EDUCATION IS NOT THE DRIVER OF ECONOMIC TRANSFORMATION

Mar 21, 2015 Features / Columnists, Peeping Tom

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A Partnership for National Unity (APNU) is making politically correct sound bites. But what is politically correct is not always right.
Indeed if a policy prescription is based on a misanalysis of a particular situation, then the solutions proposed by that policy prescription will not achieve its desired end, no matter how well-sounding it is.
APNU has a policy prescription which it intends to pursue should it win the next elections. That policy prescription places increased emphasis on education.
Now this sounds nice; it is politically correct. It is agreeable. And indeed any country has to invest in its educational system but not for the reasons that APNU provides.
APNU wants this investment because it views education as the driver of transformation. One can only assume that when APNU speaks about transformation it does not limit this to social transformation, but includes economic transformation without which there would be nothing to socially transform.
APNU’s view that education is the driver of transformation is questionable. If APNU means economic transformation, then this is a flawed analysis. In as much as its proposals regarding the emphasis of education may sound good, it is good for the wrong reasons and therefore is not going to result in economic transformation.
Education is needed for a transformational process. But it is not the driver of this process.
The three traditional factors of production were land, capital and labour. New factors of production have emerged and it is these new factors that are the drivers of economic transformation.
What are these new factors? I will name four. But I will begin the discussion with three. The first is inventiveness. The second is innovation. The third is entrepreneurship. These are the factors that are driving economic transformation in the world today.
Pushing global economic transformation is the desire for global competitiveness. And the industries that are transformative and are yielding competitive advantages are known as knowledge-based industries. Education is important to these industries but it is not the driver of transformation. The critical factors driving global competition in developed economies are inventiveness, innovation and entrepreneurship.
In developed economies, it is technical innovation that is achieving competitive advantages. However, in these economies there is in place the infrastructure and the investments in design and research that are necessary to achieve high levels of technical innovation which when coupled with inventiveness and entrepreneurship, gives a huge boost to the competitive advantage of these stronger economies.
On the other hand, in the developing countries, there is a deficit in infrastructure, including technological infrastructure, and there is a lack of resources for investment in research. As a result, technical innovation is all but absent.
In these developing economies, the factor most needed to drive this technical innovation is not so much education as it is infrastructure. Developing economies need education to manage a transformational process but education is not the driver. Infrastructure is, and in this regard, the PPP is way ahead of the opposition when it comes to its understanding what drives economic transformation.
Developing countries are limited in their capacity to innovate and invent. Developed economies and emerging economies have greater capacity in these two areas. Because of the deficit in innovative capacity, developing countries have to find another means to transform their economies. And that driver is infrastructure. You do not need to be a jaguar to know that.
There is a relationship between building infrastructure and creating the capacity to innovate. It is beyond this column to explain this but it should be obvious to the most casual of economic students that developing countries are behind the developed world in innovative capacity only where there is a deficit in infrastructure, including technological infrastructure.
Education has a role to play in building and sustaining knowledge based industries. But infrastructure has a far more important role. Infrastructure is a prerequisite for building innovative capacity.
Education on the other hand has long been associated with social transformation, or so it is argued. For example, education, it is said, is the best means to move people out of poverty.  But is it the education per se that moves people out of poverty or is it the opportunities it provides to the select to move more rapidly towards higher income jobs? And if these jobs were not there in the first place, what would be the use of education?
This is a highly debatable issue, one that many people are not willing to take on because it is considered heresy to dispute the role of education in poverty reduction. While it is true that education opens up greater opportunities for the poor to be more socially and economically mobile, the returns on educational investment are as a mass level extremely poor. That is fact but one that is ignored and dodged by economists.

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