Curing the ills of rich nations is no easy task. The International Monetary Fund's flagship yearly outlook laments a jobs crisis and rising inequality among its wealthier members. But its prescription of more education spending is unlikely to do the trick. Though desirable in many ways, such outlays aren't the golden ticket economists often claim.
It's hard to quarrel with the IMF's diagnosis. While the great compression in global living standards may have lifted millions out of poverty in poorer countries, a growing band of workers in advanced economies is being left behind. As the IMF shows in this year's World Economic Outlook, the worrying trend started long before the 2008 slump. Between 1993 and 2006, middle-income jobs were harder to come by in most developed nations.
The IMF's insistence on a skills upgrade is at best a partial solution. For individuals, such improvement generally helps land better jobs. For nations, however, it's far from clear that education is an economic panacea.
An upgraded system for teaching a citizenry is often a reward of prosperity, not its cause. For example, Taiwan had a literacy rate of just 54 per cent in 1960, compared to 72 per cent for the Philippines. Yet it is Taiwan that has grown explosively and now boasts a GDP per capita roughly 10 times its Asian peer.
Even the vaunted boost from higher education relies on scant evidence. Switzerland's university enrolment rates were around a third the average of developed nations until the 1990s yet it managed to become one of the world's most industrialized nations, according to work by Cambridge economist Ha-Joon Chang. Thus, superior education alone doesn't necessarily boost a country's overall stock of jobs.
Of course, such spending benefits societies in myriad ways – lowering birth rates for poor nations and improving social cohesion in rich ones. But expecting it to insulate workers in wealthy countries from the chill winds of global competition may be asking too much. If anything, they already spend more than is economically necessary on this precious service. The quest for remedies must go on.