Tuesday, February 27, 2007

Poll: What Hinders Development in Moldova?

Wednesday, February 14, 2007

Human Capital Development in Moldova: A Chicken and Egg Problem

There is an interesting discussion on Sandu’s blog about the existing differences between the intellectual elite in the US and Moldova. In the US, and by extension, in the Western Europe, the academic and professional elite are open to change, inquisitive, simple and flexible. In Moldova, however the intelegentzia, including university professors and students, is arrogant, narrow-minded, mediocre and unproductive. Initially, I found the family and pre-university education system as being the main factors that can guarantee high quality professionals (technocrats) and academic elite.

However, if you look at this issue from a larger perspective, we can see a more relevant picture. First, Moldova is an underdeveloped country. Many problems that the Moldovan society and economy is currently facing stem from a very low level of human development. In this sense, a nation’s human development is much more than mere financial well-being of its individuals.

Human capital, as input in the production cycle of an economy, is attained through consumption of education services. The better the education services, the more developed the human capital. But human capital is only an input. In order to achieve high quality outputs, you actually need a functioning economy. A rapidly developing economy demands better human capital via a vibrant labor market.

It is easy to see how the quality of the human capital is directly determined by the quality and dynamics of the labor market. In order to ensure development of human capital, there must be a strong motivation for investment into development. People need to perceive a promise of reward for studying hard, exercising critical judgment and being creative and innovative. Without it, peole, being what they are, won't be able to achieve and develop much. In the West, people pay a high price (including in financial and personal effort terms) and demand high quality education because they know it will eventually pay back (both in financial and esteem terms).

In Moldova, however, such motivation does not exist. There is really no promise whatsoever that if you study hard in school or work conscientiously at your workplace, you will be rewarded in any way. The Moldovan employers rarely require candidates to have previously-attained academic or professional achievements. Rewards are distributed in a random and inconsistent manner, which perpetuates all types of insecurity. There are no question asked, no promises made, and no guarantees. People are on their own with their conscience, and we very well know of what human nature, when left unattended, is capable of.