WHY THE WORLD BANK THINKS HEALTH AND EDUCATION ARE KEY TO WEALTH
▶ Organisation’s president tells Reaching the Last Mile forum what really drives economic well-being
Good health and education are as crucial to a country’s economic well-being as transport and power, according to one of the world’s leading financial experts.
Jim Yong Kim, the president of the World Bank, revealed that new research had shown health and education were also the strongest drivers of economic growth.
Mr Kim was speaking at the Reaching the Last Mile forum, which has looked at ways of easing the burden of infectious diseases on the world’s poorest nations.
The conference was organised under the patronage of the Crown Prince of Abu Dhabi, Sheikh Mohammed bin Zayed, the Bill and Melinda Gates Foundation and the Carter Centre, created by former US president, Jimmy Carter.
The World Bank president revealed that his organisation would this year, for the first time, produce a ranking of countries based on their success in health and education, as well as more traditional economic measures.
The Changing Health of Nations report, he said, in the past had recorded only what he called, “produced capital, roads, energy, the things you normally think about that will contribute to economic growth”.
More recently, the World Bank had added a measure of how well countries looked after the environment.
“Now we are adding human capital. It turns out that human capital is the majority of the wealth in the world,” he said.
Using powerful computer logarithms like those used by Google and online retail operations, the World Bank had considered the effect of improved health and education on countries in its annual index over the past 25 years.
“If you take the top 25 per cent of countries that have improved their heath and education outcomes, and compare this with the bottom 25 per cent, the difference in economic growth is as high as 1.25 per cent of economic grown per year for 25 years,” Mr Kim said.
“That’s about the highest correlation with growth of anything we’ve ever seen,” he said.
The World Bank hopes that by publicising health and education rankings in its annual report it will put pressure on governments to do better.
Countries who rank high for business “love it and want to publicise it”, Mr Kim said. “The people who rank low get very angry.”
As a result, he said: “In the past 12 years in the business ranking there have been close to 4,000 specific reforms in countries to try to improve their rankings, because every year it’s announced, it causes trouble in their country.
“Imagine what a ranking of human capital might do. What happens if countries that thought themselves far superior to other countries found themselves ranked low?”
Increased internet access, especially in developing countries, is making people more aspirational for their futures, Mr Kim said.
In countries where these aspirations can met with opportunity, “it can lead to dynamism and economic growth. But where aspirations are met with frustration it called to instability and extremism”, he said.
As traditional jobs disappear in the future, good health and education will become even more important measures of well-being, Mr Kim said.
In some developing countries, especially in Africa, up to 85 per cent of existing jobs will disappear in the future, making this of great importance.
“As low-income jobs are eliminated, healthy, well-educated people are going to be the most important part of the wealth of nations,” he said.
This view of health and education as a driver of prosperity has gained credence only over the past 25 years, Mr Kim said.
“Roads and electric grids were seen as far more important than investing in health. In fact, there were times when we talked about investing in health and education in quite derogatory terms. They have been called amenities, a missionary function, or even a soup kitchen function.”
By promoting a global health and education annual index, the World Bank hopes to accelerate a fundamental change of viewpoint in world leaders and finance ministers, who previously wished to borrow money only for infrastructure projects.
Political pressure will encourage them to take a broader view of the importance of human capital he said.
At the same time the World Bank hopes also make it cheaper and easier for poorer
The World Bank will this year rank countries on their success in health and education, as well as more traditional economic measures
countries to meet the financial pressures of better health and schooling.
Rating agencies will now include health rankings in the their calculations for bond rates, Mr Kim said, meaning that governments that are doing better will have access to lower interest loans.
The World Bank has also created an insurance fund of US$450 million (Dh1,652.96m) for 74 poorer countries that can be immediately released once certain diseases reach epidemic levels.
It means they will no longer be dependent on richer countries to send aid in emergencies, a process that can often be too slow.
“There is no reason why we cannot use instruments like insurance, the tools of the rich, to provide more financial and support for poor people,” Mr Kim said.