Defocused from the future

Nikola Popovski

While in Macedonia, the public is diligently discussing whether the name and the Constitution of the country should be changed, whether to give amnesty to crime and terrorism of all kinds, and whether the illegally acquired property of the aforementioned protagonists should be confiscated, in conditions when the institutions are in active phase of official negotiations with parts of those protagonists, the world is slowly and daily moving ahead. Indicator of this is the behavior of the World Bank. Over the course of this month, it issued two very important reports on the situation with the future of the world economy and the way in which it is analyzed and should be viewed.

Namely, in October, the traditional annual World Development Report 2019 was promoted under the title “The Changing Nature of Work” and another very important report that comes out for the first time, simply called “Human Capital Project”. For all interested, they are available on the World Bank website, and I am sure that for economists and many other professions these reports are mandatory reading. Unusually and very illustratively, accidentally or not, although the coincidence is completely excluded, both reports have the same graphics solution and the same image on their covers. The symbolism there is very big.

Of course, what is most important is not their appearance, but the issues that they coordinate with, which is the significance of knowledge and human capital as its immediate bearer for the economy and for economic development. Indeed, this year, in an unbelievable coincidence, precisely for the contribution to the research and the explanation of the importance of knowledge in the models of economic development, the Nobel Prize for Economics by the Swedish Central Bank was equally awarded to US Professor Paul Romer for his pioneering and an essential contribution to this field in his famous work since 1990 and his overall further research. Indeed, this year. The taken step to refer to the fact that the two World Bank reports should be viewed as a whole (so unusual) is that there are two identical chapters in the two: the human capital project.
But let’s go one step at a time. This is not the first time the World Bank, or any institution within the UN, to point to the importance of knowledge and human capital for the economy and the whole of society. On the contrary. It has been done continuously and systematically, as in the case of economic science, for three decades now. Just remember that the already institutionalized UN Development Program (UNDP) has started the regular annual publication of the famous Human Development Report since 1990, in which it calculates and publishes the Human Development Index for each country annually, based on a composite indicator that measures the size of GDP per capita according to the parity of the purchasing power of each country (measuring the standard of living); life expectancy in the country (measuring the possibility of a long and healthy life); and the literacy rate and scope of individuals’ education (knowledge measurement).

Now it goes much further. The World Development Report 2019 (The Changing Nature of Work) extensively deals with the impact of knowledge and technology (subject knowledge) on the changing nature of work of workers, but also of firms; building human capital and measuring it (the latter is a major progress), the processes of lifelong learning and the proceeds of the learning process and work. Today, and especially in the future, jobs will require “special skills – combinations of technological know-how, problem solving and critical thinking, as well as soft skills such as perseverance, collaboration and empathy.” In conditions of even faster innovation growth of the economies, those with lower capacity – especially economies with medium and low incomes, including Macedonia, will have additional and serious problems to catch a connection. The changes will follow the companies. It is estimated that today 10 percent of firms in the world create about 80 percent of profits and this process will not be quickly or easily redirected or changed. On the other hand, markets will become more competitive with constant technological, entrepreneurial and managerial innovations. Survival will not be easy.

A particular problem is the lifelong learning process, and above all, due to the fact that the rate of technological diffusion in the world is constantly increasing. The survival of the market, but also of the “wiped out space” of the global economy is uncertain, and learning must become lifelong everyday life. For these reasons, the need for greater regulation of labor and the strengthening of social mechanisms for helping and protecting it, in particular education and healthcare, are inevitable and most of them will need to be dedicated to the countries with their institutions in the future. The smaller scale, but a much more significant report is the “Human Capital Project”. Only 50 pages long, it makes a “small revolution” in trying to measure human capital through a pioneering inauguration of the Human Capital Index. This report is mathematically constructed to be able to predict the amount of human capital that a child born today in one country can expect to reach and own at the age of 18. The index will be periodically updated and expanded to monitor progress.
It now measures the human capital of a future generation defined as an amount and relies on measuring the ability of an individual to survive by the fifth year to start the process of accumulation of capital; measures the expected years spent in education adapted to the learning process and directly measured through international student testing; and finally health as a component of two indicators – the rate of lag in children under the age of 5 years and the rate of survival of adults. From these indicators with complex mathematical calculations, the Human Development Index is drawn out as the level of possible future productivity of the now-born generations compared to the condition, if their education and health would be ideal.

The index of each country is calculated within the limits of 0 (lowest) to 1 (the highest). The first measurement has put Singapore at the top in the world with an index of 0.90, meaning that individuals have the opportunity to gain even 90 percent of their ideal amount of human capital and then use it productively, versus Chad with an index of just 0.29. The Republic of Macedonia is ranked in the terrible 88th place in the world with an index of 0.53, which suggests that the level of possible future productivity of generations that are born now, if their education and health are ideal, would be only 53 percent. That is very low, and we have to learn a great lesson that our future long-term economic development depends, and will depend, on the level of human capital we will create. How it is created in the world has long been clear and there are no great mysteries here, there is only a lack of commitment, work and desire. Perhaps the naiveté and carelessness of those who make the decisions.

Unfortunately we live in a time when our agony with topics and problems that are defocused by such important and global topics is great.