In recent years, human capital has increasingly been regarded as one of the main driving forces for economic development and as a factor that affects competitiveness. Education and science are always mentioned as the most significant spheres which directly and constantly influence the development of human resources. As an EU member state, Latvia does everything it can to facilitate the development of a knowledge-based economy and to contribute to promoting the global competitiveness of the EU. In Latvia, ideas for strengthening and developing education, science and innovations are contained in three important documents – namely, the Education Development Concept Paper for the period 2006-2010, the National Development Plan and the National Strategic Framework Document. National expenditures for research and development in the Baltic States are smaller than the average EU level. In the EU this indicator in 2004 has not changed in comparison to 2000, and it amounts to 1.86% of the GDP. During the five-year period, a gradual increase in the rate can be observed in Estonia - from 0.62% to 1%. An increase can also be observed in Lithuania - from 0.59% to 0.76%. In Latvia this indicator has fluctuated and even decreased. In 2004, the rate of these expenditures constituted 0.42% of the GDP, while in 2000 it was 0.44%. In light of the scenario for human capital development set forth in Latvia's National Development Plan and the general orientation of the EU towards optimisation of human resources, Latvia should try to improve the indicators which characterise the transition of the national economy to a knowledge-based economy. That would increase Latvia's competitiveness in the Baltic States and other European countries, and that, in turn, would increase Europe's competitiveness in global markets.