By
Bakampa Brian Baryaguma
.......................................................................................
Abstract:
Education
and training in general help countries manage their transition from planned to
market-based economies by, building an integrated and self-sustaining economy, strengthening
private absorption, integrating people in the market-based economy, and promoting
nationalism and citizen responsibility generally. As this essay demonstrates, these
roles cannot be overemphasized.
...........................................................................................
1.0. Introduction
‘Education constitutes the major focus of all development questions because it has the greatest influence on many different aspects of life and society. ... a lag in education may limit a country’s development potential much more than a lag in income.’ Lilli Sippel.[1]
Economic
development comprises of three successive stages namely, factor-driven growth,
investment-driven growth and innovation-driven growth.[2]
As clearly indicated by Michael Mertaugh and Eric Hanushek, these stages have
particular economic challenges and accordingly, the focus of economic
production.[3]
The
hallmark of economic development is material and financial prosperity,
manifested in wealth accumulation. In the hope of stretching the level of
wealth creation to the highest extent possible, man devises ingenuous modes of
socio-economic organization, including planned and market-based economic
arrangements. Underneath these arrangements lies the pursuit of economic
development.
1.1.0.
Key Definitions
In
this essay, unless the context otherwise requires, the following terms and
phrases shall carry the following meanings.
1.1.1. Economy
This
term emanates from the word economics
which literally, is the science of the production, distribution and consumption
of goods or the condition of a country as to material prosperity.[4]
In its normative form, economics evaluates the design of institutions for the
organization of economic activity, for purposes of allocating social capital
through markets.[5] Consequently,
the term economy denotes a society’s
system of controlling and managing its money, goods and other resources.[6]
1.1.2. Planned Economy
This
is an economic system where the state centrally regulates the functioning and
operation of the production process. Issues like what to produce, when to
produce, who to produce, where to produce and for whom to produce, are
determined by selected state institutions and individuals who think they know
more than others. Hence, this economic system is often referred to as a command economy. Planned economies are associated
with socialist countries and they are generally public.[7]
1.1.3. Market-based
Economy
This
is an economic system where the forces of demand and supply regulate the
functioning and operation of the production process. Hence, this economic
system is also known as free market or
unplanned economy; implying that
there is minimum freedom of choice. Market-based economies are synonymous with capitalist
countries and they are largely private oriented.[8]
They are driven by private interests urged by the desire to maximize personal as
opposed to public satisfaction.
Planned or unplanned:
the Underlying Controversy
Some
economists have contested the attempted categorization of planned and unplanned/market-based
economy. For example, Dr. Lawrence Bategeka, the Principle Research Fellow at Uganda’s
Economic Policy Research Centre, describes this categorization as ‘disturbing’;
for him, planned should be avoided in
preference for command economy.[9]
He reasons that there is planning within market-based economies in terms of
raising resources (mainly through taxation i.e. whom to tax and with what
intentions) and budget management thereafter.
The 2008-09 financial crisis showed the need for
government intervention in markets because loose monetary policy in advanced
countries, by way of inadequate prudential regulation of their financial
systems, caused the crisis.[10]
According to Otaviano Canuto and Marcelo Giugale, ‘... left by
themselves, markets may not generate enough learning. Producers tend not to
share profitable ideas, and financiers tend not to finance ideas they do not
understand. There is room for public policy.’[11]
To
this extent, it is true that the purported distinction between planned and market-based economy is hazy and shady.
1.1.4. Transition
Countries
Generally,
transition denotes the move from
central planning and totalitarian government to market-based economy and
democratic pluralism. Therefore, transition countries are countries changing
from planned to market-based economies. In the International Handbook of Education for the Changing World of Work,
it is stated that,
Transition
countries are very diverse but what all have in common is that they are
undergoing a fundamental change in their main societal institutions, including
the education system. They are seeking to change from centralized authoritarian
societies with some form of state-planned economy towards more democratic
societies with a market-based economy. For that reason, they can be called
‘transition’ countries.[12]
I
respectfully agree with this analysis. Contemporary transition followed the
collapse of the communist economic and political system in Central and Eastern
Europe in the summer and autumn of 1989.[13]
These transition countries differed in many respects as far as their initial
conditions were concerned. For instance, they were at varying levels of income
and wealth; plus, there was a mismatch in the nature and extent of economic
distortions and the level of institutional development.’[14]
Nevertheless,
they had a common legacy characteristic of macrobalance by direct control where,
for instance, financing of enterprises was set by a credit plan, taking into
account investment targets, and implemented through a mono-bank financial
sector; plan-centred coordination where economic activity was based on a
central plan with quantitative output targets specified in physical units,
among others.[15]
This system encouraged and promoted passive citizenship.[16]
Thus,
although transition countries may have had specific problems and challenges, these
were set within the context of commonly-shared concerns and experiences.
2.0. Learning from
Experience: the Transition Process
‘Education is the memory of the past, the teacher of the present, the paradigm or the plan for the future.’ Tarcisio Agostoni.[17]
To
appraise what role education and training in general have in helping countries
manage their transition from planned to market-based economies, it is pertinent
to reflect on the experience of former transition countries, upon transition.
2.1.
The Impact of Transition
Experts
have rightly observed that, ‘The transition from a planned economy to a market
economy involves a complex process of institutional, structural and behavioural
change.’[18] Naturally,
the transition posed serious challenges, although it had pleasant surprises too.
2.1.1. Macroeconomic
Destabilization
Price
liberalization more often than not led to inflation, emanating from erosion of
the government’s traditional tax base, due to output losses accentuated by pressure
on state enterprises’ revenues, as a result of loss of monopoly power and
difficulties in imposing payments discipline, through a previously passive (now
active) financial system.[19]
2.1.2. Output Declines
from Disruptions in the Coordinating Mechanism
Transition
is associated with ‘The sudden abolition of planning in a complex, highly
interdependent economy [thereby impairing] economic coordination, affecting
both useful and unwanted production pending the establishment of a new,
efficient system of market coordination.’[20]
The dismantling of centrally planned production and consumption, occasions a shortage
of commodities which must henceforth be provided by an amateur free market, run by forces of demand and supply. Absence of
meaningful business interaction between buyers and sellers is responsible for
the lack of coordination in the amateur free market.
2.1.3. Output Gains
from Private Ownership and Private Sector Growth
Upon
transition, private ownership of resources is legalized and this creates
incentives to maximize returns. It also facilitates the establishment and
enforcement of legal frameworks to support private initiatives and the
facilitation of private entry, triggering a shift from an inefficient planned
economy to an efficient market-based economy, thus reflecting individual
preference rather than the demands of a plan.[21]
2.1.4. Occurrence of
Microeconomic and Sectoral Reallocations
Liberalization
of wages and prices, as well as cuts in state subsidies occasion the occurrence
of microeconomic and sectoral reallocations in the economy, whereby previously
repressed sectors like services, expand and offset reductions in industry.[22]
This facilitates the emergence of a vibrant private sector, which is the
backbone of a market-based economy.
3.0. From Planned to
Market-based Economy – The Role of Education and Training
‘Education plays a key role in supporting the process of development from low-income, resource-based economies to high-income, knowledge-based economies.’ Michael Mertaugh and Eric Hanushek.[23]
The
role that education and training in general have in helping countries manage
their transition from planned to market-based economies, may be deciphered from
the impact of transition on transition countries.
3.1. Building an
Integrated and Self-sustaining Economy
The
shift from a planned to a market-based economic system occasions disruptions in
the coordinating mechanisms of the economy, leading to acute shortages of goods
and services. Therefore, education and training in general plays the role of
building an integrated and self-sustaining economy, by accelerating the
establishment of a new and efficient system of market coordination, through bridging
the gap between the hitherto detached forces of demand and supply.
The
introduction of business oriented courses like commerce, entrepreneurship and
business administration, at all levels of education, is instrumental in
achieving market coordination, which is a prerequisite to market integration. Lilli
Sippel et al noted that, ‘Education
means much more than the acquisition of information. In an interconnected
world, where information is almost always available, classifying information
and being able to obtain the most out of it is essential.’ The essence of
education is enabling people to understand the way the market works, automatically
leading to a self-sustaining economy in both the medium and long run. As Bank
of Uganda’s Assistant Director, Research, Jimmy Apaa Okello, says, ‘...
education and training sensitize citizens on the general state of the economy
which enables the growth of robust service and manufacturing sectors.’[24]
The
2008-2009 global financial crisis demonstrated that understanding the way the
market operates is vital for economic management and stability, lest there is a
financial meltdown.[25]
The crisis shook the
ground under the conventional wisdom that had been held as true for decades,
thereby marking the beginning of a new era of market governance.
3.2. Strengthening
Private Absorption
Dismantling
a centrally planned economic system enables private enterprise and ownership of
resources. It also causes microeconomic and sectoral reallocations, which
trigger the expansion of hitherto repressed service sectors, thus facilitating the
growth of the private sector.
But
private sector growth depends on private absorption i.e. private consumption
and investment. Thus, the question is, in
a fast changing world of global competition, what education and training will
the country need to stay ahead of the pack? The role of education and
training, in this highly globalized and competitive world, is to nurture sustainable
consumption and investment techniques.
Thus, investing in management and worker skills
alike is paramount because today’s economies are
knowledge-driven. There is need to create a dynamic and creative workforce that
will adequately respond to the demands of a now actively consuming public, no
longer tied to the dictates of a plan. Further still, these knowledge-driven
economies are technology-centred, thus requiring a formally educated labour force to enable more
rapid technology diffusion.[26]
Equally important, consumers should be guided on the appropriate
consumption habits because in a liberalized market, production is driven by
consumer choice, rather than by central production targets.[27]
3.3. Integrating People
in the Market-based Economy
Transition
is characterized by macroeconomic destabilization, manifested in form of high
prices, high unemployment rates and subsidy cuts, usually occasioned by hard
budget constraints. Transition, being a move from passiveness to activeness,
inevitably changes people’s lives.
A
market-based economy is like a rapidly flowing river or a fast speeding bus,
with no room for sluggishness. It rewards hard workers, who move with its tide
and pace. People should be educated and trained to cope with the shocks
attendant to the accelerated pace of life under the new economic system. The
lazy and sleeping ones should be woken up too.
Usually,
transition countries aspire for higher living standards.[28]
Education motivates people to work hard to improve their situation and as Zig
Ziglar says, ‘Motivation is the spark that lights the fire of knowledge and
fuels the engine of accomplishment. It maximizes and maintains momentum.’[29]
So does education. In this respect, the role of education and training is to equip
all actors with the necessary knowledge and skills that will involve people in
the market-based economy so that they are not left behind.
3.4. Promoting Nationalism
and Citizen Responsibility Generally
Transition is accompanied by the desire
for greater individual freedom.[30]
Transition entails a change of political systems: from
dictatorship or totalitarianism to democracy or plural governance. Freedoms and liberalization drive
growth by facilitating the urge for economic and political freedoms. [31]
In fact, people’s ultimate behaviour is shaped by their economic experiences.
According
to Dr. Marcelo Giugale, World Bank Director of Economic Policy and Poverty
Reduction Programmes for Africa, a new state-citizen relationship has emerged
today where we now have a direct relationship between the state and the
individual.[32] According
to him, ‘With the relationship between the state and the people changing, so
are the tools through which the two relate to each other. The final outcome may
very well be better governments’ and that this has precipitated the value for
accountability and the importance of governance to our day-to-day life. [33]
There is, therefore, need for a nationalistic and generally responsible
citizenry that will prop, sustain and defend the new socio-economic order.
Nationalism
is synonymous with patriotism and according to Mark Twain, ‘Patriotism is supporting your country
all the time and your government only when it deserves it.’ Nationalism
is deserved only when there is what Manning and Wetzel have termed Trust in Government. To them,
Trust in Government means that citizens expect the system and political incumbents to be responsive, honest, and competent, even in the absence of constant scrutiny. ... Trust in Government is taken to be a general public assessment of government’s current entitlement to be in a position to enforce its policy decisions on individuals and firms and, more fundamentally, that it is generally felt to be reasonable that government retains a monopoly on the legitimate use of violence in the enforcement of social order.[34]
Nationalism
is important because distrustful citizens minimize their relationship with the
state by staying out of politics, relying on the informal economy, settling
disputes extra-judicially and even evading taxes. This is confirmed by Manning and Wetzel who also found that ‘... low
Trust in Government can weaken the social contract ...’ between citizens and
their leaders, thereby jeopardizing investment, perpetuating low confidence in
public institutions, causing people to shun state services, resist paying taxes
and denounce legal obligations.[35]
Education
and training clarifies the relationship between the governors and the governed.
Consequently, strong institutions will be built to sustain the new era of
governance, even if it is state-individual centred, especially considering that
the new era will not throw out the state.[36]
Thus, it is pertinent that ‘... the curriculum should be structured in the
sense that citizens can clearly tell what each party’s role is’[37]
because ‘... when the competences of the market are not understood, then
dictatorship will be the likely result.’[38]
4.0. Conclusion
‘Economic and political tectonic plates are shifting. We can shift with them, or we can continue to see a new world through the prism of the old. We must recognize new realities and act on them.’[39]
In
Central and Eastern Europe,
A prevailing view at the start of the transition was that education and training systems were among the few creations of the former communist countries that did not need fixing to function effectively in the capitalist world. It became apparent early in the transition, however, that this impression was profoundly mistaken. The accession countries soon encountered problems in maintaining their relatively advanced education systems as output and revenues fell ...’.[40]
This
extract demonstrates the critical role that education and training in general have
in helping countries manage their transition from planned to market-based
economies. This is an area that no transition country can afford to neglect.
However,
as Makerere University’s Associate Professor of Law, Dr. John-Jean Barya avers,
the requisite type of education and training should be the kind that makes
people conscious of the underlying problems and the need to change the social
set-up.[41]
The reason? William Butler Yeats gave it: ‘Education is meant to ignite fires,
not fill empty pails.’
Notes and References
[1] Lilli Sippel et al, Africa’s Demographic Challenges: How a young population can make
development possible (2011), at 60.
[2] Michael Mertaugh and
Eric Hanushek, ‘Education and Training’, in Nicholas Barrr (ed), Labor Markets and Social Policy in Central
and Eastern Europe: The Accession and Beyond (2005), at 228.
[3] Ibid., at 229.
[4] A.S. Hornby, A.P. Cowie and A.C. Gimson, Oxford Advanced Learner’s Dictionary of
Current English (1983), at 280.
[6] A.S. Hornby, A.P. Cowie and A.C. Gimson, supra note 4.
[7] Martha de Melo,
Cevdet Denizer and Alan Gelb, ‘From Plan to Market: Patterns of Transition’, (1996),
at 20.
[8] Ibid.
[9] Interview with him held
on Monday, 06 February, 2012 at 10:45 am.
[10] Luis Servén, ‘Macroprudential Policies in the Wake of the Global
Financial Crisis’ in Otaviano Canuto and Marcelo Giugale (eds), The
Day After Tomorrow: A Handbook on the Future of Economic Policy in the
Developing World (2010), at 129.
[11] Otaviano Canuto and Marcelo Giugale (eds), The Day After Tomorrow: A
Handbook on the Future of Economic Policy in the Developing World (2010),
at 4.
[12] Rupert Maclean, David
Wilson and Chris Chinien (eds), International
Handbook of Education for the Changing World of Work vol.1, at 504.
[13] Nicholas Barr, ‘From
Transition to Accession’, in Nicholas Barrr (ed), Labor Markets and Social Policy in Central and Eastern Europe: The
Accession and Beyond (2005), at 1.
[14] Martha de Melo,
Cevdet Denizer and Alan Gelb, supra
note 7, at 3.
[15] Ibid.
[16] Nicholas Barr, supra note 13, at 6.
[17] Tarcisio Agostoni, May the State Kill? at 50.
[18] Martha de Melo,
Cevdet Denizer and Alan Gelb, supra
note 7, at 1.
[19] Ibid., at 4.
[20] Ibid., at 5.
[21] Ibid.
[22] Ibid.
[23] Michael Mertaugh and
Eric Hanushek, supra note 2.
[24] Interview with him held
on Friday, 03 February, 2012 at 15:00 hrs.
[26] Otaviano Canuto, ‘Recoupling or Switchover? Developing
Countries in the
Global Economy’, in Otaviano
Canuto and Marcelo Giugale (eds), The Day After Tomorrow: A Handbook on
the Future of Economic Policy in the Developing World (2010), at 42.
[27] Michael Mertaugh and
Eric Hanushek, supra note 2, at 210.
[28] Nicholas Barr, supra note 13, at 3.
[29] Zig Ziglar, Over the Top (1999), at 105.
[30] Nicholas Barr, supra note 13, at 3.
[31] USA President Barack Obama,
remarked that, ‘Prosperity without freedom is
a form of poverty.’
[32] Marcelo Giugale, ‘The
Era of Governance’, public lecture delivered at Statistics House,
Kampala-Uganda, on Thursday, February 02, 2012 at 14:00 hrs.
[33] Ibid.
[34] Nick Manning and Deborah L. Wetzel, ‘Tales
of the Unexpected:
Rebuilding Trust in Government’,
in Otaviano Canuto and Marcelo Giugale (eds), The Day After Tomorrow: A
Handbook on the Future of Economic Policy in the Developing World (2010), at 164.
[35] Ibid., at 164-165.
[36] Lawrence Bategeka, while
discussing Dr. Marcelo’s paper. See, Marcelo Giugale, supra note 32.
[37] Jimmy Apaa Okello, supra note 24.
[38] Lawrence Bategeka, supra note 9.
[39] Robert B. Zoellick, ‘The
End of the Third World? Modernizing Multilateralism for a Multipolar World’, (2010),
at 1.
[40] Michael Mertaugh and Eric Hanushek, supra note 2, at 207.
[41] Interview with him
held on Monday, 06 June, 2011 at 17:00 hrs.
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