Business, As Usual, Distorts Education (Part I)

Published on Monday, 09 September 2013
Business, As Usual, Distorts Education (Part I) Image by Beth PH via Flickr

Capitalism became a global force centuries ago.  But for most of its history, there was a struggle through which the inequalities and excesses that came along with it were tempered, at least partially, by government interventions.  That led, in many countries, to about 50 years of the welfare state, from the 1930s to the 1970s, in which government was seen as playing a major and legitimate role in reigning in capitalism.  All that changed in the 1980s with the election of Thatcher in the U.K., Reagan in the U.S., and Kohl in Germany.  Since then, neoliberalism has dominated, within which government is maligned and seen as illegitimate, and business and the market reign supreme.  This has had enormous and harmful consequences for public policy, in general, and for education, in particular.  Business, embedded in a market system, has been the driving force for education throughout the past 30+ years of the neoliberal era around the world.   The global emphasis on business and the market system has distorted education in myriad ways, including:


Mismatch.  Even before the neoliberal era and continuing through to today, educational failures have been blamed on the mismatch with the needs of business.  Unemployment, in particular, is put at education's door, arguing education is not teaching what the economy needs.  It is, unfortunately, true that many children and youth leave schools without basic reading, writing, and social skills which are necessary for work and life.  But the mismatch argument is usually not about basic skills but vocational skills.  The mismatch argument, while superficially plausible, is not true for at least two reasons.  First, vocational skills, which are context specific, are best taught on the job.  Secondly, unemployment is not a worker supply problem but a structural problem of capitalism.  There are two or more billion un- or under-employed people on this planet, not because they don't have the right skills, but because full employment is neither a feature nor a goal of capitalism.


Entrepreneurship.  Periodically, a solution to education and employment problems is posited to be teaching entrepreneurship.  This was a popular in development circles in the 1970s and 1980s, especially tied to the idea of connecting education to jobs in the informal sector in developing countries.  In more recent decades, it emerged focused on rural women, often tied to microfinance, and sometimes more broadly seen as an essential part of the primary and secondary school curriculum in developing countries, again as a route to jobs in the informal sector.  Most recently, university curriculum in some developed countries have emphasized entrepreneurship to promote innovative employment.  But all this is simply the same labor supply approach embedded in the mismatch argument.  Moreover, this version is even more problematic.   Instead of preparing people for existing jobs a la mismatch, entrepreneurship is preparing them for jobs that do not exist.  Entrepreneurship is the result of our failure to make good on the promise of decent work and substitutes hope and prayer for effective economic policy that creates employment.


Human Capital Theory and Labor Economics.   Tied to both issues above, capitalist economics in the 1950s, and earlier, had a problem understanding labor.  While the economic framework was centered on supply and demand by individuals and small firms, at the time, labor economics was more sociological, dealing with institutions like unions and large firms, and phenomenon like strikes, collective bargaining, and public policy.  The advent of human capital theory in the 1960s took the sociology out of labor economics and focused it on individuals and the supply of and the demand for workers, mostly on supply.   Education was seen as investment in individual qualities that made one more productive and employable.  This was operationalized by measuring rates of return (RORs) to different levels or types of education.  Unfortunately, these RORs had no legitimacy for two reasons.  First, in theory, they should have been looking at much more than the impact on income, and, since they did not, results were distorted.  Second, they could not even accurately measure the impact of education on income since income is affected by dozens of variables and there is no correct way to control for them.


While ROR measures were a form of voodoo economics, nonetheless, in the abstract, there is some truth to this supply version of human capital theory.  However, that truth is partial at best, and actually more empty than useful.  That is, abilities like literacy, numeracy, teamwork, problem-solving, etc.  can have a payoff in the job market but only in a context where such skills are valued.  The more useful and important question is the demand-side one, too often ignored by human capital theorists, regarding how can we create decent jobs that require valuable skills.  Under neoliberalism, government intervention, at best, furthers human capital formation (our rather unsuccessful efforts towards EFA and the MDGs show we are not particularly serious about even this, as we postpone these goals to 2030).  Government intervention for other purposes, like decent job creation, is considered anathema under neoliberalism; the market is supposed to take care of the demand side.  We have seen how spectacularly unsuccessful reliance on the market has been for employment.


Education and Economic Growth.  Tied to the human capital argument that education yields individual income and jobs is a related, broader argument that education and other forms of human capital yield overall economic growth, thus providing some aggregate benefits to society.  Unfortunately, this has also not proven to be a fruitful line of empirical inquiry.  The death knell for this research was sounded early, in 1970, when Mark Blaug, perhaps the preeminent economist of education, showed how absurd were empirical forays into the question.  The basic problem is that GNP is the result of literally hundreds of variables, and our research methodologies have no way of controlling accurately for all of them in order to isolate the effect of one variable, like years of schooling.  It is not that you can't get empirical estimates.  You can, they are just not believable.  Over the years, since Blaug's analysis, a few economists have attempted to estimate the effects of education on GNP.   Two foolhardy souls actually estimated the effect of one more textbook available or one additional student in a class, supposedly tracing through the consequences of those factors until their impact on GNP.  But the idea that such a connection can be estimated is simply unbelievable.


However, most recently, two intrepid economists, Erick Hanushek and Ludger Woessman, published a few studies purporting that Blaug was wrong and that we can empirically measure the effect of years of schooling, and moreover the quality of that schooling, as measured by test scores, on GNP.  Well, for me, this is as farfetched as the textbook and class size example for the reasons above -- but it seems like many people are unreflectively accepting this tenuous chain of reasoning.  It has become commonplace to argue something like a 1% increase in education quality will get you a 1.3% increase in GDP.


This is simply absurd.  And the upshot is that these economic/business/market arguments further distort education and education policy.  They continue to privilege a narrow discourse about education and the economy, they are used to market very narrow approaches to and measures of educational quality, and they undermine other discourses which take more sensible and legitimate approaches to making educational policy such as ones based on human rights and participatory democracy.

Last modified on Tuesday, 01 October 2013

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Steve Klees

Steven J. Klees ( is the R. W. Benjamin Professor of International and Comparative Education at the University of Maryland. He did his Ph.D. at Stanford University and has taught at Cornell University, Stanford University, Florida State University, and the Federal University of Rio Grande do Norte in Brazil.

Prof. Klees' work examines the political economy of education and development with specific research interests in globalization, neoliberalism, and education; the role of aid agencies; education, human rights, and social justice; the education of disadvantaged populations; the role of class, gender, and race in reproducing and challenging educational and social inequality; and alternative approaches to education and development.


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