Education is the Real Stimulus


“The educational foundations of our society are presently being eroded by a rising tide of mediocrity that threatens our very future as a Nation and a people”

A Nation at Risk, 1983

WASHINGTON – This ominous quote comes from an important report issued back in 1983 by an ad hoc commission. It told us to fix the US education system, unless we wanted to see societal decline. Well, what does that warning have to do with our current economic predicament of 2009, caused by irrational financial risk taking, overleveraging and over consumption? Not much, at least not directly. But the quality of our public education system will help determine our options, once the crisis will be over. In other words, once this mess will be behind us, with better educated people we shall have a much broader spectrum of chances to re-start, innovate and compete in the global economy than without them. Starting today to repair a public education system –that actually got worse since that 1983 report– may have nothing to do with immediate stimulus, and tomorrow’s unemployment rate. But it will have a lot to do with America’s future competitiveness and ultimately with its status in the world: still a superpower, or an exhausted, semi-impoverished country? 

Fast forward to 2019. Ten years after the Big Crisis, the Housing Disaster and the Financial Meltdown. What kind of America will we have then? How strong? How rich? How self-confident?

Who knows. One narrative could feature a humbled and diminished America. The country whose people thought that they could forever spend money that they did not have, finally had to make peace with the unpleasant reality of a diminished status. “We are not as rich as we thought. We are deeply in debt and unable to produce more than modest value. Thus, we have to scale down and live more modestly. We used to be market leaders in most sectors. Well, this is no longer so. We cannot compete on price with Asia. And the sectors where we could compete on quality have shrunk, because our rate of innovation is no longer what it used to be. Hence the need to lower our prices and thus our profit margins. Besides, being poorer, we had to scale back our international commitments and our world leadership role. No way that we can afford the largest military in the world. And without muscle and little money to spread around, it is a lot more difficult to get the attention that we used to get in the past. Given our lack of means, we are no longer a superpower.”

But there is another possible narrative. Having realized that the Big Crisis was about the delusions of easy money coming from nowhere that would somehow “create” the funds for an expensive life style, America went back to the basic art of wealth creation. What were the magic ingredients that had allowed America to dominate in so many sectors? Well, it is rather simple: “The production of cutting edge, state of the art, new knowledge; itself founded on quality schools and state of the art education. The willingness of many to use this knowledge creating a system geared towards constant innovation; while this innovation drive took full advantage of an “echo sytem” –laws, intellectual property protection, availabity of venture capital–that made it relatively to easy to bring inventions to market and to scale up fast; thus rewarding financially innovation, risk taking and enterprise”. This is what America had in the past –in great abundance. If this national trait of a flexible society geared towards entrepreneurial risk taking can be rekindled, then lost ground can be regained.

However, in this new globalized, highly competitive world, featuring now new actors who have developed important skills, we need to sharply refocus on one element in the old mix that has become exceedingly important.

And this is: “education”. A good education foundation is the prerequisite for developing cutting edge new knowledge, itself the essential premise for the creation of new, money making enterprises. Well educated people will understand more things and will be better able to push the envelope. Hard to imagine a competitive society led by under educated people.

When we got the Sputnik scare in the 1960s, (the Soviets appeared to be way ahead of us in space and thus in ballistic missile technologies, threatening our very survival), rightly or wrongly we thought that we needed to make a heroic national effort to regain our lost edge in science and technology. If the Soviet Union had the opportunity to surpass us in space, then may be they could do this in many other sectors, thus overwhelming America because of their technological prowess. Fast progress in science became therefore an issue of basic national security. Well, today, even though we do not have a hostile Soviet Union to deal with, we have to contend with all the other innovators world wide. They press on and our edge and ability to compete is eroded. Many, witness China, for the time being, compete on cost, not on quality. Still, as we cannot match their prices, we have to create new sectors in which we can compete on quality.

The call to enhance our skills in science and technology that was meant to galvanize America in the 1960s should be refashioned and applied to our present circumstances. Except that the stakes, if anything, now are higher. The situation today is comparatively worse than what it used to be then. This is because overtime our education system has become worse, while education standards have improved among our competitors. Among the more developed economies, America routinely is close to the bottom in all comparative surveys of academic standars for secondary school pupils.

America’s secondary public education, with due exceptions, is now anywhere between mediocre and bad. Many poorly educated young people do not go to college. Therefore they can compete only for menial, low skills, low pay jobs. Many others do go to college. But, as the general college population starts with lower levels of basic knowledge, the standards have been lowered.

So, we have low standards, lower expectations and mediocre preparation that will translate into a mediocre work force, at a time in which the emerging knowledge economy requires much higher proficiency even for entry level workers who must be computer literate and capable of mastering and managing complex systems and controls of higher and higher sophistication. The inability to turn out workers and professionals capable to meet these new challenges is a recipe for progressive erosion of our competitiveness and eventually national decline.

The tricky thing about such a decline is that many may not see it, because it does not occur everywhere at the same time, touching all at every level. America is not an even society. Some segments of the economy still do very well. Meanwhile, the rich and the super bright, have and will continue to have access to first class education in (mostly private) high schools and then in the elite good and super universities. And they will get the good jobs in the well oiled international corporations that do nurture innovation and innovative talent as a matter of course. For them there is no impending crisis. But all the others do not and will not do so well. They are today and will be tomorrow the product of declining standards and mediocre instruction and thus they will be less knowledgeable, less innovative and less valuable. Comparatively speaking, they will be less competitive vis-à-vis an international workforce that has become more skilled in the meantime.

If we look at our past, rightly or wrongly, one attractive element of the accepted and cherished National Mythology is the one of America as “Land of Opportunity”. Supposedly, this is the country where anybody, given drive and determination, can do anything they want; regardless of their humble beginnings, lack of connections and lack of funds. This might have been true, to a degree, in the past. Most American millionaires were self-made. Many did not have a great education. Indeed, a good idea, plus spunk, persistence and belief in their abilities propelled many improbable characters to great success. And for all the others, including poor, uneducated immigrants, the old mass production model, with its immense scale, almost guaranteed a decent life as a factory worker to people with little education. American world dominance allowed high wages for many and thus that extra income that allowed working class children to aspire to something more.

But now, quite apart from the current gigantic recession that was precipitated by the housing crisis of 2007 and 2008, America’s technological superiority is no longer. And thus we need to recreate a major national commitment to education as the essential prerequisite, the yeast that can give the would-be innovators the extra knowledge and intellectual tools that will foster inventions thus propelling the broader society, and not just some segments, into the big leagues.

In other words, whatever the short and medium term benefits of any 2009 economic stimulus package, and/or other targeted interventions in housing and banking aimed at kick-starting the stalled American engine, these types of injections, while critical at this time, are not game changers. But a concerted effort to re-engineer and radically upgrade our education system would be a game changer. Overtime, it would improve the quality of the building blocks of any innovative economy: that is the people thinking new ideas; the people planning, making and selling new things or new services.

And there is more. In this globalized economy, everything happens very fast. Even before this recession, the time to adjust and make changes had become much shorter, while the negative impact of lack of competitiveness comes about immediately and hits harshly. Faced by the onslaught of new competitors, businesses relocate, outsource functions, or shut down entirely. And this happens all of a sudden, with little warning and not much time to fashion whatever transition may be possible. And lack of competitiveness hits the least sophisticated sectors. And they tend to employ mostly those with average skills or at the bottom of the economic pyramid. And in America these tend to be disproportionably the chronically marginalized. They are the African Americans or the Hispanic immigrants, legal or illegal, who came here for the entry level jobs. In a better society, their initial status at birth should not be a sentence to perpetual poverty or semi-poverty. Fair access to good quality education should provide the ladder that would propel many upward. “You start low; and you cannot help that. But you go to school; you get a good education and thus you have access to an entirely new, broader and more appealing range of options”.

And this is where our future ability to compete meshes with the goal of a more inclusive society. Education is both the key to competitiveness and the foundation on which we can restate the enduring validity of the mantra of America as an “Opportunity Society”. Without access to quality public (that is affordable) education, then the concept of “opportunity”, while still true for some, becomes meaningless. For most of those who start at the bottom, birth becomes destiny. “As you are born poor, you will most likely stay poor”. And the equation birth = destiny is what defines most underdeveloped societies that stay underdeveloped in large part because they are unable to educate people and thus develop their human capital. The poor are not poor because of some tragic predestination. They are poor because they lack access to education, knowledge and therefore options.

Which is to say that a real, sharp, massive effort on revamping education creates not just a more competitive society but also a better, healthier society in which upward mobility, in practice denied by bad schools that produce only ignorance, becomes a concrete reality.

We have heard worried warnings about education in the past. As mentioned at the beginning, back in 1983, way before the ill effects of this neglect had become so apparent, seminal work such as the Report ”

A Nation at Risk: the Imperative for Educational Reform came along. This was the report of President Ronald Reagan’s

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