and newly industrialized countries. For example, in USA and Republic of Korea, the population of 25-64 years old who received education of high school level and above occupies a proportion of 87 percent and 66 percent respectively. Among them the population who received advanced education occupy the proportion of 35 percent and 23 percent. In comparison the proportion of population between 25 and 64 years old in China 2000 who received education of high school level and above was only 18 percent, junior high school level and below was 82 percent and elementary school level and below was as high as 42 percent. The population who received education of junior college and above is less than 5 persons in average 100 persons. The 2002 World Bank Report had signaled the warning for us: the developing and transitional countries have not been prepared for the intellectual innovation in education and were at the risk of being further peripherized in the world economy of intense competition.
In the grand objectives to build a well-off society set by China in the new century, it is a key link in China's realization of the objective of well-off society to establish a modern national educational system in order to adapt to the development in the future. In the process of the past more than 20 years of reform and opening up, Chinese education has accomplished historic traverse. In the new international and home environment, it is both the important historic task we face and the essential safeguard for the healthy development of Chinese economy that how to maintain the highly attention of the whole society to education, to reform the educational investment system, to ensure the implementation of the compulsory education in countryside and ensure the functioning of the leading role of Chinese national education system and become the important cornerstone of Chinese economic development.
(China.org.cn November 6, 2003)
