Human capital is a central determinant of economic well-being and social advancement in the modern world economy. The concept of human capital covers the knowledge, skills, nutrition, and health that people accumulate over their lives, enabling them to realize their potential as productive members of society (World Bank 2019). The global economy is placing an increasing premium on higher-order cognitive skills such as expert thinking and complex communication (World Bank 2018b), as well as socioemotional skills such as problem solving, resilience, achievement motivation, control, teamwork, initiative, confidence, and ethics, or what are known as the PRACTICE skills (Guerra, Modecki, and Cunningham 2014). Building these skills requires strong human capital foundations.

In recent years, industry, agriculture, and especially services have become increasingly knowledge- and technology-intensive. The chief characteristic that distinguishes advanced economies, middle-income economies, and low-income economies is the knowledge content of their economic activities and production processes. The main components of human capital—education, health, and nutrition—play a central and synergistic role in producing the human capital required for development in the information-rich, technology-intensive world of the future.

Abundant global evidence attests to the importance of education to development (Barro and Lee 2013; Hanushek and Woessmann 2015). Among advanced economies, education levels are the single most important factor determining economic performance. Among middle- and low-income countries, economies with high education levels enjoy considerable welfare gains. Indeed, cross-country data reveal that schooling drives higher earnings. An additional year of schooling raises an individual’s earnings by 8–10 percent on average (World Bank 2018b).

Education also plays an important role in promoting a stable, peaceful society, which is a vital precondition for sustained economic growth and social development.

Good citizenship values such as tolerance and mutual respect, as well as socioemotional skills such as teamwork and collaboration, are important ingredients of peaceful, stable, and prosperous societies—and schools are widelyacknowledged to be one of the most important platforms for developing these values in the citizenry (Reimers, Jaramillo, and Cox 2005). Education systems around the world are increasingly sensitive to this role, and so they are developing programs that will instill these values in students from a young age, thereby producing citizens who have the civic values and socioemotional skills needed to contribute to the development of a strong, stable, and vibrant society.

The rapid economic development of many countries in East Asia can be attributed in large part to their education policies (Crawford, Hasan, and Bentaouet Kattan 2018). Japan, the Republic of Korea, and Singapore implemented comprehensive education policies early on and saw their economies develop quickly. Other East Asian economies such as China and Vietnam implemented such policies later and are now starting to see their economic dividends (Crawford, Hasan, and Bentaouet Kattan 2018). Box 1.1 provides a picture of the vital contribution of education to the extraordinary economic growth of East Asia.