Human Capital as a National Resource

In the realm of technology and industry, human capital researchers look for indices such as the proportion of the population with university degrees, the number of scientists and engineers per capita, or the number of scientific papers published per capita. On many of these indices, the country with one of the highest levels of human capital would be Israel, which produces 109 scientific papers per year for every 10,000 residents. In a country where 24% of the population holds degrees, Israel boasts 135 engineering degrees per 10,000 of population. If we take a slightly broader view of human capital to include intellectual capital in the form of information technology, such as personal computers, museums, and libraries, Israel again is consistently among the top four or five countries having the highest number of personal computers and museums per capita, its quality of scientific institutions, and the second highest publication of new books per capita of any country in the world (Israel Ministry of Trade and Labour 2007, 2008).

Yet it is difficult to see how this apparently very high level of human capital translates into other indices of social, economic, or sustainable development, even where there may seem to be a fairly direct relationship. Despite investing a higher percentage of its GDP in research and development than any other country, Israel ranks only 36th in terms of GDP per capita; the top performer being Qatar. Clearly, human capital as the aggregate of individual achievements and attributes does not seem to be a decisive factor in determining national economic productivity. Furthermore, this year, for the first time, Israel (including the West Bank, but not Gaza) slid into the ranks of the world's states considered most vulnerable to failure by Foreign Policy (2008) and the Fund for Peace (2008). Although Israel has been innovative in its use of scarce land and freshwater resources, its record with regard to air and water pollution has not been particularly different from those of other countries at comparable levels and scales of industrial development.

GDP has been heavily criticized as a quality of life index. The United Nations Human Development Index (HDI), first produced by the UNDP in 1990, seeks to provide more subtle, multi-dimensional measures of the "enabling environment" in which people can "enjoy long, healthy, and creative lives" and "enlarging people's choices"(UNDP 1990:9). The three principal factors represented in the index are life expectancy, education, and access to resources needed for a "decent standard of living." Three additional factors are political freedom, guaranteed human rights, and personal self-respect. Any score above 0.8 on the HDI is considered to be a high performing country, and while Israel scored 0.932 in the 2007 Human Development Report, it ranked only 23rd among the developed nations—well below the U.S.A., which ranked 12th. The country with the highest HDI ranking in 2007 was Iceland. Since the index was first published in 1980, the country topping the list most often was Canada (10 times) followed by Norway (6 times). Despite its HDI ranking, Israel consistently out performs both Canada and Norway on intellectual capital indicators. Clearly human capital, measured in terms of individual per-capita health, education, and R&D capacity, does not have a straightforward relationship to national quality of life any more than it has with economic productivity.

If it is difficult to establish a clear relationship between aggregate human capital and quality of life, then demonstrating a positive correlation between human capital and resource stewardship (management of raw material extraction, materials flows, and waste sinks) at the national level is even more elusive. At a very coarse-grained level, countries with high levels of human capital tend to be countries that also have high GDPs per capita and are likely to score well in the HDI. These tend to be countries that also have reasonably effective environmental and resource management legislation and the institutional capacity to implement and enforce it. This observation is roughly consistent with the so-called environmental Kuznets curve, which is often used to describe the relationship between rising affluence and environmental concern. However, it is not entirely clear how finer-grained differences in human capital actually relate to more subtle differences in environmental performance of states and under what circumstances, especially if normalized for different geographical, climatic, and population characteristics. Rigorous comparative research in this field seems to be in its infancy.

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