One salient feature of the United States in the 21st century is a belief that our school system – from pre-kindergarten to higher education – is failing us. There are commercials, charter schools, Pell Grants, teacher training and a focus on test scores all in the name of improving education. Those predicting our demise point to the numbers: we’re behind in math and science to ex-soviet bloc nations; the number of people with a college degree is at an all time low; kids today are less likely than their parents to earn a high school diploma. If we don’t act now economic growth will slow to a crawl; we are breeding an incompetent workforce that European and Asian countries will outperform.
This is not the first time Americans have raised concerns about how (and what) they are teaching their youth. Pundits and politicians in the later half of the 19th century feared that schools were not preparing students for the demands of the second industrial revolution – students in Germany, Austria and other industrialized nations were surely outperforming their Americans peers. During an 1885 Senate committee report Joseph Medill, the former Mayor of Chicago and managing editor of the Chicago Tribune, testified that the
college system certainly does not train our youth in habits of useful industry… On the contrary, college education is conducted with a view to imparting a knowledge of dead languages and the higher mathematics to the pupils, which is all well enough for the wealthy and leisure classes, but is not best suited for bread-winners.
Medill was right. Booming industries (railroad, steel, etc.) spawned massive companies. With hundreds, sometimes thousands of employees, owners needed people who knew how to manage other people and make sales. Unfortunately, business “skills” at the time were bookkeeping, penmanship and arithmetic, nothing close to an MBA – Greek and Latin certainly weren’t helping the railroad and steel industries.
Worse, college grads developed a poor relationship with the business world. In an 1899 New York Tribune article Andrew Carnegie proclaimed that, “college education as it exists seems almost fatal to success… the graduate has little chance, entering at twenty, against the boy who swept the office, or who begins as shipping clerk at fourteen.” As Carnegie saw it, college was a highbrow institution that contributed little. Physical work, not intellectual merit propelled the prosperity of the Gilded Age.*
Like the present, the worry then was that the American education system was “useless, obsolete, and far behind that of other counties.” The source of this fear was (and still is) the belief that education leads to prosperity. That is, without education wealth and economic growth was impossible. A now widely cited paper by Lant Pritchett – then an economist for the World Bank – shows that the casual arrow is backwards. After analyzing data from developing and rich countries from 1960 to 1987 Pritchett found that wealth and economic growth actually precede education.
Consider a few counter-intuitive facts that heterodox economist Ha-Joon Chang points out in his latest book 23 Things They Didn’t Tell You About Capitalism. In 1960, Taiwan had a lower literacy rate (54 percent) and half per capita income ($200) than the Philippines (72 percent and $122). Today, Taiwan has ten times the income of the Philippines ($18,000 versus $1,800). Similarly, South Korea had a lower literacy rate (71 percent) and per capita income ($82) than Argentina in 1960 (91 percent and $378). Today, South Korea’s per capita income is three times higher ($21,000 versus $7,000). Chang also points out that between 1980 and 2004 literacy rates in Sub-Sahara African counties rose from 40 to 61 percent while per capita income fell by .3 percent per year during the same stretch of time. “There is remarkably little evidence” he concludes, “… that more education leads to greater national prosperity.”
Education is not useless of course. It’s just not as important for increasing economic productivity as we believe. What really matters? Chang argues that what
Distinguishe[s] the rich countries from the poorer ones is… how well their citizens are organized into collective entities with high productivity – be the giant firms such as Boeing or VW or the smaller world-class firms of Switzerland and Italy. Development of such firms needs to be supported by a range of institutions that encourage investment and risk-taking – a trade regime that protects and nurtures firms in ‘infant industries’, a financial system that provides ‘patient capital’ necessary for long-term productivity-enhancing investments, institutions that provide second chances for both the capitalists and for the workers, public subsidies and regulation regarding R&D and training and so on.
There’s another reason: information learned in school has little impact on worker productivity, even in jobs where the application of a degree is obvious – a mathematics degree in investment banking, for example. Employers hire college grads over high school grads because a college degree suggests general intelligence, self-discipline, and organization. It’s not what you’ve learned, just the fact that you went to college, got passing grades and graduated that counts – specialized knowledge is usually irrelevant.
Consider Switzerland. It’s one of the richest countries and has one of the lowest college enrollment rates in the developed world. How is this possible? The low productivity content of education, according to Chang. Believe it or not, Swiss workers produce, innovate and build with fewer college degrees just fine. Likewise, the United States grew its economy during the 19th century not from education reforms but through smart economic policies that encouraged growth and innovation. It did not become one of the wealthiest countries by 1900 because Americans were smarter than everyone else.
It’s easy to look at the correlation between degree and salary and conclude that education leads to wealth and prosperity. At the individual level this is true but at the national level it is not. We should focus less on degrees and more on, as Chang puts it, “[organizing] individuals into enterprises with high productivity.”
* Notice that the relationship between college and employment flip-flopped in the last one hundred years. Today, a college education is a prerequisite for getting a good job; during Carnegie’s time college hindered your chance of landing a job.