Miracles are our business

November 1, 1996

A few days ago I strolled into the office of one my best friends, an economist. France's unemployment rate for the past month had been made public that very morning, and widely commented upon. I found my friend extremely upset.

"Why is it," he asked me, "that politicians pay so much attention to short-term movements in the unemployment figures? In the long term, unemployment responds to quite different policies, like education. The effects will show only many years from now. So why focus on short-term figures and policies?" At this point, I became very interested, and I asked for some references. So I looked up a 1993 paper by Bob Lucas, the 1995 Nobel prize winner for economics and a prominent member of the Chicago school. This very readable piece of work, Making a miracle, tells how in 1960 the Philippines and South Korea were very similar in every conceivable aspect, but in the following 30 years, the Philippines grew at the rate of 1.8 per cent per year (about the world average), while South Korea took off at the incredible annual rate of 6.2 per cent. This means that South Korean living standards doubled every 11 years.

By way of explanation, Lucas concludes: "The main engine of growth is the accumulation of human capital of knowledge - and the main source of differences in living standards among nations is differences in human capital. Physical capital accumulation plays an essential, but decidedly subsidiary role. Human capital accumulation takes place in schools, in research organisations and in the course of producing goods and engaging in trade."

This is remarkable, coming from the core of present-day economic orthodoxy. Could we educators be even more important than we thought we were? Of course, the next sentence puts us back where we belong: "Little is known about the relative importance of these different modes of accumulation, but for understanding periods of very rapid growth in a single economy, learning on the job seems by far the most central."

One should also bear in mind that the situation in developed countries like Great Britain or France is different from that which prevailed in the Philippines or South Korea in the 1960s. However, it is even today a matter of experience that the higher your level of education, the better are your chances of getting a job, the brunt of unemployment being carried mainly by the uneducated.

It does seem that schools and universities have a major role to play in fighting unemployment in the long term. This is a new idea, at least in France, where, apart from the traditional professions of law and medicine, universities until 1968 saw themselves as the ivory towers where knowledge was to be pursued by the few and transmitted to the worthy. That universities are there, not only to further knowledge, but also to train students for jobs, is an idea which has matured slowly in the past 30 years, and is now widely accepted and embodied in government policy.

In fact, French universities have really reached out to the economic world by creating a large number of professional programmes, the Instituts Universitaires de Technologie (IUT), the Instituts Universitaires Professionnalises (IUP), and many others, all directed to a small segment of the job market.

Their aim is to give students a training that is up to professional standards, so that graduates are immediately employable, and an education which is broad enough to help them adapt to changes in technology, so that they can retrain easily if their job goes.

The most striking feature of the French system is the extent of internships. Every professional programme requires all students to spend some time - from one to six months - in a business, a factory or in administration, practising their trade in an active situation. Not only do they learn the tricks of the trade, they also learn what life is like outside, how private companies function, and they react in this new environment. It also breaks the first barrier to employment, the well-known "previous experience required". Internships are so popular in France that students try to get them even in programmes where they are not compulsory. Students in humanities or foreign languages find temporary jobs in private companies or public administration.

The drawback is the sheer amount of internship that private industry has to provide every year. A rough estimate runs up to a million months of internship, and employers are shouting loud and clear that they are overloaded.

There is also a fear, and perhaps a danger, that unpaid interns will substitute for paid workers, thereby increasing unemployment. But the overall effect on French society and the economy of such a mingling between universities and enterprises is sure to be enormous - even if the effects will show only in the long run.

This job-oriented approach evolved gradually from within as an answer to the tenfold increase in the number of students which the French universities have experienced in the past 50 years. We are now facing a situation where half of all 20-year-olds are getting some kind of higher education. These youngsters, by the sheer weight of their expectations, are putting enormous pressure on their educators. Hence the incentive for developing professional programmes, and the interest in internships, if only for a glimpse into the "real" world out there.

This policy has now been endorsed by the Minister, as a conclusion to the year-long consultation process known as the Etats Generaux de l'Universite, and can be expected to be a permanent feature of French education for years to come. There is, of course, more to a professional education than internships, including things the French are not very good at, like continuing education.

Let me, however, point in another direction: is this really what Doctor Lucas ordered? Well, not exactly. In his paper, he stresses the importance of learning on the job, as opposed to formal education, and sees human capital developing basically as workers gather experience on more and more challenging tasks.

It is this opposition between formal education and learning on the job - certainly quite relevant at the present time - which we should aim to blur in the future, replacing a clear-cut change by a smooth transition. It is certainly possible in small programmes, with heavy involvement of professional and academics alike.

Whether it can be done on a large scale and whether such programmes can make up a significant part of the university population remains to be seen. This, however, is what French universities are aiming for in the future.

Ivar Ekeland teaches at the Ceremade et Institut de Finance, Universite Paris-Dauphine, Paris.

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