Until the beginning of the present decade, public expenditure on education rose rapidly throughout the third world. Starting around 1980, however, real per capita expenditure on education began to fall in some countries and in others the rate of increase began to diminish. Per capita expenditure on education in real terms declined in the following regions - sub-Saharan Africa, the Western hemisphere, West Asia and the Mediterranean. These regions include of course many countries in which average incomes fell, and hence it is hardly surprising that expenditure on education also fell, but the decline in this component of human capital formation is cause for concern.
If one disaggregates total educational expenditure among first-level (primary), second-level (secondary) and third-level education and examines expenditure per pupil, further interesting points emerge. First, in the developing countries as a whole, real expenditure per pupil declined between 1980 and 1985 in each of the three levels of education. Secondly, this same pattern is found in the four regions identified above as ones where total expenditure on education per capita declined. Thirdly, real expenditure per student in secondary education also fell in North Africa. Finally, in both the East Asian newly industrialized countries and in the other East Asian countries, real public expenditure per student on third-level education declined. In only one group of countries South Asia – did expenditure per pupil increase in all three levels of education. In every other group there was a decline in at least part of the educational system.
In the case of UNESCO, emphasis is placed on the harmonizing of strategies and methods used in financing of education with overall economic policies, within the framework of long-term development goals.
There are enormous differences between the amounts that different nations spend per pupil at all levels of education, ranging from over US$2,400 per head in the industrialized nations to less than $60 in sub-Saharan Africa. Africa spends the least per pupil, but the most as a percentage of GNP. In 1980, schools in sub-Saharan Africa and South Asia spent roughly the same amount on each pupil. By 1990, spending per pupil had risen by almost 70% in South Asia and fallen by almost 7% in Africa.
Expenditures on improving human capabilities have the potential to yield a return to society at least as high as the return on physical investment. Estimates of the rate of return on expenditure on education have made this very clear, even after making allowances for possible upward biases in the rates of return. Countries that neglect human development not only retard the expansion of human capabilities in the broadest sense, they also undermine the country's long-run potential rate of economic growth.