Positive restructuring

Fernando Fernández. Professor. IE Business School

16 May 2012

One of the most widespread fallacies is that education can only be improved by throwing more public money at it. Here are four ways to improve education in Spain without spending a single extra Euro.

There are many pressing issues at the moment. The nationalization of YPF, which is bad for Repsol, worrying for Spain, and fatal for the Argentinians. Another issue is the IMF report that questions the pace and timing of European fiscal austerity, and which marks another step towards obscurity for an organism that has tried so hard to keep everyone happy that it has lost all direction. Then there is the restructuring plan for the Spanish banking sector which the banks seem to have managed to get through successfully, although it cannot be said that it has brought the financial crisis to a close. All will play a key role in the immediate future of the Spanish economy. But today I want to talk about the really important things, like education for example. Every economist should know that an increase in salaries can only be sustainable if it is in lockstep with productivity, and productivity depends essentially on human capital, which in turn depends on the quality of its education system. And there is no doubt that Spain needs to improve its education model.

One of the most widespread fallacies currently in existence is that education can only be improved by an increase in public spending, or that cutbacks will only serve to bring about a drop in quality. Wrong. Cutbacks can actually improve efficiency levels if they reduce the monopolistic revenues of some of the system’s key players, if they result in competition and flexibility, if they mean that education better meets the demands of an economy in transition, and if they lead to the kind of institutional change needed to fully leverage the country’s potential.

I would like to propose some changes that are revolutionary and do not cost anything, and which would go a long way toward raising levels of education. First, as any good statistician knows, we have to focus on averages rather than peripheries. The problem with Spanish education is not one of excellence, but rather a paltry level of useful and relevant knowledge among its school children in general. The problem is not that top students don’t get brilliant results that enable them to successfully compete with top students worldwide, but rather that the system does everything possible to reduce incentives for average students, who manage to pass with very little effort. Thus, opportunities to improve overall results are lost. It is not the quality of their elite that distinguishes the world’s most dynamic economies, but rather the levels of productivity of their middle classes.

Second, professors should stand to benefit depending on the average results of their students, subject to national external tests, obviously. Why do we think that professors are not human enough to respond to economic incentives? There is far too much gratuitous talk about vocation and very little about incentives and productivity. Third, education centers should be managed by professionals, from schools to universities. Why are rectors selected by universal suffrages, if they are merely managers of potential sources of public wealth, placed in their hands by taxpayers? Hospital directors are not elected in the same way. And while we are at it we could get rid of the University Council, a leftover from corporatism, if only the National Competition Commission would do what it should do. Fourth, we have to permit universities to compete and specialize, charging different enrolment fees and offering attractive salary packages for the professors they see as being the most capable. There is too much fear of freedom, too much protectionism, too much abuse of privileged positions, too much demagogy that is almost Peronist in that it has Spanish education in a stranglehold. Freeing it from that stranglehold would not cost money.

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