structure and a poor education system. In truth, they were two sides of the same inflexible coin.
As the American historian and economist David Landes wrote of Britain: ‘For every idealist or visionary who saw in education… an enlightened citizenry, there were several “practical” men who felt that instruction was a superfluous baggage for farm labourers and industrial workers. These people, after all, had been ploughing fields or weaving cloth for time out of mind without knowing how to read or write… All they would learn in school was discontent.’ Even today you hear the same arguments. Britain clung to a belief that its traditional approach had won it an empire, and if only we could be true to those principles we would be great again. One consequence of this conviction was that the UK found itself with a higher proportion of low-skilled and unskilled workers than most other developed countries.
In 2006, a government review reported that ‘as a result of low skills, the UK risks increasing inequality, deprivation and child poverty, and risks a generation cut off permanently from labour market opportunity.’ More than a third (35 per cent) of adults were found to have low or no skills, double the proportion in competitors such as the US, Canada, Germany and Sweden.
That 35 per cent represented tens of millions of people whose livelihoods were increasingly threatened by higher-skilled and more motivated migrants or whose jobs would simply disappear when companies shifted manufacturing operations to countries with cheaper labour. Consider what happened to that most iconic example of British manufacturing greatness — the Cadbury’s Creme Egg. Despite assurances that the factory in Somerset where these eggs were laid would stay open, when Kraft took over Cadbury’s in 2010, they announced production would indeed switch to a new factory in Poland with a loss of 400 British jobs.
Tempting though it is to believe that a manufacturing nation like Britain should stick to what it knows, the numbers suggest this is a doomed strategy. The proportion of people employed in making stuff has fallen dramatically in virtually every developed nation since the 1970s. In 1978, almost 30 per cent of UK jobs were in the manufacturing sector. By 2009 it was 10 per cent, the lowest proportion since records began. There may be profit in making niche, high-tech or patented products, but churning out widgets or Wispa bars is not the way to go.
So, we prospered when the rules changed in the nineteenth century. We failed to adapt when the rule book was revised in the twentieth century. But we do have a chance to redeem ourselves in the twenty-first century. The rules are changing again.
Just as James Watt was critical in developing the technology for Britain’s success in the industrial revolution, another Briton, Tim Berners-Lee is credited with the invention that is transforming the global economy today. The World Wide Web has powered a new period of globalisation. In the nineteenth century, it was about access to and the effective use of industrial machines. In the twenty-first century, it is about access to and the effective use of knowledge. As the Economic and Social Research Council puts it: ‘Economic success is increasingly based upon the effective utilisation of intangible assets such as knowledge, skills and innovative potential as the key resource for competitive advantage.’
What do people mean by knowledge? A century ago knowledge was a tool. If you knew stuff you could use that to sell other tangible stuff. Now knowledge is increasingly the product in its own right. It is reckoned that within a few years, selling know-how will generate more than half of total GDP and account for half of total employment in advanced industrial economies like Britain. Business services, financial services, computer services, communications, media — these are the areas where developed countries may be able to maintain a competitive advantage.
Knowledge is providing the new jobs too. Go back to the early 1980s and almost half of UK jobs were unskilled or low-skilled jobs. Now it is about a quarter. People working in the knowledge industries accounted for a third of jobs in the early 1980s. Now it is closer to half. Knowledge services now account for more than two thirds of what Britain sells to the world. With low-skilled jobs disappearing and knowledge jobs expanding, it is obvious that the UK needs to invest in knowledge, to educate and train its workforce. Britain has a higher proportion of NEETs — young people not in education, employment or training — than any other OECD country except Greece, Italy, Mexico and Turkey.
The credit crunch only served to magnify the point. Unemployment figures in the depths of the recession showed that among those working in the knowledge economy — financial consultants, business managers, lawyers — the proportion claiming jobseeker’s allowance was 1 per cent. Among those who usually worked in unskilled admin jobs, the figure was 37 per cent. And for those without skills, matters are only going to get worse. Much worse.
Globalisation doesn’t just open up new markets; it is bringing an estimated 42 million new people into the international jobs market every year — and most of those are unskilled. What’s more, the process is accelerating as the population of the developing world soars. The celebrated Harvard economics professor Richard Freeman warns that this rapidly rising pool of labour will ‘swamp’ developed countries. ‘The world has entered onto a long and epochal transition towards a single global economy and labour market,’ he argues, a process which poses massive challenges for countries like Britain.
And it is not just a challenge for NEETs. It is a challenge for nerds too. According to forecasts by the World Bank, the global supply of skilled workers is likely to grow more quickly than that of unskilled workers. Emerging economies are educating their people faster than developed economies, albeit from a lower base. But in simple number terms, the challenge is obvious. For each Briton who graduates there are at least twenty Chinese and Indian graduates jostling for work in the global marketplace. Not every Indian degree is equivalent to a degree from Oxford or Cambridge. But then not every British degree is either.
The noisy arguments over higher university tuition fees in England have tended to drown out the really critical point: higher education is a product in the global knowledge economy and price is a factor of supply and demand. Domestic students still get a subsidised rate, albeit not quite as generous a subsidy as previously, but the real revolution has been that UK institutions have begun directly competing with each other to sell their courses. At the same time, their student customers have been encouraged to become increasingly canny shoppers.
A glance at the fees charged to overseas students has become a quick way of judging whether British undergraduates are getting a bargain or not. At Imperial College, for example, international fees can be three times what a domestic student is expected to pay. The Chinese and Indian youngsters who fork out that kind of money do so because they see it, not as debt, but as an investment in their future. They recognise the challenges of a single global economy and are prepared to spend to get the qualifications that help them stand out from the international crowd. To the business recruitment teams searching for talent, quality matters.
I have met senior Indian executives who now argue that the quality of degrees at their top domestic universities rivals Oxford and Cambridge. Certainly, since the Indian government launched the National Knowledge Commission in 2005, there has been a determination to develop an internationally competitive educational infrastructure. The commission recently reported to the Prime Minister on its objective of how to meet the ‘knowledge challenges’ of the twenty-first century and increase India’s competitive advantage.
The United Kingdom has in-built advantages as the global economy takes shape: an historic tradition of academic excellence with some genuinely world-class universities; the language of international trade still tends to be English; Britain has an unrivalled financial and business services sector. But does the UK have a fraction of India’s determination to shape its workforce so it is best placed to grab the opportunities of globalisation? Can its students match the work ethic of the students in developing countries?
A few years ago, my family was lucky enough to have two Chinese students stay with us on an exchange. They explained how they started school at 6am and were often still there studying at 9pm. They rarely got to bed, they said, before eleven because they had so much homework they wanted to do. And, much to the horror of my children, they went to school on Saturdays. ‘All work and no play makes Jack a dull boy’ perhaps, but there is a Chinese proverb that warns: ‘Be afraid only of standing still.’
The top universities in the developed world are targets for the brightest and most highly motivated young people from the developing world. Go to many British institutions and you will find that, during the lunch hour, the lecture rooms are filled with Chinese, Korean and Indian students doing extra revision and having group discussion around their topics. Domestic undergraduates tend to be relaxing.
One measure of a society’s ability to ‘meet the knowledge challenges of the twenty-first century’ is the proportion of young people with a degree. The most recent figures published by the OECD show that while 34 per cent of British students end up graduating, it is over 40 per cent in Australia, Norway, Japan, Netherlands, New Zealand, Finland, and Denmark, and over 50 per cent in Poland, Russia and Iceland. Since the mid-1990s, many European countries have seen their graduation rates overtake the UK.
