Lending Institutions Health Care and Human Capital

Lending Institutions, Health Care, And Human Capital

Human Capital, its use and Gender Disparity

Gender plays crucial roles in decision-making and resource allocations ideal for economic growth. Mothers' human capital improves child education and health, determining the well-being of the next generations (Finlay, 2007). Women Empowerment tends to allow for allocation of resources to more productive means, serving as relevant measure for improving economic outturn in the long run (Baldacci, 2004). Despite of the rather concrete understanding and appreciation gender disparity in human capital and its uses, it remains a key policy issue in both developing and developed economies.

The Role Health Plays in Developing Economies

Finlay (2007) elucidates that health does play a role in economic development. He showed that health influences economic growth through education incentive effects. Finlay went further to say that, a healthy individual tend to live longer, and has the impetus to undertake investment in education since education returns will be enjoyed in the form of skilled labor wages. Baldacci (2004) explores the role played by health expenditures and found that spending on health within a time affects growth within that same period D.E. Bloom and Canning (2008) focus on the labor productivity effects of health on economic growth, where improvements in health will lead to an increase in per capita income. Their main result is that health has a positive and significant effect on economic development. Empirically, a high level of public health goes pari passu with a high level of economic development

According to Finlay, poor health will reduce annual incomes to the society. An individual's income in a lifetime and economic growth prospects are lower where disease is prevalent. Longer-lived households will to invest a higher fraction of their incomes in financial saving and education since, prospects for an extended lifetime horizon allows for extended years to drawing on the benefits of these investments. Finlay points out that accumulation of human capital is an economic growth driver. It increases life expectancy while expanding time to reap the benefits from education. This encourages investment with the prospects for the present value of lifetime earnings increasing. Owing to the combination of early deaths and chronic disability, the economic losses to a society of truncated lives is high.

Poor health affects both the ability to save and the impetus to save (D. E. Bloom & Canning, 2008). Insofar as increased savings lead to increase investment, employees will have within their reach more capital and increases in incomes. A key element in East Asia's economic success was there region's high rate of capital accumulation, driven by an economic high savings rate of around 30% of income (D.E. Bloom, Canning, & Sevilla, 2004). A longer lifespan elicits greater savings for retirement. The savings could be transmuted into investments in assets that directly affect productivity such as land, property, machinery among others. On the other hand, infectious disease can lower productivity and deter investments. Health also affects foreign direct investment (FDI). Foreign investors tend to avoid areas where disease is rampant and with limited access to health care D.E. Bloom and Canning (2008) gave an example of the construction of the Panama Canal to back the empirical result of health on savings

Health is a basis for job productivity. Good health has a sizable, positive, and a significant effect on output on the aggregate. Workers' productivity is enhanced by increasing not just their physical ability, but also increasing their mental capabilities (D. E. Bloom & Canning, 2008). Healthier workers can earn higher wages and are more productive. Likelihood for work absenteeism due to illnesses is lower with a healthy workforce (D.E. Bloom et al., 2004). Health is a vitally important form of human capital and deserves a high level of attention in the development processes of DVCs.

Role of international Monetary Fund IMF and the World Bank

IMF and the World Bank stand out as neutral institutions in the practical global spectrum. This is disputable if we observe the source of the money they lend for purposes of contributing to economic development. These two institutions derive their sheer existence from developed nations contributing capital to facilitate lending to financially troubled economies. The volume of capital contributed and the political power a country wields in the global arena determine the voting power within these institutions (Finlay, 2007). The strong and wealthy economies in the globe exact their influence by having their own directors in the board with the other 150 member countries electing 19 directors. This shows the likely influence that few developed nations have in the formulation of development policies with developing countries like India.

IMF is the institution countries go to when in financial trouble exerts it policy by dictation requirements for structural adjustments as a condition for funding. The structural adjustments are meant to open the country's economy to the world leveraging it to undertake trade with other countries. This condition allows a country to sell its output and increase it potential for paying off its debts to the institution. The power that an institution like IMF has in influencing economic development of a developing nation is immense. Considering its approval rating the global scenario, it is observable that it is unlikely for the institution to award funding to un-credit worth counties. This alone will determine the volume and type of foreign investment a country will receive. If IMF grants funding to a developing country, there will a high inflow of foreign investment since this serves as an indicator for the countries potential to grow. This will trigger potential increases in economic output, higher levels of human labor uses and an increase in trade between the country and other economies.

The World Bank works similarly follow stringent frameworks guidelines of the SAP focusing on developing specific projects in countries. As opposed to IMF's framework of money lending, the World Bank undertakes to implement projects that propagate improvement of human capital and economic potential. The implementation of projects under the World Banks follows from approval from the board of directors and a country's potential meet the desired economic growth (D. E. Bloom & Canning, 2008). This potential is ascertained when, a country implements the desired structural adjustment and puts in place mechanisms to allow World Bank monitor its activities.