The Congress has been given a rare opportunity to form a government that can get things done-legislatively at least. What should it do? Should it secure a rapid conclusion of the Doha Round of trade talks? India has played a critical role in holding up these talks. What about public sector reform that would make doing business easier, or reforms to the courts that would support their independence but speed up the enforcement of property rights? All of these things have economic merit. But if the government could do only one thing, what is the most transformational thing, the thing that would lift most out of poverty and accelerate the economy? It is education reform.
Education empowers more than any grant, subsidy or incentive. In rejigging education we need to recall two slightly contradictory things we have learned in the ninety years since the Bolsheviks took power in Russia in 1917. Public investment in public education (and health) produce higher returns, both private returns and social returns, than almost any sustainable private investment. But given the amount they spend, governments are poor at producing public goods of deep quality and wide choice to the less well-off. Public hospitals are not cheap, but you would not risk your life in one if you could afford not to. Poor families who need every last penny are rejecting public schools and going private because they believe the quality of the public schools are so poor that that they are restricting the opportunities of their children.
Who is the best person to decide what is right for your child? The bored official at the ministry who has tens of thousands of children to think about? The disinterested teacher in the public school with the overcrowded, leaking classrooms? At the same time as the State should identify education as the central plank of economic development, it must focus on the few things it does better than markets?establishing independent qualifications, enforce non-discrimination rules and, critically, funding?and leave the rest to others.
Governments should take their school budgets and, instead of giving them to school administrators, turn them into educational entitlements awarded directly to parents and guardians. An annual education entitlement that could be spent on any education provider and this could go on beyond the school years to include skills training and retraining. Approved education providers would be able to cash these entitlements to pay for running schools. This is education that is publicly funded; but privately delivered.
There are essentially three real problems with voucher schemes like this (there are also some imaginary problems that arise from discomforting vested interests like teacher unions and education civil servants). The first problem is how do we make sure that the level of entitlements are set correctly and that government isn?t short-changing parents and children? This is not a problem unique to voucher schemes?but voucher schemes can deal with this more transparently than the current system. The government can set a figure that each entitlement is worth which makes 90% of existing school?s viable as they are, and commit to raising this figure by a minimum of 5% above the rate of inflation every year. It can also commit to a limited number of extra entitlements to those with special needs.
The second issue is that when you introduce the notion of profit for education providers, the quality of education may suffer. Perhaps, but where good performance goes unrewarded, poor performance festers. We all know great teachers unmotivated by money and lousy teachers who are unchangeable and unmovable. The key is to police standards that ensure parents and students alike are not abused by the unscrupulous and there is transparency about measures of performance. This must not be done in way that does not restrict the scope for schools to innovate.
The third problem is whether the ?supply-side? can react to the demand from parents. If parents demand a particular school or type of education, could their demand be easily and quickly met? The real question is whether this would be any worse than today, where supply is not matched to parent demand, but to bureaucrats? wishes. I am no market zealot, but the one thing we have learned is that markets are far better than central planners at giving consumers choice and quality. The problem with markets is that they reinforce the existing unequal distribution of wealth. In this proposal we are creating a market by taking purchasing power away from those who have not earned it at education ministries, and dividing it equally to those who need it. Marx would have been proud and parents would be empowered.
The author is member of the UN Commission of Experts on International Financial Reform, chairman of the Warwick Commission, chairman of Intelligence Capital Ltd and emeritus professor of Gresham College in the UK