Even if education’s impact on growth has been meagre so far, you may wonder whether the recent rise of the knowledge economy may have changed all that. With ideas becoming the main source of wealth, it may be argued, education will from now on become much more important in determining a country’s prosperity.
Against this, I must first of all point out that the knowledge economy is nothing new. We have always lived in one in the sense that it has always been a country’s command over knowledge (or lack of it) that made it rich (or poor). China was the richest country in the world during the first millennium because it possessed technical knowledge that others did not – paper, movable type, gunpowder and the compass being the most famous, but by no means the only, examples. Britain became the world’s economic hegemon in the nineteenth century because it came to lead the world in technological innovation. When Germany became as poor as Peru and Mexico right after the Second World War, no one suggested that it should be reclassified as a developing country, because people knew that it still had command over technological, organizational and institutional knowledge that had made it one of the most formidable industrial powers before the war. In that sense, the importance (or otherwise) of education has not changed in the recent period.
Of course, the knowledge stock that the humanity collectively commands today is much bigger than in the past, but that does not mean that everyone, or even the majority of the people, has to be better educated than in the past. If anything, the amount of productivity-related knowledge that an average worker needs to possess has fallen for many jobs, especially in rich countries. This may sound absurd, but let me explain.
To begin with, with the continuous rise in manufacturing productivity, a greater proportion of the workforce in rich countries now works in low-skilled service jobs that do not require much education – stacking shelves in supermarkets, frying burgers in fast food restaurants and cleaning offices (see Things 3 and 9). Insofar as the proportion of people in such professions increases, we may actually do with an increasingly less, not more, educated labour force, if we are only interested in the productivity effects of education.
Moreover, with economic development, a higher proportion of knowledge becomes embodied in machines. This means that the economy-wide productivity increases despite individual workers having less understanding of what they do than their counterparts in the past. For the most striking example, these days most shop assistants in rich countries do not even need to know how to add – a skill that their counterparts in earlier times definitely needed – as bar-code machines do that for them. For another example, blacksmiths in poor countries probably know more about the nature of metals in relation to tool-making than do most employees of Bosch or Black & Decker. For yet another example, those who work at the small electronics shops littering the streets of poor countries can fix many more things than can individual workers at Samsung or Sony.
A large part of this is due to the simple fact that mechanization is the most important way to increase productivity. But an influential Marxist school of thought argues that capitalists deliberately ‘de-skill’ their workers by using the most mechanized production technologies possible, even if they are not the most economical, in order to make the workers more easily replaceable and thus easier to control.[7] Whatever the exact cause of the mechanization process, the upshot is that more technologically developed economies may actually need fewer educated people.
Now, it may be argued that, even though economic development may not necessarily require the average worker to be more educated, it needs more educated people at the higher end. After all, as I have pointed out above, the ability to generate more productive knowledge than others is what makes a country richer than others. Thus seen, it may be argued, it is the quality of universities, rather than that of primary schools, that determines a nation’s prosperity.
However, even in this supposedly knowledge-driven era, the relationship between higher education and prosperity is not straightforward. Let us take the striking example of Switzerland. The country is one of the top few richest and most industrialized countries in the world (see Things 9 and 10), but it has, surprisingly, the lowest – actually by far the lowest – university enrolment rate in the rich world; until the early 1990s, only around one-third of the average for other rich countries. Until as late as 1996, the Swiss university enrolment rate was still less than half the OECD average (16 per cent vs. 34 per cent).[8] Since then, Switzerland increased its rate considerably, bringing it up to 47 per cent by 2007, according to UNESCO data. However, the Swiss rate still remains the lowest in the rich world and is way below what we find in the most university-heavy countries, such as Finland (94 per cent), the US (82 per cent) and Denmark (80 per cent). It is, interestingly, also far lower than that of many considerably poorer economies, such as Korea (96 per cent), Greece (91 per cent), Lithuania (76 per cent) and Argentina (68 per cent).
How is it possible that Switzerland has stayed at the very top of the international productivity league despite providing much less higher education than not just its main competitors but also many economies that are much poorer?
One possible explanation is that universities in different countries have different qualities. So, if Korean or Lithuanian universities are not as good as Swiss universities, it may be possible for Switzerland to be richer than Korea or Lithuania, even if a much lower proportion of the Swiss have university education than do the Koreans or the Lithuanians. However, this argument loses much of its force when we compare Switzerland with Finland or the US. We cannot in all seriousness suggest that Swiss universities are so much better than Finnish or American ones that Switzerland can get away with university enrolment rates half theirs.
The main explanation for the ‘Swiss paradox’ should be found, once again, in the low productivity content of education. However, in the case of higher education, the non-productivity component is not so much about teaching people subjects that will help them with things such as personal fulfilment, good citizenship and national identity, as in the case of primary and secondary education. It is about what economists call the ‘sorting’ function.
Higher education, of course, imparts certain productivity-related knowledge to its recipients, but another important function of it is to establish each individual’s ranking in the hierarchy of employability.[9] In many lines of work, what counts is general intelligence, discipline and the ability to organize oneself, rather than specialist knowledge, much of which you can, and have to, actually pick up on-the-job. So, even if what you learn in a university as a history major or a chemist may not be relevant to your work as a prospective manager in an insurance company or as a government official in the Department of Transport, the fact that you have graduated from a university tells your potential employers that you are likely to be smarter, more self-disciplined and better organized than those who have not. By hiring you as a university graduate, your employer is then hiring you for those general qualities, not for your specialist knowledge, which is often irrelevant to the job you will be performing.
7
The most influential works in this school of thought were Harry Braverman’s
9
On the issue of sorting and many other insightful observations on the role of education in economic development, see Wolf,