There is little argument that human capital plays a critical role in promoting the process of development. Alfred Marshall succinctly expressed this view by claiming that “Knowledge is our most powerful engine of production; it enables us to subdue Nature and force her to satisfy our wants” (Principles of Economics, Book IV, Chapter 1). In development economics, ‘nature’ can be interpreted as ‘diminishing returns’ to physical assets, and ‘knowledge,’ human capital. That is, Marshall’s words echo the importance of human capital accumulation as the essence of economic development in overcoming the inevitable characteristics of bounded growth from physical capital, allowing us to bypass the limitations and constraints set by the physical world. There are many cases that show such significance of human capital in the history of economic development. Among them, Korea’s remarkable success story of sustained development over the last seven decades is perhaps the most salient example revealing such essence of human capital for development process. The initial conditions of Korea were full of disadvantages for development, since it was the time when Korea got liberated from the devastating colonial rule of Japan in 1945 and a massive civil war (the Korean War) that followed. The consequent destruction of physical and human resources, a corrupt government, ideological, political conflicts from the remnants of the colonial rule, and the lack of system for state-building were huge hurdles to cross in pursuit of national economic development. The success story of Korean development is amazing not because it grew so fast but because such achievement was based on a series of efforts to overcome such constraints. Korea’s constant exertion of human capital investment in various forms, which led Korea to be ranked the third highest in terms of average years of schooling and the highest in terms of R & D spending to GDP ratio in the world, has been at the heart of such efforts. Thus, this kind of development experience would deliver important messages about human capital and development for the currently developing nations.
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