There are many definitions of human capital. The most accurate in my opinion is the one that considers it as the accumulation of a worker’s knowledge. Education and experience, but also their ability to relate and adapt to the workplace, constitute a broad definition of human capital. Basic education, the best education, is important. But so is continuous training, in an adaptation process that in many cases is required by innovation or simply by the need to retrain. Although we must not forget the need to align the education attained with the knowledge and skills required by the job.
Human capital is one of the variables, one of the most relevant, when it comes to driving growth. Together with investment, productivity, and demographics, they explain the level of potential growth. And unfortunately, all are at low levels from a historical perspective worldwide. What is failing? It would be presumptuous of me to suggest that I can answer this question in this column. In fact, after years of thoughtful analysis by renowned economists, no clear answer has been found either. We should probably think of multiple factors, both cyclical and structural, that feed back into each other. On the other hand, theories such as secular stagnation, which relies on the difficulty of reconciling sustained economic growth over time with financial stability, are undoubtedly thought-provoking. But they focus excessively on expansionary demand policies, especially regarding the role that monetary policy can play, and less on supply policies. In my opinion, it is supply policies and not demand policies that should take center stage in driving growth. I also admit that they are not easy to implement.
