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.
Figure: The negative relationship between national resources and skills
OECD Skills Strategy
Presentation: Skills matter: Developing an OECD Skills Strategy
Follow Andreas Schleicher on twitter @SchleicherEDU
Photo credit: © diez artwork / Shutterstock


Christopher Lloyd said…
The argument is disappointing because it seems to mistake a statistical correlation today with a causal argument about history and development. The exceptions that you mention are not the only cases of countries that have escaped the resource curse. Natural resource and other primary exports have been the route to economic development and prosperity for many countries from the 19th century onwards, including Sweden, Finland, Norway, Denmark, Iceland, Australia, New Zealand, and Canada. Commodity exports are not necessarily a curse, even in less developed countries today, as the case of Botswana shows. Lack of development and poor educational outcomes, even in a context of resource dependence, can have many causes, especially historical (such as post-colonialism) and institutional ones. Resource curse is, rather, a consequence of these deeper factors rather than the proximate causation of poor public services and state accountability. Searching for the historical processes of institutional development and maturity would be a better approach than mistaking statistical correlations for causes. And, by the way, Israel is on the brink of becoming a major natural gas exporter.
Frank Legge said…
Also not mentioned is the advantage that will accrue to developing nations if they manage to control population growth. No matter how educated and clever we become, food production will inevitably decline eventually as cheap energy sources become depleted. Few understand how much food is produced as a result of using nitrogenous fertilizer, manufactured using a huge amount of energy, at present cheap.
Edvin Granroth said…
Natural resources are only a starting point. Some economies strive past basic exports of raw materials and commodities by aiming at value adding. As an example Sweden moved from exporting timber, iron, and copper to an advanced manufacturer of investment type goods. The dacision to move up in the value chain is not only based on economics but also on politics. If we look at Norway, it has become a major exporter of commodities only recently. If the logic would apply to Norway, it should be sliding back in education.
i agree.
Phil Hodkinson said…
The premis is correct but there are a range of cultural changes needed for some countries to accept diversification. 25 years ago the UK developed ity's NVQ system of learning through employment and callege based programmes, working towards national standards.
This system has been adopted and adapted in around 50 countries globally. In my work as an advisor I have notuiced wide differencies in standards of application even after top government support, in several countries in the Middle East. This shows it's self in many ways but glaringly in the quality control of the programmes. Culturally, companies complain that their individual programmes are better and others say the standards go beyond what they consider necessary.Only Bahrain seems to have gone some way to solving this with their National Institute for industrial training.
I just spent 10 days in Libya, where the cry everywhere in government is to develop industrial training. As with other oil states, they have lots of well educated people with degree level qualifications. Beneath that there is a large hole ready to be filled with good quality technical training, but the new government must bring on board their largs oil industry employers if they are to move at the pace needed to keep up with their infrastucture requirements.
Phil Hodkinson, Principal Greys College Wigan UK
Anonymous said…
Well Said, Even India needs to improve it's skills and will have to learn new skills.

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