Why Nations Succeed – A Human Capital Perspective: rep. at XV Apr. Intern.Acad. Conf. on Economic and Social Development, Moscow, April 1–4, 2014
This paper offers a thesis as to why the US overtook the UK and other European countries in the 20th century in both aggregate and per-capita GDP, as a case study of recent models of endogenous growth where “human capital” is the engine of growth. By human capital is meant an intangible asset, best thought of as a stock of embodied and disembodied knowledge comprising education, information, entrepreneurship, and productive and innovative skills, that are formed through investments in schooling, job training, and health, as well as through research and development projects and informal knowledge transfers. The conjecture is that the ascendancy of the US as an economic superpower in the 20th century owes in large measure to its faster human capital formation relative to the UK and “old Europe.” Whether the thesis has legs to stand on is assessed through both stylized facts and some complementary empirical tests indicating that the US led other major developed countries in schooling attainments per adult population, beginning in the latter part of the 19th century and over the 20 century, especially at the secondary and tertiary levels. While human capital is viewed as a facilitator of, and a necessary condition for, long-term economic growth, the paper argues that it is not a sufficient condition. The underlying factors driving the US ascendancy are linked to the superior rates of return which the legal and politicaleconomic system in the US has thus far offered as rewards for individual investments in human capital and their resulting innovative and entrepreneurial accomplishments, both home-produced and imported. This approach is compared to some alternative hypotheses about the underlying factors determining the prospects of long-term success or failure in fostering a persistent, self-sustaining economic growth and development.