Human Potential as the Mainstay of the Changing International Economic Relations System

Natalia V. Yurova,

PhD in Economics, Associate Professor,

Chair, International Economic Relations Department,

Belarus State University

HUMAN POTENTIAL AS THE MAINSTAY OF THE CHANGING INTERNATIONAL ECONOMIC RELATIONS SYSTEM

Thematic vector: Investing in people

Today’s international economic relations system rests on the human being as its main agent acting as a worker, owner, entrepreneur, consumer, and, finally, manager/leader endowed with freedom of choice and making economically rational and resource-optimal decisions based on accumulated potential, interests, and goals. Since a person has many roles that accrue in the course of continuously developing economic relations, the person’s potential is accordingly expanded and brought to fruition, which ultimately results in the person’s greater efficiency in the national and global economy.

Today’s system of international economic relations rests on the important role of human knowledge (particularly scientific knowledge) and innovations; this system radically transforms established forms and connections within the given relations system with account for environmental restrictions and security. Amid rapidly changing international relations, national economies are forced to quickly adapt and build new vectors in international economic cooperation in order to reproduce human potential. And human potential are the operative words here since the level of human potential determines the efficiency of its realization as human capital in all economic areas. Consequently, it is extremely important to clearly define these concepts and apply them with equal clarity. International organizations classify countries by their socioeconomic development level, and this categorization has been established for decades; on the other hand, countries’ resource potential today is the engine of innovations and progress, and countries with highly developed and high quality human potential could engage in the new system of international economic relations regardless of their socioeconomic development level. It is therefore important to review countries’ achievements and their place in the system of international economic relations with account for their human potential development level in order to move beyond the framework of established concepts and clichés.

Today’s globalization processes are gradually replaced with increasingly active regional initiatives that serve as focal points for international regional cooperation in trade, investment, innovations, etc. Economic sanctions and other restrictions amid high interconnectedness and interdependence force some countries to revise their approaches to ensuring economic security, trade and investment cooperation, and to achieving high quality human potential based on sustainable development principles in new formats of cooperation between countries.

The role of individual countries in international economic relations is now being seen in a different light owing to these countries’ desire to “break” established stereotypes. Sanctions imposed on Russia showed that the traditional assessment of its role in global economy was unfounded, which became a “sobering” factor for many western experts. International organizations such as the International Monetary Fund, the World Bank, UNDP, etc. frequently use value indicators (GDP, GNI, per capita income, etc.) to classify a particular country under a specific category, which distorts the perceptions both of individual countries’ roles in global economy and of their potential. As Professor Sergey D. Bodrunov said, “The only GDP measure is the speed of money moving in the economy.”[1] Of course, abandoning altogether value-based representations of individual criteria is hard, but we should rationally and optimally minimize their application in subsequent research.

New approaches to categorizing countries are important for understanding the changes in the paradigm of countries’ significance for global economy. In international economic relations, leadership could be based on accumulated and ready-to-use economic potential, prospected and available resources, created innovations, and proper management of the international economic relations system at different levels. For instance, for the last few decades, western states’ leadership has been based on importing human capital, on massively investing in it, on exploiting natural resources of the countries with a rich natural potential, and on smartly redistributing reproduction processes via TNC operations and their control over financial and commodities markets.

Today, international discussions focus heavily on the ideas of changing the current world order and transitioning to a multipolar world on the one hand, or, on the other hand, to all countries submitting to the new global organizational structure and its binding decisions, as proclaimed by the Club of Rome.[2] Most countries in global economy that have major economic and human potential, yet are still traditionally categorized as developing, are leaning toward multipolarity. This process is accompanied not so much by political changes, as by economic alterations. Certain states can proclaim their adherence to the West in applying economic sanctions (for instance, against Russia and Belarus), vote like the West in the UN Security Council, participate in various peace and security forums and conferences around the world, yet continue to trade with countries that follow different policies and politics or are governed by political regimes that the West does not like and consequently imposes sanctions and restrictions on. For instance, anti-Russian sanctions were supported by about 60 countries[3] out of 193 UN member states, which is only “a third.” The overwhelming majority of countries within that “third” continue to maintain various economic relations with Russia (ranging from trade to cooperation in production) and are interested in sustainable cooperation terms. Time will tell how strong the coalition of this pro-Western “third” will be, particularly with new global economic centers inevitably emerging on the world stage. Already now, we can say that international economic relations are inevitably shifting to new global economic centers and/or mega-regions, and this trend is irreversible.

Today’s mega-region is a grouping of countries based not on their economic development level, but on their common national and international priorities, initiatives, traditional values, and other economic and non-economic development goals, on ensuring security, and on their significant natural and resource potential in global economy. Countries may belong to several mega-regions; the key thing is that goals in each association should be aligned with their national goals. A grouping of countries can be classified as today’s mega-region on the basis of the following criteria: overall territory (no less than 15% of the global territory); overall natural potential (no less than 15% of the global potential); average population density (100-199 persons per square km); treaties on joint development or common institutional structure (an integration association). The following alliances meet these criteria and can be classified as mega-regions: BRICS+ (31% of the global territory, overall natural potential over 63%, average population density of 117.89 person per square km, treaties on common development), the SCO (24% of the global territory, overall natural potential over 50%, average population density 128.109 persons per square km, treaties on joint development). The EAEU in its current shape does not meet the overall territory criterion (14% of the global territory) and population density criterion (40.606 persons per square km). Therefore, today’s mega-region should not necessarily have every attribute of an international alliance, but it should have common values and seek justice. Getting rich together, and not at the expense of others.

Certainly, each country seeks to create favorable conditions for shaping and developing its human potential and bringing it to fruition with a view to improving its people’s standards and quality of life. Individual countries’ successes can be seen in annual UNDP reports that reflect the results of national social and economic policies. Currently, the Human Development Index and successes in achieving SDG could help assess countries’ progress in their efforts to create conditions for developing human potential and bringing it to fruition. However, these approaches need to be qualitatively revised already today.

Assessing human potential as the basis of human development possibilities is still a difficult task as quantitative indicators cannot always reflect the entire range of national and global qualitative changes. Yet countries should seek to sustainably develop their human potential, which translates into improving health, knowledge, skills, creative abilities, and the level of culture of both individuals and the entire population with account for their needs and the environmental load; this process should be based on a country’s economic potential.

An alternative approach involves calculating the New Human Potential Development Index (NHPDI) that uses quantitative (non-value) and relative indicators to objectively reflect the development of crucial human development areas. Seeking to cover various groups of countries/mega-regions, the index was calculated for the Eurasian Economic Union, BRICS that includes the most significant so-called developing countries, and G7. The list of indicators was based on quantitative (non-value) and relative indicators selected by experts and on these indicators’ influence on developing individual human potential forms (sub-indices). The NHPDI has four sub-indices: “Human life and health index,” “Education and Human Intellectual Development Index,” “Professional Potential Index,” “Human Culture and Creative Perception Index.”

Based on aligned expert opinions (concordance coefficient), every sub-index was assigned a specific weight, which does not run contrary to the logic of all previous research into human development as this logic states that the key component of human development is human health and preserving and promoting it (0.4), followed by education and human intellectual level based on it (0.3), followed by professional potential (0.2) connected with the longest period in human life and with the drive to create via engagement in public production; the cultural component certainly augments the potential even though it has the smallest weight (0.1) in the final index. With its value range between 0 and 1, the NHPDI equals 1 only when every sub-index of a given country has the maximum positive value typical for every sub-index in countries under research in a specific period (year).

For BRICS countries, the NHPDI opens up new possibilities for international comparisons, namely, accounting for the countries’ strong suits such as supporting education, massive social spending, etc. This makes for a more objective representation of the so-called developing countries’ human potential development alongside their international peers and for entrenching their sustainably positive human development track. (See figure)

 Figure. New Human Potential Development Index and Human Development Index for BRICS states in 2017-2021.

Amid BRICS states, Russia has higher HDI figures, but lags behind Brazil in the NHPDI. We should remember that these two states have different starting positions: while Brazil is currently running many social programs to eliminate poverty and improve education quality, which is statistically reflected in its spending, Russia has already reached high development levels in these areas that currently require only maintenance spending. Generally, HDI dynamics and indicators trends for BRICS states carry over into the NHPDI, with the difference being that NHPDI values sometimes do not exceed 0.5, while HDI indicators vary between 0.63-0.845.

Abandoning established approaches to categorizing countries’ roles and places in the system of international economic relations is predictably hard, but human potential as their mainstay forces us to expand our representations going beyond purely economic indicators. Should it become acceptable in the future to evaluate all decisions in foreign economic policies based on their consequences for developing human potential, it will prompt countries toward both sustainable and responsible development.

Thus, today’s international economic relations system functions on the basis of human interests, development, bringing human potential to full fruition, implementing sustainable development principles, and ensuring countries’ economic growth and economic security. Economic efficiency and even expediency of all forms of international economic relations, regardless of the group of countries or the mega-region they belong to, should be evaluated through the lens of human potential: such is the demand of our time.

[1] Bodrunov S.D. Noonomics. Мoscow: Kulturnaia Revolutsiya Press, 2018. 432 p. (in Russ.)

[2] A World Call to Action on the multiple crises now enfolding humanity. URL:https://www.clubofrome.org/wp-content/uploads/2024/08/Roundtable-Final-Report.pdf

[3] Russia Sanctions Dashboard. URL:https://www.castellum.ai/russia-sanctions-dashboard