The concept of economic development is the expanded reproduction and gradual qualitative and structural positive changes in the economy, productive forces, factors of growth and development, education, science, culture, level and quality of life, human capital. Speaking about economic development as a process, it should be understood that it is characterized not by directness of its motion, but lack of uniformity, i. e. the periods of growth and recession are inevitable. It means an increase in the scale of the total production and consumption in the country, which is characterized above all by such macro-economic indicators as gross national product, gross domestic product and national income (Lipsey and Chrystal, 2015).
Economic growth is the main criterion and source of economic development. Economic growth is measured by the rate of growth or growth of these indices over a certain time period (the ratio of indicators at the end and at the beginning of a period or indicator of growth related to its initial value). Modern economics divides growth factors into direct (factors lying on the side of the aggregate supply) and indirect (factors lying on the side of aggregate demand). Direct factors are recognized as the most important, making economic growth actually possible. These include the quantity and quality of labor resources; the quantity and quality of natural resources; the amount of fixed capital; technology and organization of production; and the level of development of entrepreneurial skills in the community (Hubbard and O’Brien, 2014).
Human Capital
Human capital in the broad sense is an intensive productive factor of economic development, the development of the family and society, including the educated part of the labor force, knowledge, tools, intellectual and administrative work, environment and employment, which ensure the effective and efficient functioning of the human capital as a productive factor of development. In the context of globalization of the world economy, under conditions of free flow of any capital, including human capital, from country to country, from region to region, from city to city, under conditions of fierce international competition, rapid development of high-tech, national human capital is the main intense competitive development factor of those countries, which carry out anticipatory investment in human capital, organize its inflow into the country, creating the best conditions for work and life and the world’s leading experts of the country (Noe, Hollenbeck, Gerhart and Wright, 2014). Countries with gained quality human capital have massive benefits in forming a stable environment for the growth of quality of life, formation and improvement of the economy, the information civilization and progress of civil society. That is the state with an educated, healthy and enthusiastic populace, competitive world-class professionals in all types of economic activities, education, science, management and other fields (Lipsey and Chrystal, 2015).
Understanding and selection of human capital as the main factor of the development dictate a systematic and comprehensive approach to the elaboration of the concept or strategy development and linking them with all other policies and programs. Human capital is formed at the expense of investment in raising the level and quality of life, the intellectual activity, including in the upbringing, education, health, knowledge (science), entrepreneurial capacity and the climate, labor communication, forming an effective elite, the safety of citizens and business and economic freedom, as well as in culture, art and other components (Lawler III and Boudreau, 2012).
Role of Education
The accumulation of human capital takes place both at the stage of schooling, which lays down the basic knowledge and skills, as well as post-secondary education, which has the aim to obtain a certain profession, and as in the course of professional activities. Moreover, the skills and knowledge gained in the previous stages of education increase the effectiveness of further investment in human capital and, as a result, provide the ability to be successful in various fields. The higher education institution gives professional knowledge and skills, the possibility of their application in practice, and receipt of the initial idea of the labor market in the form of practical training (Noe, Hollenbeck, Gerhart and Wright, 2014). Also university provides maintenance loans, listed on the labor market and confirmed by the reputation and the name of the university, namely bachelor, specialist, master degree and certificate of obtaining academic degrees. However, its most important function is to develop a common cultural capital, laying the foundation for a universal future professional activities and further development. At the macro level, a highly educated workforce is a human potential of the country (Lawler III and Boudreau, 2012).
Despite the fact that there are various forms of investments in human capital, education in today’s world is one of the crucial. Any investment decision involves a dilemma between the consumption, which is able to immediately meet the needs, and investment, contributing to the creation of additional capacity for the production of goods and services in the future. Choosing between consumption and investment is based on the economic analysis, which takes place in the broader socio-political context, and basically cannot be separated from this context (Lipsey and Chrystal, 2015). It is fair to say in the choice between various alternative investments with limited resources. Investment decisions relating to education are quite specific. This is caused by the dual characteristic of education, consisting that, in essence, education is both consumption and investment. Until the early 60-ies, education was considered as one of the fundamental human rights, mainly associated with the consumption. In the future, the dual nature of education revealed more and more. The emphasis was transferred to the characterization of education as an investment in people (Lawler III and Boudreau, 2012).
In fact, understanding that investment in human capital contributes directly to economic growth relates to the time of Adam Smith, classical economists have paid due attention to the necessity of the costs on acquisition and development of skills of the person. However, only in the 1960s, T. Schultz and E. Denison showed that education contributed to the growth of national income by improving the skills of the workforce. Therefore, today, education is a leading sector of the human capital production, the foundation of the future of human well-being and society (Noe, Hollenbeck, Gerhart and Wright, 2014).
Effect of Health on Economic Development
The relationship between the health of the population, on the one hand, and economic growth, on the other, is recognized by both medical and economic sciences. In the face of an aging population in recent decades, the mutual impact of health and economic growth comes to the fore as a compensatory mechanism to maintain economic growth, while reducing labor flows. Improvement of population health through health extension leads to an increase in labor supply, labor productivity growth and, consequently, the growth of economic indicators of development of individual regions and the country as a whole (Lawler III and Boudreau, 2012). The health system influences the development of the national economy through the preservation of public health (reduction in mortality in the working age, age-specific decline in infant and child mortality, reduce morbidity and disability, increase in life expectancy) (Noe, Hollenbeck, Gerhart and Wright, 2014).
Health relates to key element of the productive forces, namely directly the manufacturer with his/her ability to work and the skills to labor. Health has a direct impact on productivity and only proper health allows achieving high productivity. As an inherent property of labor, health, along with other qualitative characteristics of labor (education, skills), has a significant impact on the pace of socio-economic development of society (Noe, Hollenbeck, Gerhart and Wright, 2014). Health status determines the well-being of families, businesses in different fields, the economic prosperity of the region, and defines the quantity and quality of human resources and social, economic and labor activity of the population, which, in turn, have a direct impact on the level of the most important macroeconomic indicators (GDP, national income, etc.) (Lawler III and Boudreau, 2012).
An arrangement of various medical health measures is aimed at reducing the incidence of diseases (vaccination, for example) or vaccination of children against infectious diseases, injury prevention, preventive examinations for early detection of diseases, clinical examination of certain contingents of working people significantly reduce the economic losses due to diseases. Reducing the incidence of post-active medical health measures and reduction of economic losses due to the reduction of disease determine the economic health effect (Lipsey and Chrystal, 2015).
Thus, economic development will undoubtedly lead to an increase in social benefits, to a greater satisfaction of people’s needs, combat of existing problems and encouragement of creative work and entrepreneurship, and lifts the state as a whole. By investing money and effort in the process of economic development, we can bring the state on the path of sustainable growth and ensure stability and security in it.
Works Cited
Hubbard, Glenn P. and O’Brien, Anthony P. Macroeconomics. 5th ed. New Jersey: Prentice Hall. 2014. Print.
Lawler III, Edward E. and Boudreau, John W. Effective Human Resource Management: A Global Analysis. Stanford Business Books. 2012. Print.
Lipsey, Richard G. and Chrystal, Alec. Economics. Oxford: Oxford University Press. 2015. Print.
Noe, Raymond, Hollenbeck, John, Gerhart, Barry and Wright, Patrick. Human Resource Management. 9th ed. New York: McGraw-Hill Education. 2014. Print.
