(Archived Content)
Twenty, even ten years ago it would have been unusual for a senior Treasury official to be addressing a conference such as this one. Today, you do not have to be an ex-economist -- an ex-World Bank economist, even -- to spend a lot of your time at Treasury thinking about education. Education matters today at Treasury not just because we are public servants and education is a public good. It matters because in these last years of the 20th century it is no exaggeration to say that no investment any nation makes will be more important to its future prosperity and stability than the investments it makes in education.
President Kennedy once said that our progress as a nation can be no swifter than our progress in education. As we move into a post-industrial age, one in which opportunity depends less and less on what people can lift, more and more on what they can understand, the relationship between economic and educational success is ever more direct. The fact is that without effective investment in human capital there can be no effective investment in any other kind of capital. And without globalized education there can no truly global and prosperous world economy.
I'd like to start today by placing the question of Latin American education reforms in the context of the region's reform process overall -- what has been done and what remains to be done if the possibility of rapid and inclusive growth is to be realized. I will then go on to discuss the second generation of education reforms we need to see in Latin America, and the role of the World Bank and other multilateral institutions in carrying these efforts forward. .
I. Education as Insurance
Eight years ago when John Williamson first summarized the gospel according to Washington, education had a place on the list as a desired beneficiary of efforts to re-order public spending priorities. This element of the Washington Consensus has not entirely fallen by the wayside in the course of reforms. But it is fair to say that the greatest successes of Latin American reform to date have lain elsewhere: in the restoration of macroeconomic control; in the embrace of openness and ever deeper integration; and above all in the spread of market mechanisms and private ownership.
We have seen in Latin America's weathering of the recent crises both a testament to these reform achievements -- and a significant maturation of them. The world is still a dangerous place, and the risks to Latin America have not all passed. Equally, the market and terms of trade effects of the Asian crises mean that Latin America is not going to emerge entirely unscathed. But when we consider what might have happened -- what many, possibly, expected to happen -- the message is surely a positive one. It turns out that it may, after all, be possible for there to be a major developing world financial crisis, and for Latin America to be a bit-player.
It would be nice to break another long tradition today -- and give a speech about the future of Latin America without discussing the need for a second generation of reforms. But while it is true to say that the second generation is now well under way in many countries. It is equally true to say that some countries are a good deal further along then others. And in none is the job complete.
The list of second generation reforms is long and varied: it includes reforms of pension, tax, and financial sectors to stimulate savings and ensure they get channeled effectively into higher investment and growth. It includes greater investment in education, social services, and basic infrastructure, and programs to bring government closer to the people, through decentralization of power and resources to subnational authorities. It includes stronger rule of law through judicial reform, and eliminating corruption.
What these all add up to is democratizing economic opportunity just as institutions and constitutions were democratized in the first wave of reforms -- by making government a constructive force in every society. In the past decade and a half an unprecedented number of countries, not merely in Latin America but around the world, have won government for the people. What we have yet to see achieved, in most of these countries, is effective government for the people. This is the challenge we all face in seeking to build the basis for rapid and inclusive growth.
Make no mistake: the United States cannot exempt itself from this same challenge while a child born in Harlem has a smaller chance of living to the age of five and a smaller chance of graduating high school than a child born in Shanghai; and when more than 10 percent of Americans do not have a bank account and pay perhaps 10 percent at the local pawn shop to get every pay check cashed.
As nearly every country has now recognized, when it comes to addressing these challenges and building the basis for cohesive and prosperous economies, education stands out as the closest thing to a free lunch policy-makers are likely to find. Because uniquely, education is something that not only increases the size of the pie -- but helps include more in its benefits.
One recent study of six Latin American countries cited in Jhaved Burki and Guillermo Perry's excellent Long March study last year suggested that the income of the average employed urban 15-24 year-old rose linearly with the increase in the number of years of education completed. In Brazil in 1990, having ten years of education, rather than five or fewer, was the difference between earning 3.4 times more than poverty line, and hovering just above it. In a region so dismally distinguished by its level of income inequality -- these returns are too good to miss.
II. New Education Policies for New Generation
How well has the lesson of education been applied in Latin America? The answer -- until recently -- was less than encouraging. If most now agree that macroeconomic reforms took precedence over microeconomic ones in the earlier stages of reform, and that reductions in the scale of government took precedence over increases in its quality -- then most would also agree that the reform of education was particularly ill-served by these biases.
It is not that nothing has been achieved. Almost every country has seen impressive improvements in the most basic indicators of educational investment -- namely primary and pre-school enrolment. The proportion of children receiving pre-school education doubled between 1980 and 1990 -- to 42 percent. And rare is the country in the region that cannot boast near universal primary enrolment rates.
Critically, and most gratifying to me personally is the fact that during this period in most Latin American countries -- gender disparities in enrolment have all but disappeared.
It has become a cliche in development circles that investing in female education has the highest return of any investment in the developing world: in higher wages; in lower child mortality; in slower population growth; in reduced maternal mortality and in the reduced spread of AIDS. I am glad that it is now a cliche. I would be even more glad if all of the world's female population now had a chance to experience its validity firsthand.
As in the OECD, women make up more than half of the population in Latin America. This compares favorably with East Asia and South Asia, where the share was 47 or 48 percent as recently as the early 1990s. Likewise Latin America and the Caribbean are unique among developing regions in having a differential between female and male literacy rates of less than 5 percent.
And yet, for all these achievements in Latin American education, probe beneath the basic data and the same old failings stand out:
- in low attainment: with a primary completion rate of just 52 percent, on average, and a stunning 29 percent of children going to school in a given year will be retaking that same grade a year later. And in the levels of attainment my reading of the evidence is that the Latin America's begins to score less well on the matter of gender bias.
- in unequal access and expenditure, with large differences in access to secondary and pre-school education as between rich and poor, and urban and rural children; and too much money spent on higher education for the few, too little on high quality education for the many. In Venezuela, for example, it has been estimated that more than 75 percent of higher education students come from the richest 20 percent. Yet universities -- as occurs so often -- remain the most heavily subsidized of all levels of education.
- and in a mismatch of inputs and outputs: as The Long March noted, at 4.3 percent of GDP, Latin America's $50 billion annual investment in education is not so very puny by international standards. What are puny are the results, with Latin Americans scoring low, by and large in standardized achievement tests. In a standardized reading examination held in 32 countries in 1992 only Nigeria, Botswana and Zimbabwe performed worse than Venezuela.
Doing better will sometimes be a matter of resources. Without adequate resources, there cannot be adequate investments in people. But as these last points underline -- equally, if not more, important will be spending more wisely the resources countries have now:
- public sector resources need to be targeted more effectively to those that are currently il-served. Chile has shown the way here in using the results of national assessment tests and other social indicators to target additional support to the poorest schools;
- leverage for public resources needs to be sought both in the private sector and elsewhere, notably, the direct involvement of parents themselves. We see this in the rural areas of El Salvador -- in the payoffs to greater local community group involvement in school management; we see it in Columbia, where teaching by parents and older students has played an important role in the success of the New Schools -- schools that far outscore old schools in tests and now house more than a third of all Colombian students.
- and countries need to begin judging education systems rather less by the quantity of jobs they provide for teachers -- and rather more by the quality of the education they provide for children. Reforms such as those in Chile are beginning to have this kind of effect. Student learning time is being increased, teachers are being made more responsible -- and accountable -- for results, and pay and performance are being more closely linked.
Slowly, the right lessons are beginning to be applied in more and more countries. And slowly, countries are beginning to see the results. But there is still much to do in every country -- and much that the Bank and other multilateral institutions can do to speed those efforts.
III. The Way Forward and the Role for the Bank
In a world in which private capital flows to developing countries exceed public ones by a factor of seven it behooves us all to consider that the most effective role for a multilateral development bank will be. This debate is far from over. But it strikes me that the Bank's approach to education, in Latin America and elsewhere has the potential to be something of a flagship for the knowledge bank and an example for other development institutions around the world.
It has been said that the Bank should not try to be all things to all clients. But in education, at least, I would suggest it should focus on at least being three things:
First, it should be a monitor and catalyst for peer pressure. Education is too important to do poorly. If the International Financial Institutions (IFIs) and the interactions between national governments are essential to ensuring that our banking systems remain stable, if they are essential to ensuring that our telephone systems work, then they are essential to ensuring that our education systems work. The IFIs need to monitor governments' efforts here: as they monitor the operation of fiscal policies, to monitor the allocation of resources for education; as they monitor the state of the tax system, to monitor the state of the education system.
Second, and perhaps even more critical, the Bank and the IDB must be collectors and sharers of knowledge. In education reform, perhaps more than any other sphere, learning occurs by doing -- and by telling. The two banks are uniquely well situated to ensure best practice and best results are disseminated effectively to others and put to work. Put it another way -- if the knowledge bank is to be a knowledge bank it has to teach. And it has to maintain the pressure on governments to re-order their priorities toward education -- and re-order their thoughts about education to focus more on outcomes.
Third, the bank must husband its resources and focus programs on leveraging the maximum possible spending and policy change from the national authorities -- or the maximum possible social return. Preferably both. The latter, in turn must mean a particular emphasis on programs that will address inequities in access and the quality of education -- particularly when it comes to girls and indigenous groups.
The Bank has made great strides toward these objectives since granting the first loan for education in 1963. Education is largely and rightly a task for individual nations to finance. But as the Bank as shown, international institutions can make a big difference.
It is a credit to the Bank is the single largest source of external financing for education in developing countries. But even more gratifying is the fact the resources devoted to education continue to increase by leaps and bounds -- with a tripling of the total volume of lending for education since 1980 and a more than doubling of education's share of the total. For its part in the past three years the IDB has approved more than $1.5 billion in loans for education -- around 7 percent of its new lending.
But we need to do more. At the Summit of the Americas in Santiago de Chile last April the leaders of the region called for a hemispheric effort to signal a renewed commitment to putting people -- and education -- first. As part of this effort the IDB has agreed to more than double the share of new lending to primary and secondary education in the next three years, to more than $3 billion.
In addition, work has begun at the IDB on devising a Special Fund for Hemispheric Education to meet the particular challenges which educating this region presents. This might:
- provide loans and grants to plug the gaps in well-intentioned reforms -- the times when teachers are trained but have no books, when schools are built but have no teachers; when parents seek involvement but need mechanisms to organize themselves;
- bring new resources to bear on steps that can help us integrate as we educate -- such as developing more systematic testing systems and uniform performance standards across countries;
- channel funds into finding more innovative ways to reach those who have most often been forgotten: the very poor, the rural and isolated, minorities, and the young adults who want a new chance to complete an equivalency at the secondary level and to upgrade their skills to be more productive members of society;
- look creatively for special initiatives to advance our shared goals -- for example, using regional exchange to improve teaching quality.
Educating our people is the central challenge of our time. If we are serious about meeting that challenge we must be serious about marshaling the resources to meet it -- at the Bank and at the other international institutions and, above all domestically. The desirability of the goals is not in question. And with so many positive examples now to choose from, nor is our ability to achieve those goals. What will perhaps be in question is the depth of our commitment to them. We must all of us work to invest in all Americans -- North and South. Because if the 20th century was the American century -- there must now be a strong chance that the 21st century could be the century of the Americas.