Tackling our long-term education crisis is just as vital as tackling our short-term jobs crisis
Every once in a while--and it does not happen very often -- something comes along that deserves to have a strong influence on government policy, individual behavior, and how business leaders align the pursuit of profit with their social responsibilities. I believe that two issues warrant such a designation today; and the implications are consequential.
The first is something I have written a lot about and it worries me greatly -- as an economist, a parent, and someone concerned about the most vulnerable segments of our society.
What I am referring to here is the real risk that, for the first time in nearly a century in most western countries, our children's generation may end up worse off than that of their parents. This sad state of affair is the result of a number of multi-year developments.
For too many years, our job creation engines were excessively re-oriented from competitive global markets to inwardly-oriented sectors that were taken to unsustainable levels (e.g., construction, finance, housing and retail). The result was an unbalanced and vulnerable labor force.
Our generation also overdosed on debt and credit entitlement. We got seduced by financial engineering, even believing that "finance" was the next (natural) stage of capitalistic economic development.
So we opted to de facto subsidize our financial sector. We sacrificed safety for the allure of the unquestioned efficiency of unfettered markets. And we fell in love with easy borrowed money, as opposed to earned income.
Too little genuine growth, too much debt, and a risk culture gone crazy culminated in the very messy global financial crisis of 2008 and its aftermath - a costly shock to society whose impact will be with us for quite a few years still.
Understandably, crisis management mindsets have dominated companies, governments, and individuals. And, as often happen, this has crowded out the important but seemingly not urgent.
For years, western societies have under- and mal-invested in education. As we slipped down global rankings, we convinced ourselves that our traditional global edge in entrepreneurship and innovation (which, thankfully, is still with us) could compensate for the failure to maintain a dynamic curriculum, engage our kids, and deliver to them an exciting and rewarding educational environment.
Not a week goes by -- indeed, not a day passes -- without a reminder of the toll that all this is having on society.
Government and market failures have fueled excessively high unemployment, unusually sluggish growth, loss of trust in key institutions, and recurrent concerns about the deficit. Absent a course correction by several western economies, we risk encumbering our children with lots of debt, structural unemployment, poor growth dynamics, a discredited financial intermediation process, and a dysfunctional political system.
It doesn't need to be like this. There are immediate steps that can -- and should -- be taken by governments to reduce the real and present danger of declining living standards.
It is about initiating proper reforms, setting sensible priorities, sticking to multi-year commitments, and nurturing a more enabling environment. And, as detailed elsewhere, effective implementation requires the trio of much faster political consensus on what ails the western economies, broad buy-in for a multi-year vision of reform, and detailed policy markers.
We should all hope that our politicians will step up to this important responsibility. But we cannot rely just on them. We also need to do more to help the next generation stand a better chance of overcoming the real threat of declining living standards - and this is even before we take into account critical sustainability issues that have to do with the multiple abuses of our environment and natural resources.
This leads to the second critical issue: how to better empower and enable our kids to take control of their destiny.
Critically, this starts with doing all we can to enhance education. You need only look at the latest monthly U. S. employment report to gasp its importance. Within the aggregate 8 percent unemployment, the rate for those with a bachelor degree is 4 percent compared to 11 percent for those that lack a high school diploma.
The prospects are even worse for those teenagers out of school. Joblessness among 16-19 year olds in the labor force is a stunning 24%. And the longer this persists, the greater the risk that this generation goes from being unemployed to unemployable. This possibility must not and should not be allowed to occur.
The implications go beyond encouraging the young to remain in school and a more effective financial commitment to the sector. Further progress is needed in evolving curriculums to ensure their relevance for today's quickly re-aligning world. And this evolution needs to be made more global, interactive and engaging, thus fueling the type of intellectual curiosity that anchors mental agility that is so helpful in today's fluid world.
Financial literacy can, and should be a larger part of our children's basic education. Unlike prior generations, they will not be able to rely on market appreciation and compensation growth to overcome the debt legacies that they will inherit. Responsive asset-liability management will be a constant requirement for them. This is a skill-set that we have not emphasized enough as part of core educational curriculum to date.
Vocational training will also need to play a more important role in preparing the next generation - thus reversing a secular decline in emphasis. And safety nets will need strengthening given the time that it takes to re-orient a labor force and overcome structural rigidities that have been allowed to get embedded in the structure of too many economies.
Clearly a focused and well-defined government policy plays an important role in all this. It is necessary to set the tone and support an enabling environment; but, critically, it is far from sufficient. Moreover, the scope and scale of government policies will be inevitably limited by the realities of tight budgets and large competing claims.
Individuals and companies need also to step up to the plate and assume greater responsibilities.
As parents, we must play a greater role in equipping our children for a more challenging future. We should also care for those members of society who are marginalized. Our wellbeing is intrinsically interconnected with theirs. If we are not all much more attentive, further disparities in wealth and income inequality will seriously tear the fabric of our society.
As citizens, we should also think twice about what we do with the older generation's domination of the ballot box. As demographics worsen, there will be a natural tendency for the electorate to try to borrow even more growth and revenues from the future, thus imposing a much higher cost on the next generation.
This natural tendency is understandable, but it can also be countered by clever design of financial responsibility and fairer burden sharing. It can also be offset by earlier and more comprehensive political awareness among the young, including through the use of social media.
Companies can also help, and do so in a matter that improves their own prospects. This goes beyond solidifying their future base of consumers and investors.
By offering more summer internships, training and entry level jobs, companies can enhance their flexibility in a cost effective manner while also providing the young with greater experience and productivity enhancers. Financial firms can and should do more than this, stepping up to the responsibility to become more effective providers of financial literacy programs.
The bottom line is simple yet important. The response to the west's challenging outlook should neither be paralysis or more of the same. Instead, we collectively need to make greater efforts to arm the next generation with the right mix of robustness and agility.
We owe this to them not just to offset the excesses of our generation - and thus the burden we have already imposed on them - but also as responsible parents, grandparents and citizens of vibrant and caring democracies.