In the early 1990s, I was working for a non-profit public health management consulting organization. Although based in the US, I spent most my time conducting short-term assignments that aimed to strengthen management systems of public, private and NGO providers of health services all over the world.
By coincidence, I started two, multi-year engagements with private, non-profit providers of women’s health services at the same time, one in Bangladesh and one in Romania. The objective was to assist them examine their cost and revenue structure and develop strategies to programmatically and financially sustain their organizations.
The size and structure of the organizations were similar, but the parallels ended there. They could not have been further from one another in one key facet – access to quality education. In Bangladesh, the general population was well versed in the free market economy, where everyone from the street vendor to government officials understood the basic principles of capitalism. As a result, the initial phases of the engagement saw a quick uptake in the nuts and bolts of budgeting, revenue generation and associated simple management practices.
In contrast, Romania was far less encouraging. We faced a degree of skepticism about free market economy principles and, in fact, learned that teaching elements of capitalism was a huge challenge to a population that have not lived in such a system (this occurred just a few short years after the fall of Communist leader Nicolae Ceaușescu).
We persevered in Romania, fascinated by their perspectives, and savoured the Bangladeshi enthusiasm for what we were doing to assist them with mastering these new skills.
Something changed halfway through the engagements. Whether it was our late night philosophical discussions with the Romanians about political systems, or the easing of tension as they thought about revenue and expenses being “ok” to talk about, something clicked. They understood what we were conveying. Without much more encouragement from us, their comprehension of our free market approach soared in leaps and bounds. And before we knew it, were soaking up everything they could about what we were doing, and even taking it to the next level.
In contrast, the Bangladeshi’s plateaued at a certain, basic level. They were unable to as easily advance in their understanding of the principles we were providing to them. They simply did not have the educational foundation needed to rise to the next level.
This experience cemented my belief in the power of education to drive long-term, sustainable economic development, and continues to fuel my professional interest.
The GBSN 2017 Annual Conference Intersections of Business Education and Economic Development, will explore the innovative and interdisciplinary ways business schools are collaborating with academia, businesses, NGOs and the public sector to advance economic development and expand opportunities.
Our conference theme endorses a direct and positive relationship between business education and economic development. But is there such a relationship, and to what extent, under what environmental conditions? These questions are not new and have been the topic of many scholarly papers, political platforms, and myriad discussion forums, all of which provide interesting perspectives and data. Let’s take a quick look around the globe at other instances where relationships between education and economic development have been studied.
In New Zealand, David Earle, Senior Analyst at the Ministry of Education, states “education is associated with long-term improvements in economic performance. The link between education and economic performance can be conceived of in three broad ways:
- Improving the overall knowledge and skills of the population
- Providing capacity for innovation
- Transfer of new knowledge and ideas
Research indicates that improved school education leads to improved economic performance (more so than the other way around). However, it is the quality of learning, rather than the amount of time spent in education that is most important.
New Zealand is well educated compared with other developed countries. It has a high, and increasing, proportion of people with tertiary qualifications and a reasonably high proportion with good literacy and numeracy skills. However, New Zealand’s labor productivity has been low relative to the level of educational attainment. Reasons for the recent low labor productivity in New Zealand include:
- The rapid expansion of the workforces from 1999 – 2007, which brought in lower skilled workers
- A high reliance on skilled migrants, many of who have English as an additional language, and take time to adjust to the New Zealand workforce
- A relatively high proposition of the workforce in low value-added industries and low capital intensity
- Small size and distance from major economic centers
Overall, tertiary education provides a small, but important contribution to driving economic growth. The quality of the skills graduates bring to their work is more important than simply the number of people in the workforce holding qualifications. These skills are the most productive where businesses have the capital, management skills, scale and links to international markets to support innovation and productively gains.”¹
Panagiotis Pegkas, from Harokopio University of Athens, examined the educational levels and economic growth and estimated the potential impact of the different levels on economic growth in Greece over the period 1960 – 2009. During that period, an educational expansion took place, especially in secondary and mainly in higher education. The empirical analysis reveals that there is a long-run relationship between educational levels and gross domestic product. The overall results show that secondary and higher education have had a statistically significant positive impact on growth, while primary hadn’t contributed to economic growth. The results also suggest that there is evidence of unidirectional long-run causality running from primary education to growth, bidirectional long-run causality between secondary and growth, long-run and short-run causality running from higher education to economic growth.²
Middle East and North Africa (MENA):
Interestedly, this region has not seen the same results as other parts of the world. In the MENA Development Report, The Road Not Traveled, the authors state: “the relationship between human capital and economic growth is highly conditioned by the quality and distribution of education in the labor force and the economic structure of each country. Investing in more and better-distributed education in the labor force helps create conditions that could lead to higher productivity and higher economic growth, but this is by no means sufficient. It is also necessary to adopt policies that lead to the creation of diversified, dynamic, and competitive sectors capable of absorbing the more educated labor forces to translate human capital into higher economic growth. The evidence supports the view that countries that combine both do better on average than those that do one without the other.
The story of MENA is simply one of catching up on both fronts. There are exceptions, but most MENA countries have yet to reach the level and quality of human capital of the more dynamic economies in the developing world. In addition, most countries in the MENA region have yet to develop economically into modern, industrialized productive structures capable of absorbing a significant fraction of the labor forces into high-productivity jobs. Short of making a leap forward in both areas, further investment in education is likely to go unrewarded.”³
In the US, Noah Berger and Peter Fisher conclude in their article A Well-Educated Workforce is Key to State Prosperity that the wealth of a society can grow only if the economy becomes more productive. Productivity increases with investments in infrastructure and workers as well as investments in education that raise educational achievement. Thus, investing in education is a core contribution states can make to the wellbeing of their residents and the overall national economy. Most significantly, states can build a strong foundation for economic success and collective prosperity by investing in strategies that make their people more productive, chief among them education. Providing expanded access to high quality education and related supports – particularly for people that lack such access – will not only expand economic opportunity for those individuals, but will also likely do more to strengthen the overall state economy than anything else a state government can do.
The 2017 GBSN Conference will convene global leaders from several sectors to share their unique experiences. Together we will open channels for further dialogue and action to address the challenges we face in our current world environment.
There is so much more work to be done! If you feel the imperative to advance management education for economic and social advancement, please join us for two days that will enrich and inspire you. It could make all the difference!
¹The Road Not Traveled, Education Reform in the Middle East and North Africa, MENA Development report, The World Bank, 2008
² Panagiotis, Pegkas, Harokopio University of Athens, The Link between Educational Levels and Economic Growth: A Neo-classical Approach for the Case of Greece, International Journal of Applied Economics, 11 (2), September 2014, 38-54
³ Earle, David, How Can Tertiary Education Deliver Better Value to the Economy? Tertiary Education Occasional Paper, 2010/08, Tertiary Sector Performance Analysis and Reporting, Strategy and System Performance, Ministry of Education
Stephen Sacca is the CEO of the Global Business School Network