Does prosperity depend upon education?

Christopher Lingle, Luxembourg Ville, Luxembourg

It has become an article of faith that economic progress depends upon having an educated citizenry. A corollary is often attached requiring governments to provide resources to meet this end. However, like so many self-evident truths, there may be less than meets the eye.

Let's look at the proponents of this conventional wisdom about education. Amartya Sen, Nobel Laureate in economics, insists that India's plague of poverty will be best remedied through massive additional state spending on education.

Naturally, politicians and state-employed educationists eagerly embrace any idea that lets them acquire more power and gain access to ever more tax money, especially when where there is little accountability for corruption or nonfeasance.

There are at several problems with assigning so much importance to education as the basis for a community to be well- off. On the one hand, formal education is neither necessary nor sufficient for either an individual or a community to be prosperous. On the other hand, proposals to increase public spending on education ignore extensive theory and endless examples of the failures of public-provision of goods or services.

First, let's begin with some introspection concerning the effect of education on material success. At the individual level, numerous self-made tycoons succeeded with very limited formal education. For example, a Balinese friend of mine, Made Sandi, never attended school. He learnt English and enough of several other European languages so that he could sell curios on the beach. As he grew up, he expanded into handling local art work and then eventually built an art gallery. He plowed some of his money into property that is now worth several million dollars.

Second, formal education is not sufficient for a community's economic progress. Consider Cuba and Zimbabwe, countries that are at the top of the charts when it comes to literacy. Being well educated offers no guarantee of success for individuals or entire countries.

A problem with refuting the false connection between education and economic progress is that the private returns to education are so obvious. Clearly having a higher degree allows an individual to earn more. Unfortunately, the social returns to education diminish rapidly once basic skills like reading and writing and numeracy are covered.

As it is, public spending on education tends to focus on quantity rather than quality.

Indeed, the lowest social rate of return from public spending on education is at the university level. This means that public spending in poor countries should be minimal for tertiary education and most resources providing good primary education.

What about public funding for schools.? A good place to start is with the numerous failures associated with public provision of education. An Indian-government sponsored "Probe Report" revealed that serious "malfunctioning" of government schools causes harm to low-income families.

However, the problems found in government schools by the Probe Report were not found in private schools serving the poor. Similar random visits made to private schools revealed "feverish classroom activity"!

And so it is no surprise that despite desperate economic conditions, many of the poor abandon state-funded schools to place their children in private schools. Government schools offer free tuition, books, and even lunches. Yet in Hyderabad, official figures indicate that 61 percent of all students attend schools in the private, unaided sector. This ratio is probably higher since government schools overstate the number of the students they instruct to insure more public funding.

Private schools are driven by a commercial logic instead of depending on handouts from state or charities. Despite charging low fees, the private schools in urban ghettos of India make reasonable profits that are reinvested in the school.

It turns out that the principal difference in performance in government and private schools is the lack of accountability of government teachers. Private schools provided stronger incentives for teachers to perform well and for administrators to insure that they offered quality education.

Teachers can be dismissed by the administrators and parents can "fire" the school by withdrawing their children. No similar incentives operate within government schools where teachers have jobs for life. Such security leads to complacency instead of inspiring them to be better teachers.

Even though even the poor choose private schools, educational entrepreneurs in the slums face hostility from government officials and official barriers to offering their services. One estimate for India suggests that before a private school can be opened there are at least 35 different procedures and licenses that must be satisfied.

Governments should only provide what the private sector cannot or provides badly. In the case of education, the private sector in India is ready and able to fill the needs of the people by providing education at all levels. Lessons can be learned from the behavior of many of India's poor that know private schools often offer better services than government-funded schools.

The writer is Professor of Economics at Universidad Francisco Marroqumn in Guatemala.