By Dr. Allen Zeman

No one would argue against the idea that, to thrive in today’s global economy, nations must grow their capital. But many people don’t realize that “capital” comes in two very different forms.

We often think of capital as tangible things — physical assets like factories, farms, roads, highways, and even warships.

But what about intangible capital? These are also critical for success, and include such competitive advantages as creativity, motivation, loyalty, and trust. These intangible assets are called human capital — and in How to Grow Human Capital During Hard, I argue that investing in human capital is the best choice right now.

I also posit that, although the branches of our military services have benefited greatly from human capital strategies, our nation has never tried to implement a national strategy to marshal and grow our most important asset: people.

What Would a U.S. Human Capital Strategy Look Like?

National human capital strategies grow out of human capital policies; both the policies that are consciously adopted by a country, and those that are so deeply embedded in its DNA that we take their impact on our lives for granted.

There are five policies that I believe are essential for maximizing human capital at the national level. Some of these are areas in which the U.S. proudly leads the world. Others are areas in which we’ve arguably fallen to last place among other wealthy, industrial nations.

They are:

1. Education and Training
2. Enforcement of Contracts and Property Rights
3. Balance of Risk and Safety
4. Freedom
5. Agility of Government and the Private Sector

Let’s look at each of these policy areas to see how they do or don’t support a U.S. national strategy to maximize our human capital.

Education and Training

Although education can be its own reward, many advanced societies offer rewards and incentives to encourage their populace to pursue more education and/or more formal skills training.

The U.S. clearly doesn’t offer such an organized incentive structure. While college graduates often earn more money than those without diplomas or degrees, the skyrocketing cost of a college education is born by individuals or families, which explains in large part why, over the past 50 years, the percentage of Americans with four-year degrees has grown by a paltry 5%, from 25% of adults to 30%.

Our grade schools and high schools are also not optimized to produce the best outcomes for most U.S. citizens. Because local schools are controlled by local school boards, the best predictor of the quality of your education is the zip code where you were born.

Enforcement of Contracts and Property Rights

The strong U.S. protections for owners of both physical and intellectual property provide a tremendous incentive for economic growth. Owners know that if they successfully expand and nurture their assets, they will reap economic benefits and — most importantly — be allowed to keep them.

This basic tenet of the U.S.’s social contract has fueled periods of tremendous growth and innovation by allowing us to invest in both human and tangible capital to produce future growth, confident that we “know what’s ours is ours.”

Balance of Risk and Safety

Every nation has rules about what risks will accrue to individuals and families, and what risks will be managed on their behalf by society. The social safety net adopted in the U.S. following the Great Depression ushered in a long period of property and growth that benefited Americans from all walks of life and allowed many citizens to develop themselves and contribute to society.

By contrast, countries like Japan (where families are expected to provide the safety net, and 65% of elders live with their children), can expect that adult children — and particularly women — will do significant care-taking during their prime years of productivity, with a consequent diminishment of positive economic activities.

Freedom

In America, citizens have the freedom to decide where they will live, what job or professional field they’ll choose, who and when they marry, how big of a family they’ll have, whether or not they’ll move for advancement, how much they’ll work and when they’ll stop working. And while these decisions can be daunting and hard, they’ve allowed many in the U.S. to develop their own human capital to a high degree — to invest in themselves and garner the rewards.

Agility of Government and the Private Sector

How quickly can a country’s government and its private sector adjust to the reality of a changing world? How smoothly can they coordinate their responses to challenges like economic disruption, artificial intelligence, new technologies, terrorism, or even a global pandemic?

In a world of accelerating change, the ability of nations to increase their human capital depends on the agility and effectiveness of both government and private sector responses to those changes. And here, the U.S. has a mixed record: Some technologies, like social media, have developed rapidly and had a tremendous impact on society. Others, like stem cell research, have languished because government could not be agile on the policy side, and the vision of industry was thwarted at great potential cost.

Can the U.S. Create a National Human Capital Strategy?

That answer is clearly complicated. An effective national human capital strategy requires clarity and coordination between government and industry, across a wide range of policy areas.

In some of these areas, the U.S. excels. In others, our success has been limited.

One thing is clear, however: Because of the nature of global competition, it is time for nations to look hard at their current human capital strategies and take actions now to optimize the sum of our human capital. Our future will depend primarily on how well, how effectively, and how fast we learn to maximize our human capital.

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