BEFORE 1800, nearly everyone on the planet was poor. Royalty and large landowners were a small minority, and wealth was tied to land — those who controlled land, controlled much of the world’s wealth. Nearly everyone else lived in poverty. This was what society looked like for virtually the entire recorded history of humanity.
Throughout that history, the vast majority of people were born and died in largely the same circumstances. Then starting in the early 1800s, the industrial revolution and steam power enabled manufacturing and changed the nature of work. Technology drove down the cost of moving goods, fuelling trade and economic growth that forever altered the world’s economy. For a few overall, quality of life improved tremendously, but many others were left out of the arc of progress. These disparities, which have continued — and in some cases worsened — in the past two centuries, contributed to the realisation that organisations like the World Bank Group were necessary.
How can countries prepare for the economy of the future?
We are now going through a similar period of disruption and upheaval, and what we do with this technological revolution will shape the next chapter in the ongoing project of human progress and human solidarity.
By 2025, many analysts estimate that eight billion people will have access to broadband. Technology is getting everyone connected, but at the same time, it is causing similar convulsions to what happened during the Industrial Revolution.
No one knows for sure what jobs of the future will look like. Globally, we estimate that innovation and automation will eliminate five to 12 per cent of existing jobs over the next decade. But rather than disappear, we expect many more jobs will be redefined in terms of the tasks they do, and large numbers of new jobs will be created that will require an entirely different set of skills — a combination of technological know-how, problem solving, and critical-thinking skills, as well as perseverance, collaboration and empathy.
We are seeing the effects of innovation all over the world. Many garment factories in places like Bangladesh, which used to employ hundreds of people per factory, are becoming fully automated. The garment and textile industries are creating tens of thousands of jobs where hundreds of thousands — in some places millions — of jobs are needed to keep pace with growing populations.
How can countries respond to these kinds of upheavals and prepare for the economy of the future? The surest answer is to invest in their people. We are finding that investments in human beings, especially in their health and education, are far more powerfully correlated with economic growth than we ever thought.
Look at economic growth over the past 25 years. If you compare the top 25pc of countries that have improved their human capital stock the most, and you compare them with the bottom 25pc — countries that have improved their human capital stock the least — the difference was 1.4pc of GDP each year over a quarter century.
And countries need to make those investments with a sense of urgency, because we are facing a human capital crisis. It starts with childhood stunting. Globally, 155 million children are stunted due to chronic malnutrition, lack of stimulation, and other factors. When children are stunted, their brains don’t develop properly, which means it’s very unlikely they will catch up. They may already be hardwired to fail and locked into lives of poverty and exclusion long before they reach their fifth birthday.
Around the world, 400m people lack access to essential services; 100m people fall into poverty every year from catastrophic health expenses; and only one third of the world’s poor are covered by safety nets.
Rich and poor countries alike need to understand that investing in people is investing in economic growth. When you invest in human beings, you are putting the foundations in place to grow your economy. But too often, we still hear from leaders, ‘First we’ll grow our economies, then we’ll invest in our people’.
To help countries make these critical investments, we launched the Human Capital Project, a rigorous and detailed measure of the human capital in each country. Next fall, we will announce the results of an index to rank countries according to how well they are investing in the human capital of the next generation. The measurement will provide information that heads of state and finance ministers will find hard to ignore.
As we work with partners to tackle the interconnected global challenges of climate change, conflict, famine, and pandemics, we must help countries prepare their people for a more complex, disruptive, digital future. The most important investments countries can make are ones that build human capital — to prepare for that future, and to write the next chapter in the ongoing project of human solidarity.
The writer is president of the World Bank Group.
Published in Dawn, May 16th, 2018