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Learning for the Knowledge Economy

Welcome to Innovation Nation where we’re going to get agile and disrupt some paradigms!  The knowledge economy is the next big thing, and we’ve got some transitioning to do.

There is almost universal agreement that education is a key factor in building the ‘new’ Australian economy.  Where the major parties differ is just a continuation of the same old education policy debate in Australia, which remains fixed around funding and curriculum content.  A closer examination of the rhetoric and policy reveals how the economic theories to which politicians and policy makers subscribe defines the treatment of education policy.

One of the dominant voices in the dialogue surrounding education, and the economy in general, is that of Human Capital Theory.  This economic approach amalgamates information, learning, innovation, and research under the banner of Knowledge; which in the Knowledge Economy is now cast as an important asset or form of capital. The result is a higher level of interest in how these knowledge assets are acquired.  Or in non-economist speak, government interest in the daily operations of schools; including not only what is taught but how.

If Australia is to avoid drifting down to second-world status, enhancing the capabilities of the population is essential.  We cannot rely on minerals or agriculture alone for the prosperity of the nation; but is a human capital approach to our education policy the right road into the future?

The Knowledge Economy

According to the OECD in 1996, knowledge-based economies are “directly based on production, distribution and use of knowledge and information”.  Over the past three decades, advanced industries in Western economies have become more knowledge intensive, and now rely heavily on innovation for economic performance.

The service economy is no longer where it’s at folks.  We now find ourselves 20-30 years behind other OECD nations; and to avoid Keating’s infamous banana Republic, Australia needs to shift from the current heavy reliance on raw resources, education as export, and tourism. Value-adding in the form of knowledge-based enterprises that can actually make products and services are what is required to carve out a niche for Australia in the world economy.  This is why we are now hearing so much about innovation from our political class, as the nation tries to play catch-up.

Humans as Capital

At the core of Human Capital Theory is the desire to break down fuzzy socially-related aspects of society, like education, and place on them a unit of value.  These ideas connect strongly with broader political-economic views of neo-liberalism, and the market-driven society that its proponents champion. This way of seeing the world deeply colours the way people are viewed; for example, according to economist Ben-Porath

“The objective of the individual at any time is to maximize the present value of his disposable earnings”

While there is considerable literature criticising these ideas, Michael Apple provides eloquent polemic on the matter, it is important to recognise what makes the Human Capital Theory attractive.  The approach reduces human complexity to a quantifiable set of statistical data, that can be used to measure inputs and outputs.  Schooling becomes a process of adding capability or knowledge modules, which can all be abstracted and converted into formulas to calculate the costs, both direct and through loss of productivity, and the potential return on investment.  Allowing an optimal schooling decision to be expressed thus:


Human choice and learning reduced to an equation. No mess, no fuss, because you can’t argue with figures. The inherent utility of this approach, of being able to produce statistics with strong correlations to economic data, underpins the success and popularity of Human Capital Theory in business and government alike.

However, formulas do not work without actual numbers. To produce their percentages economists and policy wonks need numbers from the real world.  This requires measurement.  In Australia, this measurement comes in the form of NAPLAN, aka: Standardised Testing; and here we see the expression of economic theory in education policy.

Much has been written on NAPLAN and standardised testing in general.  Apart from the impact on classrooms and time spent studying for tests; there are also the concerns on how the narrative of “choice” transforms schools, from places of learning into competitive businesses.  Schools and teachers then have to market themselves as the best investment for the child’s education to ‘maximise value’.   Kevin Rudd as Prime Minster stated that the MySchool website, and the NAPLAN scores listed there, were specifically designed to allow parents greater choice and enable them to “walk with their feet”.  The resulting importance for schools and teachers to score well leads to many hours teaching to the test, rather than for comprehension.

This preoccupation with testing, and of the utility-view of education reaches its peak in PISA testing, coordinated by the OECD. Like NAPLAN, PISA is focussed on measuring if students have “acquired key knowledge and skills that are essential for full participation in modern societies”.  According to PISA these are: maths, reading, and science.  To claim these three metrics can generate an accurate leaderboard of the value and efficacy of a nation’s education system is testament to the reductive power of the human capital approach.

The marriage of human capital and free-market thinking in education policy changes the very purpose of learning. Education is no longer a public good that improves society, promoting opportunity and better living standards. Instead, education is a process of adding knowledge and capability modules to future workers.  Education becomes a commodity in a marketplace of sellers and buyers.  With predictable results, as seen most recently with the corruption and fraud that has completely undermined vocational education in Australia.

What could education in Australia look like if the nation continues down this road?

Directions, choices, and consequence

South Korea gives us a glimpse into a possible future.  South Korea is an industrialised nation with democratic values and regularly ranks highly in PISA scores. Many have identified the economic and social importance of achieving high academic marks as a key driver in the performance of South Korean students in PISA testing.

To gain high marks at school and the eight-hour long university entrance exam, the suneung; families invest heavily in South Korea’s large private education market.  Sending their children to Hagwons, or cram schools, after regular school hours.  These are similar to the ‘coaching colleges’ that have proliferated recently in Australia.  The result in South Korea is that many students average 13 hours a day undertaking direct instruction. Many who support a return to ‘back to basics’ teaching commend the approach as a main contributor to the success of South Korean students.  The time-on-task and work-study ethic of the ‘Asian Model’ touted as a panacea for the apparently ailing educational institutions of the West.

However, South Korea fails to perform on broader social and economic measures.  Even by the human capital measurements published by the World Economic Forum, between 2013 and 2015 South Korea fell from 17th to 30th ranking.  When we look beyond the metrics, the real cost of the human capital / high-stakes testing approach become apparent. Korea, Japan, and China all suffer from high levels of youth unhappiness and suicide, as well as extensive bribery and corruption. The education markets spawned by this high-stakes testing approach are fiercely competitive, and bring high personal, social and financial costs for students and families.  Perhaps disturbingly we are already seeing parallels in Australia, with the increased social and economic importance of having attended a private school on one’s future opportunities.

Sadly, after all the cost, stress and testing, many graduates find it difficult to engage in creative problem solving. The result of PISA and standardised testing is a student who is very good at providing answers to well-defined problems in an acceptable format; and poorly prepared for innovative or creative thinking, key skills for success in a knowledge-based economy.  A problem underlined by evidence that links a decline in entrepreneurship and creativity to curriculum changes designed to boost test scores.  It is ironic then that Australia and other nations wish to emulate the system that many Asian countries are trying to leave behind. After topping PISA tests in 2009, China is now shifting to a more comprehensive model of assessment, with the stated goal to reduce the importance of testing in the curriculum.

Innovation Nation

At this point it is perhaps instructive to look again at the ideas associated with the knowledge economy in more detail.  Innovation is tricky, as new ideas may come from anywhere:  A scientist in a well funded lab may deliver an innovation in metal-alloy generation; however a worker in an industrial setting may also deliver the same innovation.  Though setting, resources and education (read human-capital investment) may be vastly different, they both apply what they know to generate new knowledge.  The process is not linear or incremental, but rather fluid and unpredictable.

This level of complexity and non-linearity, that there is no ‘correct’ way, understandably makes economists and policy-makers uncomfortable.  There is also the problem that despite piles of reports and articles on the subject, there continues to be a great degree of fuzziness about what the Knowledge Economy actually is. Sifting through the literature does reveal the character of the knowledge economy and indicators for success:

  • The speed of adaptation and innovation is crucial for future competitiveness.
  • Investment in education and research has a direct influence on learning and innovation outcomes.
  • Higher participation in creative problem solving and learning in the workplace leads to higher levels of innovation and knowledge production.
  • Low social distance between managers and workers builds trust and high diffusion of new ideas.
  • Knowledge must be read from different points of view, mutli- and interdisciplinary and requires engagement with and by government, industry and knowledge centres (such as universities).
  • Actors must have an awareness and understanding of the social, economic, and political facets of knowledge.

The two ideas most often listed are that broader creative thinking is needed; and that state intervention of a nature akin to the Welfare State model is beneficial, and may actually be essential. Concepts that are in direct contradiction to the neo-liberal human capital approach, which prefers limited subject proficiency and privatisation. Where then can we look to find an alternative approach to inform potential practice?

Go East

Brazil is a large nation with a population concentrated in urban areas, and a smaller portion of population spread across rural and remote areas.  Like Australia, It is also currently seeking to transition from an economy based on resources and traditional manufacturing to one where they can leverage innovation to compete in the global marketplace.

1985 marked the end of twenty one years of military rule for Brazil, as well as the end of strong alignment with neo-liberal governments in the USA and the West in general.  What followed has been a tumultuous period of reform characterised by education of empowerment; and decentralised authority, with states and municipalities having high levels of control over local school priorities.

Attempts by central authority to control curriculum by setting of competence standards or imposing centralised testing to national and international standards have been heavily criticised. How the differing view of education, as a social good instead of economic commodity is well illustrated by the local Catholic schools compared to the curriculum mandated by the World Bank.  The Catholic system teaches literacy in a social and political context; students learn the importance of nuance and how context can change meaning.  The human capital model eschews anything to with politics and concentrates instead on phonics-based instruction; thus keeping literacy linked purely with economic development.  With even a passing familiarity with our recent education ministers, one can see how the latter approach has gained much currency in Australia.

In Brazil the goal appears to be to ‘extend politics’ by educating citizens instead of workers. The national government does publish loose guidelines on curriculum.  These have familiar human capital emphasis on development of skills and competencies and building citizens’ capability in science, math, and literacy (with notable difference that bi- and even tri-lingual literacy is the norm).  However, the purpose of national testing is to create improvement programs for each school subjective to their individual circumstances; rather than to meet an arbitrary national standard.  This shows how a different economic view, in this case in opposition to the neo-liberalist market line, changes the way that policy is developed.

Many educators and policy makers in Brazil refer to Conscientização, or critical consciousness, and the importance of moving beyond mere observation and description to a level where the social, political and economic meanings can be recognised and subject to scrutiny.  Here is a conception of knowledge not simply as a unit of additional value, but that knowledge is emancipatory; enabling not mere social movement, but also greater access to freedoms and involvement in the future of the nation.

Multi- and interdisciplinary thinking, social equity, and the importance placed on having a broader understanding of economic and social contexts build capacity for students to think for themselves; and ‘outside the box’.  The national government is also building links between industry and universities through a quasi-Welfare State approach to subsidies; giving students future pathways for study and work, as well as giving practitioners access to research bodies to test ideas.

Based on observations on the characteristics for success in building a knowledge economy, Brazil appears to be on a firmer path toward leveraging of technological advancement and innovation; and the realization of a knowledge economy with a strong resource and manufacturing base.

The way forward

Human Capital Theory is a tool used to simplify how individuals and groups function to fit them into an economic equation.  However, it is a flawed tool.  It does not address the democratic and social aspects of the citizen-person, and is largely incapable of describing the complexities of learning or knowledge in the economy. This begs the question; if human capital is about enhancing the means of production, then what is it that our curriculum is preparing us to produce? What do we hope to achieve by teaching our citizens to ‘maximize the present value of [their] disposable earnings’?  The truth is, despite the rhetoric, the political and economic focus on The Market as arbiter of all good shows us that government and business are less interested in creative thinkers, and more interested in consumers. Or as Michael Apple puts it, people are

…either stomachs or furnaces. We use and use up, We do not create.
Someone else does that.

The implications for a knowledge-based economy, where value-add comes from the act of creation, are stark.

Despite ample evidence that test-focussed regimes do not deliver citizens ready to engage in a knowledge-economy; current policy directives in Australia still appear to champion the human capital conception of learning and the neo-liberal privatisation goal of education-as-commodity.  An approach highly divergent from what economists, educators and innovators are advocating as effective approaches to building a successful knowledge-based learning economy.  This dilemma dramatically underlines the need to divest from economic and political beliefs and look at the evidence with clear eyes and open minds.

We ignore the lessons from Brazil, China, South Korea, and Scandinavia at our peril. Preaching education as the answer to a future is not enough.  Promoting STEM education will not deliver results without complimentary application of resources into research bodies and policy work to change prevailing attitudes in labour-force relations.  Australia must overcome recent neo-liberal tradition and look to the Nordic and South American economies, where government involvement and Welfare State approaches are actually more effective in building and nurturing innovation and knowledge production.

Australia needs to move beyond the primitive human capital education-as-training model to a new formula of education-as-learning.  Ultimately we need to begin to view education not as a project that sets out to universalize knowledge, and forge students of today into the consumer-workers of the future.  Rather that school and curriculum is the space-time of cultural boundary where we dispute the significance of ideas and the world and negotiate knowledge and meaning.  Where learning links academic school-based learning with vocational learning in the workplace; extending knowledge acquisition with an understanding of social and economic contexts, with a focus on how to engage in hybrid thought and interdisciplinary collaboration.

In an increasingly globalised economy it is imperative that nations do not encumber themselves with one-size-fits-all theories whether they be liberal, Marxist or progressive.  Australia cannot afford to continue reducing citizens and their education into formulas.  Instead, we must look to our unique strengths and situation and build pragmatic policy that can engage Australians as active and innovative citizens in the future commonwealth.



*Edit: as pointed out by a commenter, the education equation included had been cut off at edges.  This has been corrected.  Hopefully it now makes sense mathematically, at least.


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  1. Freethinker

    Interesting article and I agree with many points on it.
    I dislike very much that theory of using Humans as Capital because it is going with the theory that people have to adjust or serve the economy instead of the economy be adjusted to serve the people needs in a sustainable way.

  2. Matters Not

    Don’t know who the writer of this article is but she/he is certainly at the forefront of the ‘education debate’. What it ‘is’ and what it ‘might’ and perhaps ‘ought’ to be.

    Re Brazil and developments there. As the writer knows, much of the credit belongs to Paulo Freire, a leading advocate of critical pedagogy. His most famous book, Pedagogy of the Oppressed, was once required reading in any teacher education course. As I recall, he visited Australia in the 1970s.

    This article takes me back. Really enjoyed it. Can only recommend.

  3. Steve Laing

    Well written. Our universities are increasingly little more than businesses, rather than bastions of thought and learning, where extracting as much funding from as many applicants as possible is more important than finding ways to encourage thought and innovation. Moreover our brightest academics often outsource their teaching load to sessional externals ensuring no fortune pollination of their innovation. It is scandalous and leads nowhere.

  4. Michael Taylor

    MN, ‘The Weasel’ is one of our regular writers who has had a name change. If you click on their name it will take you to their previous articles.

  5. guest

    There are problems in this education-as-learning. Some of them are here in the article: 13 hour day, psychological and social problems…Then there are problems with the delivery: direct instruction about everything? Can it be done? What we see in our society is the way specialisation occurs so that the highly educated know more and more about less and less so that in the end they realise how little they know.

    Once upon a time the emphasis was on how to find answers to questions, where to look for information, etc. Now the emphasis is on filling up the bucket with information delivered by batteries of teachers and mentors, somewhat like the old Lancastrian schools of the C19th where learning was achieved by recitation and drilling like a catechism.

    And you will notice how homogeneous are the countries listed here as models: single language, few non-speakers. One school arising to the top in PISA testing was a school in Shanghai made up of top students preparing to sit USA university entry exams taught by rote by groups of teachers who taught only half the lessons of the week.

    Comparisons with such different cultures and education systems is like trying to compare apples and oranges and wishing each one was like the other.

    But such exercises are what make education faculties and institutes grist for the mill. So it goes round and round and you can be so far behind you are ahead.

  6. totaram

    There is a lot of material worth thinking about. Purely as a technicality, the “equation” has been copied and pasted with the left and right edges truncated, so it doesn’t make proper sense mathematically.

  7. susan bedford

    I think that making education a commodity has debased its value. Education in Australia needs to be adapted to all the different levels of talent in the community. The fact is that not everyone is equal in terms of learning capacity. Taxpayer money being spent on Beauticians Certificates etc is a disgrace because it steals funding from serious study that will contribute to our “innovation” nation.

  8. nexusxyz

    Argues from the wrong perspective and reinforces a failure to understand firstly, how an economy creates ‘economic well-being’ and secondly, the focus on innovation is utterly misplaced and will not add to national competitiveness.

    The idea that throwing money at R&D and Innovation creates a competitive economy is a myth and so is the LNPs innovation smoke and mirrors initiative. Given this the dot point ‘The speed of adaptation and innovation is crucial for future competitiveness’ is utterly meaningless. That’s not to say that education is not important, it is. It’s not a driver that creates a ‘competitive economy’ but it’s an important contributor to supporting national competitiveness. Why is being competitive important? It’s important as it’s the ONLY way to evolve existing industries, create new industries, create jobs and then balance trade. Nothing else will do this and economists and business academics have zero answer in terms of making an economy competitive. We are throwing away multiple industries as we have a truly dumb government.

    Countries like South Korea, China, Japan, etc. take a totally different approach whereby the acquisition of technology to increase competitiveness and national economic well-being is the objective. This is called ‘Technology-based Planning’ which then drives, R&D, Innovation, funding, education/training, etc. While we are playing with ourselves these countries will continually ‘out manoeuvre’ Australia in the ‘global technology space’ in terms of creating an unassailable competitive advantage. The reality is that no matter how ‘educated’ your workforce is it will be meaningless without the creation of and then alignment with the underpinnings of a competitive economy. The same observation applies to the idiotic myths related to increasing productivity, driving down labour costs, etc.

    Many articles like this and mainstream commentary from academics and economists now smack of desperation. They still want to maintain the illusion they have an answer, they don’t.

  9. Jack Russell

    It comes back to simplicity doesn’t it? Teach them how to think, not what to think.

  10. wam

    how can one evaluate schooling when little johnnie put everyone into 12 years of school without the preparation or the resources to change a system geared to the top 10%?.
    When we add the tertiary system principals and vice chanchelors salivating over the rabbott’s broadening of the poorly thought out labor scheme of VET/TAFE $96000(a look at singapore would have shown a manageable debt free system). The result is a teaching force who have little or no academic experience, no examination practice beyond naplan and no university rigour.
    Comparison with brazil shows a rigorous exam at the end of each year and an 8 hour tertiary entrance. In aust there are thousands of functionally illiterate students or poorly skilled nursing/teaching undergrads blindly accumulating debt in tertiary studies, by donating tax-payer millions to institutions and universities, with little or no hope of success at studies or of discharging their debt.
    Does Australia or brazil fit ‘with a strong resource and manufacturing base’?
    however the bottom line is a country with 10 times the population and held back by religious beliefs. Curiously the same religions as almost all the male federal politicians????
    How about a one size fits all? When teachers are poorly prepared at school and through tertiary. When maths science secondary faculties have a majority of primary trained arithmetic and general science teachers. Most of whom could not excel at grade 9 naplan.

  11. Matters Not

    nexusxyz at 7:30 pm:

    still want to maintain the illusion they have an answer

    This ‘answer’ you request implies presumes a ‘question’. What is your ‘question’? Is it, about the ‘meaning of life’? The ‘purpose(s)’ of education? Or something as crass as … take your pick.

    Please explain.

  12. guest

    Jack, so simple. “Teach them how to think.” Then comes the can of worms. Teach them to think about what? So we get the wrangling over the national curriculum. Three Rs. The History Wars. The The Literacy Wars. The Western Canon. STEM.

    And we divide up the cohort into levels. General Course for top aspirants heading for Medicine, Law, Engineering…And the Commercial Course for Accounting and Clerical Studies and coming a dull last the Technical Courses over there, boys to the right and girls to the left.

    Remember all that?There are elements of that approach here. The 1950s.

    And what about creativity and agility? Can it be taught by direct instruction – or even taught at all? Whither Start-up Innovation?

    Testing does it. Examinations. Testing testing testing. Competition.

    You can see it all here. Fear of failure. The ladder to success. How to win friends and influence people. Lifters and leaners.

    Problem is, we are very new at this business of education. We look back with nostalgia at the Socratic method in the market place. We dream of ruling the Empire on a diet of Greek and Latin. We militarize the Science to fend off the Marxist hordes. We economically globalise the world to access the resources for growth, growth, growth. Yet we stay politically bound by Nationalism to the point of xenophobia.

    “Simple” is just the start of it, Jack.

  13. king1394

    Thousands of unemployed teachers out there, including the many new graduates who are fed through the mincer of casual teaching till they exit the profession. Those children who don’t learn to read easily are left behind. TAFE colleges are closing courses, and campuses are empty. Fees are leaving students indebted for the rest of their lives. Mickey Mouse courses are forced upon job seekers. People who are skilled in teaching reading are expected to do it as volunteers. From where I’m standing, this does not appear to be a society that values knowledge acquisition and cultural development except where it may be profitable

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