COD99572

Traditionally, public education has contributed directly to the maintenance of social democracy through building communities of literate and informed citizens. Within the Keynesian welfare state, with its goals of full employment and social security, the primary function of a public education system was to provide the social foundation for a democratic polity and a stable mixed economy. However, with the economic collapse of the welfare state and the rise of neoliberalism, educational policy has been subsumed, to a large extent, within economic policy.

Thus, the dominant discourse of neoliberalism, which is derived mainly from neo-classical economics, is now the dominant discourse of educational policy. Within this discourse, the economy is the primary source of legitimation for the state’s role in education, particularly at the tertiary level. It is assumed, moreover, that investment in education by the state can produce measurable returns on indicators of increased competitive advantage and economic growth. For example, the New Zealand White Paper on Tertiary Education has the following opening statement:

The main assumption behind this statement relates to the formation of human capital. By participating in tertiary education, individuals will acquire skills and abilities that enable them to perform more effectively, hence more productively, within the labour market. Consequently, individuals who gain higher levels of knowledge will contribute indirectly to the competitive prosperity of a knowledge economy and will be rewarded directly by higher levels of personal income. Thus, higher education is seen to be a sound economic investment both for individuals and for the state.

The emphasis here on competition and the commodification of knowledge is not surprising within the context of neoliberal discourse. It is consistent with the individualism that is pervasive within such a discourse. But it is the reference at the end of the statement to social cohesion that is of particular interest because it signifies something that is not commonly found within the discourse of neoliberalism.

Neoliberal ideology holds that pervasive state intervention in social and economic life, which it associates with post-war Keynesian welfarism, is destructive of civil society because it undermines individual freedom and self-reliance. After a decade of neoliberal restructuring and economic rationalism, however, there are signs that New Zealand policy makers are beginning to acknowledge that minimal government, combined with unfettered market forces, can have enormously damaging consequences for social well-being and the quality of community life.

An indication that there is a move by government policy makers away from neoliberal fundamentalism can be seen in the interest that has been shown in the concept of social capital. In a general sense, this appears to be an economic concept that embraces notions of social cohesion, social responsibility and social well-being. Unlike human capital which is vested in individuals and represented by the credentials they hold and the services they produce, social capital resides in communities and is represented by the levels of coordination and cooperation within them. The concept is one that appeals to some economists but not to the economic rationalists who subscribe to neoclassical fundamentalism.

In his recent book, Taking New Zealand Seriously, Tim Hazledine, an Auckland University economist who challenges the theories and assumptions of economic rationalism, devotes a chapter to the concept of social capital, which he refers to, in the form of a question, as "the next big idea?" (Hazledine, 1998: 92-101). It is an idea, he suggests, that is informed by sociology, providing another ingredient to the recipe for a successful market economy to add to "the rationalists emphasis on opportunistic individualism" (ibid: 94).

It may be far too soon to herald a break with neoliberalism, but at least the flawed doctrine, strongly held to by the free market ideologues of the 1980s, that there is no such thing as society, appears to have been firmly discredited. The problem with free market extremism is that it undermines the very social traditions that are necessary for a market economy to survive. As Giddens argues:

Thus, policies for public education that are based on market fundamentalism are bound to fail because of a misconstrual of the relationship between social processes and a market economy.

The following discussion examines this claim and argues that public education can contribute to the creation of social capital by fostering active citizenship, community involvement, socio-political literacy and moral responsibility. By eliminating barriers to social inclusion, public education, it is argued, contributes to the social well-being of society, providing necessary conditions for the effective functioning of markets and for enhancing economic prosperity. It is suggested, moreover, that this recognition of the social basis of the market is, in many ways, a rediscovery of the views held by that great champion of the free market, Adam Smith, whose ideas have been selectively and distortedly represented by the neo-classical economic fundamentalists. Finally, it is argued that the state’s investment in public education is a justifiable and necessary form of social investment and a precondition for the renewal of social democracy.

Simon Marginson (1997) has written a comprehensive and penetrating critique of the various ways in which economic theories and concepts have been applied to education. Drawing upon Foucault’s (1972) analysis of discourse, and the relationship between knowledge and power within academic disciplines, Marginson argues that:

The application of neo-classical economics to education policy can be seen in two main ways, constructing it either as human capital or as an economic production function. Both of these constructions separate education from its social base and reduce it to an exchangeable commodity.

In human capital theory, the economic value of education is measured by the increase in the earning power or productive capacity of individuals. Empirically it can be shown that the average earnings of workers with more years of formal education are higher than those with fewer years. Moreover, when other variables are controlled (e.g. ethnicity, class or motivation) there remains some variance that can be attributed directly to the amount of education acquired. This equates with human capital which is measured not directly but indirectly through what is produced. Human capital theorists acknowledge that education has other effects not so invested in individuals and these are referred to as externalities. For example, education may have spillover benefits for others who are not actually acquiring the education (such benefits might come from higher general levels of literacy, or improved professional services etc) but these are not sufficient for the neoclassical economist to define education as a ‘public good’.

In the economic sense, public goods are non-marketable and cannot be appropriated by individuals. Any individual’s consumption of the public good cannot exclude any other individual from consuming the good. Education, however, is what Hirsch (1976) termed a ‘positional good’ in that it confers relative advantage on the recipient. Those who acquire education (particularly higher education) have an advantage in the competition for scarce positions in the job market or the social hierarchy. Thus, the gaining of positional advantage by some results in a loss of advantage for others. It is a zero-sum game.

Marginson (1993, 1997) argues that education can take the form either of a public good that is non-marketable or of an individualised positional good that is subject to competition and exclusion. Non-market education may be promoted by reforms that increase educational access and equality of opportunity, whereas the marketisation of education is promoted by policies based on user-pays and meritocratic selection. The market approach, moreover, becomes self-fulfilling. Thus:

Neo-classical economists emphasise the marketisation of education for the production of human capital because such products can be readily measured. The quantification of externalities, on the other hand, has proven to be incredibly difficult if not impossible. It could be claimed, for instance, that education produces higher levels of civic responsibility, thus lowering the crime rate and in due course generating savings in the law and order budget. Empirical evidence for such outcomes, however, would be very difficult to establish.

Construing education as an economic production function is another common device of the neo-classical economist. This derives from the economic theory of the firm. Within this theory, business firms operating in a competitive market are considered to be input-output systems. A measure of a firm’s efficiency or profitability is the extent to which it combines its inputs in order to maximise its outputs. The process through which it achieves this is referred to as a production function, that is a mathematical description of the production process though which a given set of inputs results in measurable outputs (Marginson, 1993).

When this theory is applied to education it gives rise to what Easton (1999: 149-157) has called "the commercial theory of the school". In the New Zealand education reforms, this theory has been enormously influential in shaping policies of governance and accountability (Smelt, 1998). The school, or other educational institution, is viewed as a ‘black box’ and the educative process is considered to be a production process in which resource inputs are used to produce measurable educational outputs. However, as Easton points out:

The main conclusion to be drawn from the discussion so far is that neoliberal education policies based on neo-classical economics are unable to take account of education as a social process. Economic rationalists assume that the economic behaviour of individuals can be understood independently of the social relations in which they are involved, and the history of those social relations. This point is well made by Bourdieu in a recent essay where he states that:

Neo-classical fundamentalism has an impoverished conception of the role of public education in the formation and renewal of a democratic citizenry. It has no conception of the economic significance of social inclusiveness, positive freedom, trust and co-operation. The neo-classical economist defines the essence of individuals as isolated utility maximisers and then brings those individuals into association with others through an aggregation calculus. Homo economicus is an abstraction devoid of any social context or history. Within such a world-view, there can be no conception of an educational process in which social relations precede the formation of individuals as social beings. This is where the concept of social capital is of particular interest to economists who reject the basic tenets of the neo-classical view and seek a theory that will integrate the economic with the social.

The American sociologist, James Coleman, developed the concept of social capital a decade ago (Coleman, 1988, 1990) distinguishing it from the more tangible economic concepts of physical capital and human capital. It refers to those features of social organisation that exist in the relations among persons, such as social networks based upon trust, co-operation, goodwill and reciprocity. Thus:

In his seminal paper, Coleman points out that social capital differs from both physical capital and human capital in that the benefits accrue to the collectivity rather than to the individual. In economic terms, therefore, it is a public good rather than a private good and the benefits of social capital cannot readily be captured in the way that other benefits can be captured by those who invest in them. Thus:

(Coleman, 1988: 117-8)

This suggests an important difference between social capital and Bourdieu’s concept of cultural capital. Whereas social capital resides in the collectivity (or rather, in the social relations that bind the collectivity together) cultural capital resides in the individual. In some ways, Bourdieu’s concept of cultural capital has more affinities with what Coleman means by human capital but it needs to be said that Bourdieu’s concept is much more subtle and fine-grained, embedded as it is within a major theory of cultural reproduction (Harker et al, 1990).

Further extension and development of the concept of social capital is to be found in the writings of Robert Putnam (1993) and his collaborators who provide empirical evidence for the importance of social capital as a major component of "civic community" in the emergence of successful institutions. They commenced their research in 1970 when Italy created new local governments for each of its regions and over the next two decades they gathered data on the effectiveness of these governments in such fields as agriculture, housing and health services. Analysis of this empirical data has revealed a major contrast between southern Italy, with relatively weak social organisations, and the regions of the north in which the people have a higher propensity to form organisations based not on kinship, but on what Putnam calls "spontaneous sociability". In these regions, civic community, good governance and economic prosperity have been facilitated by patterns of trust, co-operation and norms of reciprocity, all of which Putnam attributes to higher levels of social capital.

Trust is a basic ingredient of co-operation and this can lead to improved productivity and civic engagement. Putnam’s research shows that:

Another highly productive component of social capital is what Putnam calls generalised reciprocity. This is the norm that underpins social trust and

This norm of generalised reciprocity is closely associated with the third important component of social capital identified by Putnam, networks of social exchange or civic engagement. These networks reduce the risks of opportunism, foster robust norms of reciprocity, facilitate communication, and "serve as a culturally-defined template for future collaboration" (Ibid: 174). This leads to a distinction between vertical (or hierarchical) networks and horizontal networks. Membership in the latter (e.g. co- operatives, mutual aid societies, cultural associations) is positively associated with good government (Ibid: 175).

This extended discussion of Putnam’s work is justified because he has been undoubtedly influential in popularising the concept of social capital. Perhaps even more influential, however, at the present time, is Frances Fukuyama’s 1995 book entitled, Trust: The Social Virtues and the Creation of Prosperity.

Fukuyama, who conducted his study as a Senior Social Scientist at the RAND Corporation in Washington, is clearly not on the left politically, but he is an astute critic of neo-classical economic policy and the concept of social capital is central to his critique.

In a wide-ranging analysis of the relationship between culture and economic performance in North American, European and Asian societies, Fukuyama contrasts what he describes as low-trust societies (such as Chinese economic culture in Hong Kong and Singapore) with high-trust societies (such as Japan and Germany). The thrust of his argument is that social capital is critical to economic prosperity and the component of social capital to which he gives the most attention is spontaneous sociability which refers to the capacity of people to form new associations and to co-operate with and trust people who may previously have been strangers.

Economic rationalists would argue that new associations or co-operative groups are the result of voluntary contracts between individuals who carry out a rational calculation that co-operation is in their long-term self-interest. This is where social capital theory departs most clearly from economic rationalism. Whereas the latter reduces all human motivation to the level of rational desire, social capital theory recognises that human beings may be motivated just as strongly by feelings of indignation, pride and shame. Fukuyama makes this point as follows:

Human motivation, in Fukuyama’s view, is rooted in culture, a self-evident truth so often ignored by neo-classical economists and economic rationalists. For this reason, the accumulation of social capital, unlike the accumulation of financial, physical or human capital, is not the result of rational investment decisions made by individuals. The acquisition of social capital entails enculturation and habituation into particular moral virtues such as loyalty, honesty and trustworthiness. In many ways, this is a reaffirmation of Adam Smith’s conviction that economic practices are fundamentally social in nature and cannot be understood without also understanding the cultural habits, norms and moral values of the society in which they are situated.

Adam Smith’s influence on modern day economics is undeniable, but many of his latter day followers pay attention only to selected parts of his work, often taken out of context and interpreted without acknowledgement of where they belong within his total corpus. It is this misreading of Smith that has enabled the economic rationalists to claim him as their intellectual progenitor.

Modern day economic rationalists tend to portray Adam Smith as advocating libertarian individualism, promoting the pursuit of self-interest within a free market economy, and opposing all forms of state intervention apart from the maintenance of law and order and defence of the realm. Such a portrayal is not only grossly distorted but it aligns Adam Smith with people whose ideological views he would vehemently oppose. It is not surprising that several contemporary scholars, including Amartya Sen who last year was awarded the Nobel prize for economics, have sought to rescue Smith’s ideas from the serious misrepresentation to which they have been subjected (cf also, Ormerod, 1994).

In a carefully researched re-appraisal of Smith’s work, Muller (1993: 2) points out that:

Smith would never have accepted the reductionism of homo economicus, in which human motivation is equated with rational utility maximisation (Fukuyama, 1995: 17-8). To the contrary, he held a highly complex view of economic motivation which he developed in The Theory of Moral Sentiments, his other major work besides The Wealth of Nations. For Smith, the pursuit of self interest is necessary for market transactions, but it is not sufficient. Indeed, as Sen points out, Smith "did not rest economic salvation on some unique motivation" (Sen, 1988: 24). Neither did he "assign a generally superior role to the pursuit of self-interest in any of his writings" (Ibid: 25). As Ormerod points out, very clearly:

Although Smith does not use any term that equates with "social capital" there is much to support the concept within the body of his writings. What we must recognise, however, is that it is inappropriate to take specific policy prescriptions from Smith’s writings and transport them from the eighteenth to the twentieth century. Indeed, to do so is contrary to Smith’s deeply held conviction that economic life is but one aspect of social life and cannot be divorced from cultural traditions. He believed that cultural traditions, especially moral traditions, could not be sustained by market institutions alone. Virtues of sympathy and self-discipline had to be nurtured in the family, in the school, in all the social institutions supported by the state.

It is very clear from Adam Smith’s writings that he saw public education, funded and provided by the state as one of these institutions (Ormerod, 1994: 14) but his views on this must be understood in the context of eighteenth century Scotland where parish schools, supported by a combination of fees, donations and church patronage, comprised the only form of basic education. Smith recommended that these schools should be universally available and maintained partly at public expense and partly by fees, provided that the children of the poor would always have access to them. Smith was in no doubt that there must be a system of compulsory public education. Moreover, as Skinner (1995: 83) argues, such a programme of compulsory education "was intended not only to preserve a capacity for moral judgement, but also to support individuals in their roles as citizens". Ormerod (1994: 14) also comments on Adam Smith’s argument that the state should provide "a level of education sufficient to render every citizen capable of exercising an appropriate level of intellectual and social ‘virtue’."

It is ironic that many modern day economic rationalists have invoked the name of Adam Smith to defend a reduced role for the state in public education and a narrowing of the focus of that role towards the production of human capital. The true legacy of Adam Smith would see a vigorous defence of public education as an investment in democratic citizenship. It is echoed in the following statement by the American economist, J.K. Galbraith:

Traditionally, the New Zealand education system has been characterised by consensus and co-operation. When a team of OECD examiners evaluated the system in 1982, they commented that consensus was valued in the world of education and that education was seen as "having to do with the growth and development of individuals, rather than as an instrument for the attainment of political or social goals" (OECD Reviews of National Policies for Education: New Zealand, 1983: 22).

It is indeed ironic that the central thrust of the educational reforms of the past decade has been towards the attainment of particular political and economic goals. The first draft of the National Curriculum in 1991 coincided with the publication of what became known as "The Porter Project". This was a study of the New Zealand economy by a team of economists and business consultants led by Michael Porter of the Harvard Business School. This report, entitled Upgrading New Zealand’s Competitive Advantage, concluded that New Zealanders were poorly motivated, inappropriately skilled and insufficiently competitive. In the words of the report: "There is a glaring mismatch between the skills needed to upgrade the New Zealand economy and those provided by our education system." (Crocombe et al, 1991: 161)

In his foreword to the 1991 Budget document, Investing in People: Our Greatest Asset, the Minister of Education would state that: "Studies, like the Porter project, questioned the relevance of our current curriculum with its excessive focus on social issues and poor preparation for the competitive world." (Minister of Education, 1991: 1)

The Budget document then went on to announce that:

It is clear from these statements that the economic production of human capital was to replace citizenship as the primary political purpose of public education. More recently, the political rhetoric has emphasised the role of education in creating the knowledge-based economy and preparing young people for the globalisation of markets.

If education is to have a central role in the formation of social capital, more emphasis would need to be given also to its role in the promotion and preservation of social justice. But whereas in the past social justice has generally been defined in terms of social equality, it is now more often defined in terms of social inclusion.

Writing about "third way" politics in Britain, Giddens has suggested that the old-style welfare state should now be replaced by what he terms the social investment state. He also suggests that:

Within the social investment state the emphasis is on investment rather than direct economic subsidy or support. Public education is not viewed as a cost to the state, but as a social investment. As a preparation for democratic citizenship, education contributes to personal identity and social cohesion; it is a large part of the state’s investment in social capital.

In Britain, the government of New Labour in 1997 set up an Advisory Group to provide a statement of aims and a broad framework for citizenship education in schools. After a decade of educational reform in that country, this was an admission that something was seriously missing from the National Curriculum. The final report of the Advisory Group on Citizenship, entitled "Education for Citizenship and the Teaching of Democracy in Schools" was released in September 1998 and has been subsequently adopted as policy by the British government.

This means that there is to be a statutory requirement on schools to ensure that education for citizenship is part of the entitlement of all pupils. The report emphasises that citizenship education is education for citizenship, it is not just knowledge about citizenship and civic society. It has three inter-related elements, each of which is to be included in the curriculum. These are: social and moral responsibility, community involvement and political literacy. The purpose of citizenship education in schools, according to this British report, is:

As an educational aim, this statement points in quite a different direction from the competitive individualism of Margaret Thatcher’s enterprise culture. Perhaps the time has come in New Zealand and elsewhere, to look beyond the market or the knowledge-economy to rediscover the deeper purposes of public education.

One way of looking beyond short-term economic objectives is through the idea of a "learning society". Michael F.D. Young (1998: 141) refers to this as "a contested concept in which the different meanings given to it not only reflect different interests but imply different visions of the future and different policies for getting there." Young identifies three conventional models of a learning society: (1) the schooling model which aims to maximise participation rates in post-compulsory education as measured by enrolments in tertiary education; (2) the credentialist model which places the emphasis on as many people as possible gaining qualifications or certificated knowledge and skills; and, (3) the access model which promotes life-long learning, with learners able to choose from a variety of open learning contexts. Each of these models, in Young’s view, has some strengths, but each also has fundamental weaknesses. He argues, therefore, for a fourth model of a learning society which he refers to as an educative or connective model.

The connective model emphasises the social nature of all learning and the importance of distinguishing between different types of learning. It is based upon the concept of connectivity which, according to Young:

Connectivity refers to the connections between different combinations of knowledge and skills within a community of practice and the wider social purposes of education related to democratic citizenship. Connectivity, therefore, transcends traditional academic, disciplinary and vocational divisions. It cannot be commodified; nor can it be converted into human capital. At the individual level, Young argues, connective specialisation

If public education policies are to nurture this kind of learning society, the direction would need to be away from the short-term goals of economic productivity based on competitiveness and possessive individualism, towards the building of inclusive communities (Tam, 1998).

The main conclusion to be drawn from the preceding discussion is that neoliberal education policies are based upon a flawed theory of economics – a theory that does not recognise the interdependence between economic activity and the social fabric. While the focus of such policies has been on the short-term effects of human capital accumulation or educational production functions, longer-term consequences for the effective functioning and survival of the market economy have been disregarded. In reflecting upon the limitations of the free market, J.K. Galbraith comments that:

The argument that public education is a form of social investment assumes that the returns, both social and economic, will be manifested in the long-term. Education as a social investment is education for democratic citizenship within a cohesive and inclusive society.

Easton, B. (1999) The Whimpering of the State, Auckland: Auckland University Press.

Hazledine, T. (1998) Taking New Zealand Seriously, Auckland: Harper Collins.

Hirsch, F. (1976) Social Limits to Growth, Cambridge: Harvard University Press.

Marginson, S. (1997) Markets in Education, Sydney: Allen and Unwin.

Muller, J.Z. (1993) Adam Smith in His Time and Ours, New York: The Free Press

Ormerod, P. (1994) The Death of Economics, New York: Wiley.

Sen, A. (1988) On Ethics and Economics, Oxford: Blackwell.

Young, M.F.D. (1998) The Curriculum of the Future, London: Falmer Press.