Wednesday, August 20, 2014

Education and Ideas of Economic Growth

It is commonplace to talk about education for economic growth, but our ideas about what leads to  economic growth somehow defines what kind of education we may want. 

As Joel Mokyr highlights in his eminently readable 'Lever of the Riches', there are four 'ways' to economic growth that the standard economic history brings forth. 

First, what he calls the 'Solovian Growth', after Robert Solow, the doyen of economic growth theorists, which hinges of capital formation. In this model, the entity, the country in the standard formulation, saves more than it produces, and build capital stock in terms of infrastructure, human capability and investible capital.

Second, what Professor Mokyr calls 'Smithian Growth', this alternative route to growth hinges on trade, either within the country, between the villages and cities, or between regions. The more trade there is, greater the rate of growth.

Third, there is a theory that population growth itself bring about economic growth, making infrastructural projects efficient. This is perhaps applicable for those societies with limited population, where it does not make sense to build a road because so few people will use it.

Fourth, and final, is the 'Schumpeterian Growth', where technological creativity creates new efficiencies and new ways of doing things, thus augmenting the existing capital stock but increasing the level of economic activity. Some economic historians, cited by Professor Mokyr, talk about technological creativity coming together with expansion of credit, a feature of developed economies, to create conditions for such growth, but as Professor Mokyr points out, expansion of credit isn't a necessary precondition for this kind of economic growth; technological creativity, though, is.

While we seem to unquestioningly accept that education facilitates economic growth, it is perhaps logical to think the kind of education we would need depends somewhat on our underlying theories of economic growth. For example, India, where the talk of economic growth is incessant, is somewhat after the Smithian paradigm, where the expansion of trade, facilitated by increased consumption, is supposed to bring about the economic growth. The education, therefore, is geared towards making Consumer-Citizens out of students, by teaching them industrialised lifestyle and making them financially literate (so that they can manage credit). It is a very different kind of education from the developed nations, where the predominant paradigm is Schumpeterian, and therefore, the kind of education that is expected and delivered, is focused on values that may lead to technological creativity.

The key question, of course, is if these categories are mutually exclusive, or even sequential. So, the people who may think that India's growth will come from opening up its inside market, without the Schumpeterian innovation engine powering such expansion, may not be right. Consumption-driven growth that India is in the pursuit of, and the pro-young rhetoric that it is accompanied with, somewhat obscures India's need for disciplined innovation, that may augment its rather limited capital stock. The approach of India's government which focuses on making more people join the modern consumption economy (to keep busy the sprouting shopping malls and occupy the new housing stock) as the only goal of the expansion of education system lacks such perspective. India, if it is develop, will have to build an education system which bring together Schumpeterian growth with Smithian growth (and indeed plug the holes to Solovian growth through better institutions and curbing corruption), and not build its formula for prosperity on the expansion of consumption alone.   


Tuesday, August 19, 2014

Education for Employment: What Private Businesses Can Do?

Because businesses need more and more skilled people to do the jobs, they are the key beneficiaries of education. This has not always been the case - the Church and the Government needed educated people more than businesses until very recently - but in a secular society and with the age of small governments, that has changed. Today, the businesses are perhaps the largest recipient of the educated people, and for most students, education is about preparing for a career in business. Indeed, this does not mean that education does not have any other purpose, but it is best to recognise this changing perspective about education.

What the educators should, or shouldn't, do in this changed context gets discussed all too often. However, what does not get proportionate attention is what businesses need to do. The businesses often complain that they don't get the trained manpower that they need to remain competitive, and they expect the education sector to deliver them what they need, but they wouldn't similarly step up their efforts to facilitate the education that they may want provided. The governmental resources to provide an education that will satisfy the business' requirements are clearly inadequate; and even if the education is privately funded by the students, it is difficult for the educators to balance off all the constituents, including the students, to create an employment focused education.

In this context, it is appropriate to talk about the role of private businesses themselves in bridging the employability gap. The direct engagement of the businesses into the education process, through exchange of know-how, facilitation of experiential learning and provision of funding, can all help make education more relevant to businesses. All these are indeed better than complaining endlessly about the limitations of the traditional education process, and paying a heavy cost in terms of sub-optimal recruitment pipeline.

That businesses should be more engaged in education is already a part of the global conversation, but the current paradigm may be counter-productive. Some countries, like China and India, are experimenting with the ideas of a CSR tax, which is a forced mechanism for businesses to contribute to social causes, education among them. While this works at one level, there is a renewed commitment and expanded commitment among many Indian and Chinese companies, this somewhat undermines the point that the businesses need a learned society for its own sake. With short term earning pressures weighing in on every move of the executives in modern businesses, a business case is far more convincing than any other sort of persuasion. And, taxation, while effective in the short run, may end up undermining a greater consciousness among the businesses about what they need to do to help develop a better workforce.

Besides, the taxation approach, while rightly focusing on the problem of educational access, somewhat ignores the challenge of educational quality and relevance. The latter is, in the context of rapidly changing society, at least as big a problem. While the suggestion that one should focus on Quality but not Access is nonsensical, the opposite is also equally wrong. However, this is the implicit argument in the conversation behind the CSR tax, that one needs to solve the problem of access first (and quality and relevance can be thought about later). This does not work, because a bad education is often worse than no education: While the countries have increased the numbers going into education over the last two decades, the numbers dropping out has soared, not just in absolute terms, but also as a percentage of people going into education at every level. And, graduates found unemployable topped up this problem further. The CSR approach to education does nothing to encourage businesses to join the conversation about relevant education for their own sake, which arguably would have a much greater impact, both in convincing businesses about their commitment to education as well as overall educational impact.

In fact, businesses can do a lot in injecting result orientation and innovation in education. In fact, where they play a role, they do such things. While most of these things are viewed with suspicion by educators, these are basic values of modern business. If the students are to prepare for a career in business, they are better off going through a system which are informed by such values. Indeed, no one is suggesting that there will be one monolithic system of education and businesses will do all of it; the state will still have a role to play and so will the religious and community organisations. But businesses can involve itself within the context of sectors or types of institutions (say Business or Engineering Schools) and innovations in these sectors, if effective and relevant, can spread to other places. 

However, to get the innovation and result orientation going, the businesses will need to be more involved. Currently, it is all about doing good, which translates into some limited amount of money and mostly hands off engagement, alongside lots of window-dressing to make the business look good. The little money that flows in also goes mostly into 'trophy items', Academic Chairs, Research Centres, or at best Scholarships, and most of these remain one-off, unsustained and of limited impact for both the student and the respective businesses themselves. An urgent conversation needs to happen towards how best to make businesses create a sustained commitment, through greater involvement and clear linkages to its own strategic goals: Getting the businesses on the table to have this conversation is perhaps the best way to enhance employability. 


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