Human Resources

As the previous chapter demonstrated, with great technological advances rapidly transforming knowledge and skills, traditional measures of HC, which consist of investment through health, education and training, are now seen as inadequate when used on their own. Consequently, an approach is needed that accounts for its impact on a nation’s progress.

To accurately reflect the knowledge criteria of the human resource definition, the current study needs to initially view some workers as intellectual assets. Additionally, it must determine whether a country has established a nurturing environment conducive for creating progress (Bontsis, 2004). Alongside knowledge, many other aspects play a role in the acquisition of greater human resources. As mentioned in Section 4.5, these comprise: the quantity and quality of education, on-the-job training, medical care, nutrition, improvements in working conditions and other informal (non-market) activities that go alongside formal education (Wobmann, 2003). Consequently, an accurate specification of the human contribution to national progress has to incorporate aspects of HC, IC and knowledge management theory.

The proposed RIE framework will account for the aforementioned issues under the human resources theme, reflective of a more comprehensive national progress application. This will be achieved by splitting the human resources theme into six dimensions. The six dimensions and their respective characteristics are reviewed below. The first dimension is health. This focuses on the degree of physical wellbeing of individuals that makes up part of the stock of human resources. It is considered a central input to poverty reduction and socio-economic development (WHO, 2003a). This framework concerns itself with the support of health systems and the quality of life of its citizens. The characteristics of this dimension are:

• Health status: this deals with health outcomes, incorporating people’s quality of life.

• Access to health: can be used to gauge the commitment to health a country employs.

The second dimension is population. It assesses the renewal of the stock of human resources. This will determine whether a country is regenerating at an adequate rate. It consists of one characteristic.

• Demographic: represents the rate of regeneration of this resource.

Given that by the year 2020 chronic diseases, largely preventable, is reported to account for almost three-quarters of deaths worldwide, and the fact that diet, or food consumption, plays a key role as a major risk factor for it (WHO, 2003a), justifies this study’s inclusion of it as the third dimension in the human resource theme. Since the latter half of last century, great modifications in diet have occurred where plant-based diets have been substituted by high-fat, energy-dense diets. The RIE framework will therefore reflect the extent to which the countries have taken up this change in dietary habits. This dimension has no characteristics.

The three dimensions above however, only constitute a part of the overall human resource component. Equally important is how a country develops these human resources. This is achieved primarily through the fourth dimension, education and training. This deals with the activities that assist in expanding the knowledge and skills of a country, which amongst other things, helps develop technologies and produce better capital goods (Bontsis, 2004). The RIE framework will focus on the quantity and quality of education. The characteristics of this dimension are:

• Access to education: focusing on the extent of education (outcome) and the quantity of utilisation by expected users at tertiary level.

• Investment and educational quality: the significance of educational quality was made clear in the previous chapter. Hence this dimension will intend to assess this aspect via a mixture of input assessment, expenditure by government and teacher provisions, and processes focusing on the quantity of utilisation.

The shift from knowledge as use-value to knowledge as exchange-value occurs with the next dimension. Given the intangible nature of knowledge, also referred to as invisible wealth (Andriesson and Stam, 2004), the benefits arising from its codification are optimally exploited via sound knowledge management techniques (Arthur, 1994). Exploiting these techniques for a country’s future progress is referred to as knowledge renewal. The key parameter for this lies in a country’s R&D whose significance,

Bontsis (2004) argues, is only further reinforced when one considers the direct relationship between continued investment in improving the effectiveness of R&D and sustained economic growth. Furthermore patents, despite impeding dissemination, allow an environment that is conducive for innovation and thus for knowledge renewal to occur (Antonelli, 1999). Although large amounts of knowledge remain in tacit form, which measurements are yet to capture, Section 4.4 highlighted that knowledge spillovers (which facilitate creativity and innovation) are enhanced when knowledge is codified through public patent disclosures (Striukova, 2007).

Given the close link between IC and economic growth, which Bontsis (2004) argues has become a leading factor of production for advanced economies, the RIE framework will focus on the investment and stock of knowledge,145 while incorporating both the processes and outcomes of this. The characteristics of this dimension are:

• Investment and stock of knowledge: refers to expenditure on R&D by government and business. Moreover, it comprises information about current research numbers and the number of high technology exports.

• Codifying knowledge and ideas: another part of knowledge renewal, which assesses a country’s potential to perform, and is normally represented by patents and scientific publications (Bontsis, 2004).

Any realistic assessment of progress needs to abandon the idea that the progress model is strictly linear; an idea that sees inputs enter one end of the framework and increased progress come out the other end. The net brain gain, with its ability to produce a positive or negative outcome, is reflective of this.

The significance of the net brain gain, the sixth and final dimension of human resources, has been discussed in new growth theory. A net brain gain (drain) occurs when the number of highly skilled people departing their country to pursue better opportunities overseas is lower (higher) than the incoming number. A net brain drain has the ability to undervalue the effect of investment in education, ultimately impairing the source country. This can result in substantial leakages of the country’s most important resource (UN, 2004). Determining whether a country endures a gain or a drain is not clear, since

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In fact, Ducharme (1998) reports that the impact of research on innovation is strengthened when one considers that empirical literature shows that rates of return of R&D vary between 25 and 50 per cent.

the theory has progressed further than the evidence. For instance, as Saxenian (2004) states, does a country that experiences a high outward flow of workers (e.g. India) lure more inhabitants to pursue education, which could then became the catalyst for an indigenous software industry? Despite the inherent complexities, a number of studies have been attempted,146 of which this present research is able to identify one key characteristic to this dimension:

• Net skilled migration: looks at the international transfer of human resources via the migration of relatively highly educated individuals.

The next theme identified from the literature is natural resources. 5.5.2 Natural Resources

The recent concerns about the natural environment have come to the forefront of public opinion, which has led many economists and ecologists to unite. It was established in Section 4.10 that natural resources perform many welfare-related functions and are a material source of progress, which take the form of both renewable (can be regenerated if used carefully) and non-renewable (cannot be replaced by human action). Furthermore, two types of environmental sustainability that have a tradition of being incorporated into progress measurements were also outlined. Briefly, the first approach is weak sustainability, which is a criterion that calls for the maintenance of total capital stock. The alternative approach, strong sustainability focuses on maintaining the structure and functioning of its natural resources. Here, natural and generated resources are complements and not substitutes (Martinez-Alier, 1995).

The review in Chapter 4 concluded that the chosen approach must derive from ecological theory and practice (an interdisciplinary research approach); however this is made difficult given the uncertainty surrounding the scientific and epistemological foundations of ecology.

This uncertainty has meant that the union between many economists and ecologists seems somewhat fragmented. For instance, to facilitate a dialogue with ecologists,

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Studies include: Carrington and Detragiache (1999), Dumont and Lemaitre (2005), Docquier and Marfouk (2004) and Kapur and McHale (2005).

economists adopted the term environmental capital, an approach that has raised the ire of ecologists (Harte, 1995).

The uncertainty arises from the vast array of natural resources that exist. The myriad of natural resources makes it incumbent on this framework to bring together disciplines related to soil, vegetation, water, fisheries and organisms to achieve an integrated multidisciplinary approach for understanding and managing natural resources. A pluralistic approach to the measurement of natural resources is seen as the preferred method for environmental evaluation (Norgaard, 1989b; Harte, 1995; Norton and Noonan 2007), and is favoured by the current study.

As is the case with most environmental sustainability measures however, it is outcomes that matter in the end. Hence, this framework will make outcomes a major focus of this theme. The approach to natural resources will be presented as a function of 5 dimensions.

The first dimension is land and agricultural use. This includes the production of crops, the raising of livestock and forest areas that have been logged. The use of land in producing goods and services is the most significant human alteration of the earth’s system. Practices such as converting forests and grasslands into low biomass ecosystems modify the configuration and performance of ecosystems, and how it interacts with the atmosphere, aquatic systems and surrounding land (Vitousek and Mooney, 1997).Ensuring that land practices are sustainable, via proper land cultivation, means that the many benefits currently enjoyed do not impinge on future generations. Hence, the characteristics of this dimension are:

• Land management: assesses the farming practices that can impact greatly on the natural environment in both a positive and negative manner, and can possess high ecological implications, as well land use and protected areas.

• Agricultural production efficiency: deals with the intensity of use regarding production efficiency for livestock and crop production.

However, sustainable land practices alone will not guarantee the sustainability of a country’s natural resources. It also requires that the production of energy, a major drain on a country’s natural resources, be used efficiently. Therefore, the second dimension is

energy production and use, particularly in production and manufacturing. This, like most other dimensions, has the ability to both contribute to and hinder national progress. The characteristic of this dimension is:

• Energy efficiency and alternative sources: the undesirable effects of burning fossil fuels and nuclear waste product (damage to ecosystem) has made countries focus on ways to more efficiently harness energy. A key indicator of this commitment can be found in either the availability of viable substitutes, or the appropriate level of investment in traditional versus alternative fuels.

Another critical natural resource of a country is water. The selection of this is self- explanatory as it is essential for livelihood. This dimension will assess the volume or amount of water available to a country as well assessing water quality. The recognition of safe drinking water levels, as a prerequisite for a healthy environment has long been recognised. Moreover, water quality supports a rich and varied community of organisms and protects public health (WHO, 2003b). The characteristic of this dimension is:

• Water availability and quality: this is an important indicator of environmental services, and is crucial in providing support for the needs of the population. The fourth dimension is fisheries. This dimension considers fish stocks as an important component of marine ecosystems. Historically, as long as fisherman can earn a profit, they continue to catch fish to the point where overfishing occurs (Gordon, 1954). In 1995, two-thirds of the world’s recognised marine fisheries were either over-exploited or at their limit of exploitation (Vitousek and Mooney, 1997). Ideally, this measure will assess whether the areas of the ocean with large populations of commercial fish and other aquatic species are being maintained at a sustainable rate. The characteristic of this dimension is:

• Overfishing: overfishing upsets the earth balance by placing undue pressure on the ecosystem as well as contributing to biodiversity.

All these natural resource pressures have led the International Panel on Climate Change (IPCC) to recently claim that many species of microorganisms, plants and animals would soon be unable to adapt to changes in their environment or to immigrate to more habitable areas (IPCC, 2001). One of the largest contributors to biodiversity losses has been the clearing of forests through the almost universal spread of agriculture into even

the most marginally productive areas (Nadeau, 2002). Although many economists find the concept of biodiversity difficult to measure, this dimension is included due to the consensus of its importance. As Swaney and Olson (1992) state, continued under- valuation can occur or even a change in valuation, however what cannot happen is to choose not to value it. The issue of biodiversity studies the impact that current economic practices have had on the abundance and richness of species in a region or the world. The five dimensions outlined above reflect a broad pluralistic approach to the measurement of the natural resource theme. Furthermore, the present research acknowledges that other factors, such as the prevailing social, physical, economic and cultural constructs of a country also give rise to environmental preferences (Harte, 1995). This dynamic nature of natural resources and progress is reflected later on in the framework.

The third and final theme in this area is generated resources. 5.5.3 Generated Resources

Traditionally, it has been perceived as comprising the traditional wealth of a country and is included in most progress measurements. Generated resources are a combination of both human and natural resources in the form of the finance and physical capital available to a country.147 This theme will be presented as a function of two dimensions, with the progress framework mainly focusing on outcome aspects. The first dimension involves the financial resources of a country. In particular, it represents the funds that are available to a country to acquire real capital. The three characteristics of this dimension are:

• Traditional capital investment funds: deals with the availability and allocation of traditional investment funds such as, banks, foreign direct investment (FDI), etc.

• Quality of funds: assesses whether funds are being utilised in an efficient and suitable manner. This is due to the growing concern of increased paper wealth.

• Cost of funds: this examines the major costs of borrowing money and assesses the impediments to members in accessing funds.

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The other dimension of generated resources is physical capital, which comprises the machinery vital to produce goods and services. The characteristic of this dimension is:

• Manufacturing and agricultural machinery efficiency: assesses the efficiency of the machinery of these two significant industries, which helps determine the sustainability of the practice of ‘adding value’.

The second major area this study will review is infrastructure, an area that helps maintain and improve national progress.

5.6 Infrastructure Themes

As discussed in Section 1.3, infrastructure involves the basic facilities, services and installations needed for the functioning of a community or society. It includes roads, railways, canals, ports, airports and communications, and is manifested by its network structure, for instance, the road or rail network (Banister and Berechman, 2000). It is imperative that a country’s infrastructure supports its resources to ensure long-term prosperity. This is recognised by the WB (1994) whom view an efficient infrastructure set-up as a key to facilitating economic growth, poverty reduction and improved environmental outcomes. Investment per se is not sufficient, since poor management can cancel any potential benefits.

This present research identifies two key infrastructure themes. They are information and communication technology (ICT) and transportation. Both possess one dimension each. The first theme is ICT.