Developing nations warned: invest or face unrest as World Bank launches first 'human capital' index

Laurence Dodds
Mr Kim, who has long advocated for the Bank to focus more on health and education, explained his fears in a speech at Stanford University - AFP

Ranking countries, according to World Bank president Jim Yong Kim, is about the most controversial thing someone in his position can do. Whenever the Bank publishes league tables such as the Ease of Doing Business Index, it is bombarded by angry phone calls from low-ranked nations objecting to their position. A president can probably get away with introducing one new ranking during their tenure. So why is Mr Kim putting all his chips on the Human Capital Index, released for the first time today?

The Bank describes its new report as measuring the investment of each country in the "skills, health, knowledge and resilience" of its people. It takes in schooling years, standard test scores, mortality rates and malnutrition rates, and aims to measure outcomes, not merely spending. It is openly designed to cause trouble, and create a PR penalty for countries that neglect their citizens. Singapore comes first, with South Korea and Japan close behind, while 19 of the bottom 20 countries are in Africa (Britain is 15th). Behind these rankings, however, is a dark vision of how automation and malnutrition could create a global underclass and provoke unrest on par with the Arab Spring.

In a speech to students and a roundtable with reporters at Stanford University in California, Mr Kim, who has long advocated for the Bank to focus more on health and education, explained his fears. Traditionally, he said, poor countries have developed from agriculture to light manufacturing to heavy industry to services, using their low cost of labour as a grapple to climb towards prosperity. Mr Kim's native South Korea, dismissed by the World Bank of 1963 as a helpless backwater, followed this path perfectly. 

The worst five performing countries

But today, the South Korean ministry of future technology predicts that wage costs will "no longer be a competitive advantage to anyone". Innovations such as "sewbots" - garment-making robots which may soon become faster and cheaper than the most highly trained Bangladeshi workers - will force poorer nations, especially in Africa, to skip straight over the light manufacturing stage into an unknown future. 

In that scenario, the third world's safest bet is the same as the first's: invest in education systems that teach "advanced cognitive and sociobehavioral skills" such as problem solving, critical thinking and adaptation to new methods. Every year of good schooling, Mr Kim told his audience, leads to a 9 per cent increase in lifetime earnings. Converting rapidly into knowledge economies will be difficult for many African nations, requiring better tax and payment systems for a start, but not impossible. 

And yet, just when this need to invest in people is becoming urgent, many developing countries have horrifying levels of childhood malnutrition. Nearly a quarter of the world's children are stunted, climbing to 33 per cent in Tanzania, 38 per cent in India and 45 per cent in Pakistan. Such children, Mr Kim said, literally form fewer neural connections during their critical first thousand days, and they never make it up. "This is probably condemning the people who have to go through that," he told reporters. "[They] will probably be unable to adjust to the changes that are coming." 

The five best performing countries

By 2025, most of these people will have also broadband. Fast internet access boosts people's life satisfaction, but it also hikes up their "reference income" - the level of income to which they compare their own. For most people, a ten per cent rise in reference income requires a five per cent rise in real income to maintain the same happiness. For the very poorest, however, that ratio is ten per cent to twenty per cent.

"This is a medical emergency," Mr Kim said. "These are the people who, when they become adults, are going to be able to look at their smartphones and see how people are living - and then know that because they were stunted as children, and then went through bad school systems, they can't compete. They probably can't even participate." The result could be an African and south-east Asian version of the Arab Spring (which Mr Kim portrays that event as driven by disgruntled humanities students who paid too much for useless degrees). Its beginnings, he claims, are already visible.

It is a disturbing idea, reminiscent of HG Wells' division of humanity into two subspecies in The Time Machine  HG Wells' The Time Machine. But Mr Kim says he is motivated by his own improbable journey from the chaotic Korea of 1953, via a childhood in Iowa, to his current office. Today there is no telling how many potential World Bank presidents are having their futures stolen by miseducation and poor health. To change that will require more than angry phone calls. 

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