Since ancient times, education has been recognized as an important factor for the amelioration of human conditions in a social setting. Greek thinkers like Socrates, Plato, and Aristotle were all aware of the role of education in society. Plato, in fact, had a very comprehensive scheme of education for his contemplated ideal state. He clearly understood that the philosopher king should have sufficient education to conduct the affairs of the state. In other civilizations also education was accorded an important place in their scheme of things, especially in their objective of attaining a good society. Kautilya in Athasastra and Khaldun in his Mukkadama have greatly emphasised the role of education in achieving ideal society.
Although education has been recognized as something important, it is in recent times that there have been theorizations about the causal link between education and development. Economists like Theodore Schultz, Gary Becker, and Amartya Sen have written extensively on the contribution of human capital to economic growth. They theorize that education, through providing skills, can make people more productive, and this give them chances to earn higher wages in the labour market. Human capital has been defined as “the stock of useful, valuable and relevant knowledge built up in the process of education and training.” Investment in human capital, through schooling, increases the productivity of labour. Education not only increases productivity, but also has many spillover effects. Several World Bank studies show that human and social capital comprises two-thirds of the wealth of nations. Theorists cite the case of Japan as a glaring example in support of the human capital thesis. It has been found in the case of Japan that human and social capital contributed 85% to the total national wealth while physical capital (machinery, building, and physical infrastructure) 14% and natural capital only 1%.
From the foregoing observations, it is evident that education is crucial for economic development in the modern world. In fact, higher education can transform human beings into human capital. Only those societies that have acquired the basic tools of essential knowledge and skill can successfully compete in today’s global markets. This fact has been borne out by the experiences of Japan and other East Asian industrializing countries such as South Korea, Hong Kong, Singapore and China. These countries have abundant human labour. But, this factor alone could not raise them to their present height of market leadership. They could scale up to this pinnacle of prosperity and massive labour productivity only when they combined knowledge and skill with abundance of low-wage labour through education. Thus, in terms of human development objectives, education is an end in itself and not just a means to an end.