Sunday, April 27, 2014

'Futureducation': Preparing For The Wrong Future

The last two decades were a great time for educational expansion. The ideas of mass education caught up, not just in the West, but also in the rest of the world. Population is no longer seen as a problem, but a source of strength, of consumption and of production, and 'demographic dividend' was added to our lexicon. Personnel quickly became Human Resources and then Talent, and in this transformation, education came to be seen as the key to unlocking the great wealth that lies hidden in the teeming masses. Especially in the last decade or so, schools, colleges and universities were built at a furious pace. Governments accepted the fact that they can't build the educational capacity fast enough, and looked for ways to build private capital into education, and entrepreneurs saw this as the new frontier of opportunity. The importance of education is one thing that everyone agreed upon.

Now, it is perhaps time to look back at all that has happened, and start asking an uncomfortable question: Are we mostly preparing for a wrong future? The underlying reason for asking the question, indeed, the shifting patterns of the labour market and the dis-alignment of educational institutions and ideals (see my earlier post). However, this disconnect is even more crucial when seen together with another key policy-making assumption - that of the hierarchy of the labour markets.

There is a model in the world in every policy-maker's mind about how their countries can develop, and usually, they follow the patterns followed by the industrial west: Increasingly mechanised agriculture releasing the surplus labour, which gets absorbed into factories and service sectors, producing goods and services for globalised trade. And, in this model, the world's jobs gets sorted out in an hierarchical order: Developed economies lose out their manufacturing and low skilled jobs to the developing ones due to cost disadvantages, and the developing economies cede the high value activities, design, branding, research, to the advanced economies because of their advanced education systems and pool of qualified manpower. This is a common sense narrative which has been accepted all across the policy-making circles, high finance communities, development business and even educators. This is the model that drives both the perceived need of education in developing countries and its intended outcome.

So, in lay terms, this means developing countries need to 'catch up education', prepare their students for basic jobs in manufacturing and service back offices, while the advanced nations need to move up the ladder and train for higher order thinking skills. This model is not just common sense, it also has empirical evidence: The rise of Asian Dragon economies, and then China, chipping away the manufacturing from North America and Europe, proves the salience of this theory of 'hierarchy of labour'. 

However, this may be a wrong view of the future.

To start with, the view that the countries will specialise in some areas come from the ideas of David Ricardo and its later refinements as done by Swedish economists Eli Heckscher and Bertil Ohlin, which states that if a country has comparative advantages in some trades due to the advantages in factor prices (cheap labour, for example), it will tend to specialise on the same, and import other products in which it does not have an advantage. But this, as we know now, despite its common sense appeal, may not hold in reality: The countries may develop similar industries based on the similarities of domestic demand, rather than supply side factors. So, a booming demand for cars in China may mean that China will develop a car industry and world-leading automobile companies, despite the fact that it may not have a comparative advantage in car manufacturing (which was true twenty years ago) compared to some of its Asian neighbours. [The Economists will call it the Linder Hypothesis] Given this view, the convergence of demand will mean a global convergence of jobs and work, and this means designers may be as much in demand in India as they would be in Britain. 

The second problem with the assumption of hierarchical labour market comes from the supply side. With the advancement of computing, the national comparative advantages may matter less than a global competition between human labour and mechanisation. There may be a prevalent view in developing countries that while computerisation may be destroying office jobs in the West, Indian accountants, underwriters and clerks are so cheap that they will remain in demand in the foreseeable future, but that may precisely be the wrong way to think about the future. Even overlooking the efficiency-adjusted costs (Indian back-office workers may not be as cheap given a level of efficiency), the costs of the machine-driven alternative is going down and the costs of efficient manpower in India is going up: It is this competition we need to be mindful of. And, indeed, one can't just win this game.

These twin reasons prompt the observation that all the 'skills agenda' adopted by the developing countries, mostly with the aspiration to develop a 'catch up' labour market, is completely misdirected. These initiatives are mostly failing to deliver, but those failures mostly relate to implementation. The bigger failure, which seems to lay in the future, is the fact that this may all be about preparing for the wrong future.

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