Knowledge and skills are infinite – oil is not

by Andreas Schleicher
Deputy Director and Special Advisor on Education Policy to the OECD's Secretary-General

As the bible notes, Moses arduously led the Jews for 40 years through the desert – just to bring them to the only country in the Middle East that had no oil. But Moses may have gotten it right, after all. Today, Israel has an innovative economy and its population enjoys a standard of living most of its oil-rich neighbours don't offer. More generally, countries with greater total rents from natural resources tend to be economically and socially less developed, as exports of national resources tend to appreciate the currency, making imports cheap and the development of an industrial base more difficult. And as governments in resource-rich countries are under less pressure to tax their citizens they are more prone to autocratic leadership.

But there is more to this: OECD’s PISA study shows that there is also a significant negative relationship between the money countries extract from national resources and the knowledge and skills of their school population (see figure): Israel is not alone in outperforming its oil-rich neighbors by a large margin when it comes to learning outcomes at school, this is a global pattern that generally across 65 countries that took part in the latest PISA assessment. Exceptions such as Canada, Australia and Norway, that are rich of natural resources but still score well on PISA, have all established deliberate policies of saving these resource rents, and not just consuming them. Today’s learning outcomes at school, in turn, are a powerful predictor for the wealth and social outcomes that countries will reap in the long run.

One interpretation is that in countries with little in the way of natural resources - other examples are Finland, Singapore or Japan - education has strong outcomes and a high status at least in part because the public at large has understood that the country must live by its knowledge and skills and that these depend on the quality of education. So the value that a country places on education seems to depend at least in part on a country’s view of how knowledge and skills fit into the way it makes its living. Placing a high value on education may be an underlying condition for building a world-class education system and a world class economy, and it may be that most countries that have not had to live by their wits in the past will not succeed economically and socially unless their political leaders explain why, though they might not have had to live by their wits in the past, they must do so now.

The most troubling implications of these data relate to the developing world. Many of the countries with below-average GDP succeeded to convert their national resources into physical capital and consumption today, but failed to convert these into the human capital that can generate the economic and social outcomes to sustain their future.

But there is an important message for the industrialised world too. Particularly in these times of economic difficulties, it is tempting to resource our standard of living today through incurring even greater financial liabilities for the future. But in the long term, there is no way to stimulate our way out or to print money our way out. The only sustainable way is to grow our way out, and that requires giving more people the skills to compete, collaborate and connect in ways that drive our economies forward. Without sufficient investment in skills people languish on the margins of society, technological progress does not translate into productivity growth, and countries can no longer compete in an increasingly knowledge-based global economy.

In short, knowledge and skills have become the global currency of 21st century economies. But there is no central bank that prints this currency, you cannot inherit this currency and you cannot produce it through speculation, you can only develop it through sustained effort and investment by people and for people.

Moreover, this new ‘currency’ depreciates as skill requirements of labor-markets evolve and individuals lose the skills they do not use. The toxic coexistence of high unemployment and skill shortages in many countries today illustrates that producing more of the same graduates is not the answer. To succeed with converting knowledge and skills into jobs, growth and social outcomes which nations require, we need to develop a better understanding of those skills that drive strong and sustainable economic and social outcomes; we need to ensure that the right mix of skills is being taught and learned over the lifecycle of people; we need to develop effective labor-markets that use their skill potential; and we need better governance arrangements with sustainable approaches to who should pay for what, when and where. OECD’s new Skills Strategy is now providing a framework to support countries with building, maintaining and using their human capital to boost employment and growth and promote social inclusion.
Links:
Figure: The negative relationship between national resources and skills
OECD Skills Strategy
Presentation: Skills matter: Developing an OECD Skills Strategy
PISA: www.pisa.oecd.org
Follow Andreas Schleicher on twitter @SchleicherEDU
Photo credit: © diez artwork / Shutterstock