Question

What are the benefits for a "lesser Developed Country" to invest in human capital? What kinds of investments would/can/should a country use to "catch up"? Can a country "catch up"? Name a country where explosive growth has occurred.

350 words

Answer 1

Human capital is the measure of economic value provided by employees with their knowledge, skill and ability. To get the best of the employees , it is necessary for lesser developed countries to invest in human capital.The benefits of such investments is that it increases the job satisfaction of employees.Secondly it increases the retention rates of employees as employees who get professional education and development , do not look for other better employment opportunities.Thirdly it increases the engagement of employees. When career advancement and development opportunities are given to employees ,they do not leave the job and remain engaged in the same job.Such employees prove to be productive.Fourthly it develops client engagement as the more satisfied the employees are, the more the clients get satisfied .Fifthly such investment helps to promote organizational communication.This helps employees who lack in communication skills. Sixthly such investments help in developing the culture of the organization.This in turn increases productivity.

The catch up theory says that poor economies will eventually catch up with the rich ones.Poorer countries are at an advantage because they can imitate the richer countries in terms of production methods , technologies etc.The kind of investment that countries use to catch up is law of diminishing marginal returns. This is based on the idea that as country profits and invests , eventually the amount gained from investment will be less than initial investment.So returns on capital investments in developed countries are not very strong as compared to developing countries.

Few developing countries experience sustained growth.The contribution of agriculture in developed countries is 2% whereas in developing countries like India, agriculture contributes about 25% to GDP.India's ( developing country)GDP per capita is very low. So the question will developing countries catch up is ,No, in the present world system.Capitalism and the world system thus created , are the reasons of underdevelopment,and main barriers to development.Capitalism leads to exploitation and the rich get richer at the expense of the majority.Underdeveloped countries can never catch up with developed countries because capitalism is a global system which depends on underdevelopment.

India will be the fastest growing economy in 2018-19 with 7.3 per cent growth rate.