March 15, 2006 | Volume 3, Issue 1
Relationships Among Globalization, Development, Primary Education Spending and Brain Drain in the Developing World
Trade policies that accelerate the globalization of goods and services also increase the international migration of college-educated people from less-developed nations to industrialized nations. This “brain drain,” or loss of human capital, impairs the progress of less-developed nations and impedes their ability to compete in the global marketplace. For developing nations seeking to integrate into the global market, neoliberal reforms that require a reduction of government spending on education and a redirection of remaining education spending to the primary grades correlate to a reduction in brain drain.
Spending less on education to prevent highly educated people in a society from emigrating seems counter-intuitive. It appears more logical that nations providing high levels of benefits to their citizens would retain the people they educate. However, high rates of government spending on education do not translate to effective or efficient education systems (Birdsall & Londono 1998). Nations that have implemented neo-liberal reforms in education spending have lower rates of brain drain than their less-globalized peers. This paper will examine the relationships among globalization, development, primary education spending and brain drain. It will provide a brief history of contemporary globalization, including definitions of ideologies, examine the role of education in developing economies and discuss the implications of losing large percentages of college-educated individuals. The paper will also provide data tables comparing brain drain rates with development indicators, education spending patterns and measures of globalization. In conclusion, this paper finds that neo-liberal reforms calling for reduced government spending on education appear to better serve the education policy needs of developing nations, because fewer educated citizens emigrate.
Historical Context
The United Nations Development Programme (UNDP) defines globalization as the worldwide economic, social, and political processes in which the markets, tools, actors, and rules of activities are integrated without differentiating national borders. According to the UNDP, the process of globalization redirects the capacity building of nations from managing their local territories to managing their capacities to for global competition (Franche, 2000). Scholars, policy makers, participants and activists debate the effects of globalization with varying, often contradictory, verdicts depending on the outcome they are measuring. Understanding history and some of the players in the analysis of the globalization process is central to the conclusions drawn in this paper.
World War I marked the beginning of a contemporary period of globalization characterized by significant advances in technology, which in turn have proven influential on the speed of the globalization process. This speed and the issue of who has access to the tools that drive it are at the heart of the modern globalization debate. The tools required to compete in the 20th century globalization process frequently require some level of formal education. Since access to formal education is inextricably linked to issues of class and social status (Wright, 2002), these issues are central to the discussion of 20th century globalization.
Often the question of economic competitiveness translates from one of fitness to compete to one of preparedness to compete. According to social theorists such as Collins (1971), and Marx (Wright, 2002), people who do not have access to education as a means to increase the quality of their skill set will remain locked into a lower social or economic class status in capitalist economic systems. Because education is both a conduit of class status and a means to transcend the barriers class status poses, it is an especially precious commodity in the context of 20th century globalization.
Contemporary globalization has its roots in the pre-World War I political economy of Europe. In The Great Transformation, Karl Polanyi (1944) argued that unfettered international trade caused the World Wars of the 20th century. This unfettered trade simultaneously weakened the sovereignty of national governments and strengthened the role of international finance organizations. Polanyi viewed unchecked markets as predatory and advocated for governments to protect their citizens while not eliminating the benefits of market competition. Social spending on education, health care, and social safety nets is one way a government can protect its citizens (Polyani, 1944).
The Significance of Neoliberalism in the Globalization Process
According to Brad DeLong (Wikipedia Contributors, 2006), a former Deputy Assistant Secretary of the Treasury for Economic Policy, the term “neoliberal” in the context of globalization refers to two basic assumptions regarding economic development on a global scale. First, trade between industrialized nations and developing nations is the best way to help poor economies become wealthy. Therefore, all barriers to international trade should be eliminated. Second, governments do not have the capacity to run large industries or businesses, such as utilities or steel manufacturing. Thus, except for core mission functions such as tax collection, public-good infrastructure or the provision of justice, governments should privatize all other functions.
It is important to note that although neo-liberal theory became international economic policy under the Thatcher and Reagan administrations, it is not synonymous with conservative political ideology. Within the American political vernacular, a center-left or liberal group of supporters is growing behind the idea that neoliberalism is a logical and pragmatic response to the seemingly inevitable globalization process. The trade-friendly policies of the Clinton administration represent the ideology of this center-left movement.
The policies of the World Bank and International Monetary Fund (IMF) are most often referenced when discussing neo-liberal reforms. According to their charters, the World Bank and IMF are lending institutions created during the World War II recovery process to manage funds and international currency during the recovery effort. As such, they are heavily influenced by American political and economic interests. In the 1970s and 1980s, the scope of their work changed from currency management to lending to developing nations for development purposes. World Bank and IMF lending policies often require borrowing nations to make changes in governance to align with neoliberal ideology. Changes, such as reformed banking sectors or property ownership laws, facilitate dropping trade barriers and are frequently called structural adjustment policies.
Critics of the trade openness associated with neo-liberal reforms in the developing world question the effectiveness of World Bank and IMF reforms as a condition for receiving multilateral foreign aid. The Neoliberal defense of the World Bank and IMF contends that structural readjustment policies designed to make the markets of the developing world easier to integrate into the global economy are sound lending terms for a return on their investment, yet these institutions have a very low rate of return on the capital they lend. Structural adjustment opens the markets of developing nations to investment by foreign capital, which purchases large shares in the most profitable sectors of developing economies. This capital is mobile, where the laborers it employs are not. Thus, when cheaper labor becomes available in another location, or when labor tries to organize to bargain for better wages or working conditions, foreign capital has an advantage in negotiations or can leave if it finds conditions unfavorable. Workers generally do not have these options, arguably weakening their bargaining position. Foreign investment is also generally not tied to the national interests of developing nations, but is instead responsible to shareholders. These factors cause tension between the interests of foreign capital and national governments. For these reasons among others, structural adjustment policies have a mixed performance record, with results ranging from highly effective in the former Communist block countries such as the former Czech Republic, to arguably subversive in East Asian nations like South Korea or Taiwan (Stiglitz, 2002). Critics question the appropriateness of the one-size-fits-all approach advocated by the World Bank and IMF, and what some term the cultural hegemony posed by the value system of market integration. Significant debate still focuses on the central questions of whether trade openness can solve development issues and whether a focus on market integration weakens the sovereignty of national governments in favor of global capital.
Recording the migration of college-educated people from the developing world to the industrialized world began in earnest in the 1980s, about the same time that researchers began to track the globalization process. The global brain drain generally increases as the globalization process accelerates. It is important to note that reliable statistics on emigration and education are just beginning to emerge across the globe. Most of the statistical data on brain drain comes from receiving nations rather than émigré nations, and methodologies generally vary.
The literature on brain drain is divided into two camps regarding its effects. Traditionalists argue brain drain hurts developing nations, because college-educated citizens and the benefits they bring to society leave. A second analysis, termed the “brain-gain” literature, emerged in the late 1990s and contends that the remittances, or money sent home, by highly skilled migrants actually benefit developing nations by increasing the demand for education domestically (Schiff, 2005). Maurice Schiff, lead economist in the International Trade Unit at the World Bank, is critical of this second theory, concluding that the brain-gain remittance economy does not replace the value of human capital lost to emigration. Schiff provides strong evidence that a brain gain does not exist in econometric terms except in member nations of the Organization for Economic Co-operation and Development (OECD), such as the United States or United Kingdom.
Brain Drain, Immigration Laws, and Developing Nations
As the contemporary phase of globalization has evolved, the immigration laws of many large, industrialized, capitalist nations have also evolved to favor the immigration of highly skilled workers. In 1965, the United States revamped its immigration laws to remove a historical bias that favored European immigrants. In 1963, Canada enacted similar legislation. Similarly, as the European Union grew in scope and membership, its immigration laws were liberalized to include certain ethnic groups. The result has been a substantial increase in net legal migration for the United States, Canada and the European Union during the corresponding periods. The reforms passed by all three are based on the Australian point system that rewarded individuals’ abilities to contribute to domestic society and economy. These point systems are implicitly skewed to attract skilled labor, and the result has been that immigrants to these nations have a much higher level of education than their domestic counterparts (Cobb-Clark, 1997).
When considering the effect that brain drain has on developing nations, it is important to understand the proportion of citizens possessing higher levels of education that migrate from émigré nations. A 2005 World Bank report on global brain drain estimated that 11.3 percent of the world labor force has a college education. Within nations belonging to the Organization for Economic Co-operation and Development, 27.6 percent of the work force has education at the college level compared with 6.3 percent of the work force in non-OECD nations. Of legal migrants to OECD nations, 34.6 percent possessed college education (Docquier & Marfouk, 2005). The same report finds that “the international mobility of skilled workers is a crucial issue for middle- and low-income countries, mainly because their share of tertiary educated workers remains low compared with high-income countries” (Docquier & Marfouk, 2005, p.18). Appendix A provides a summary of skilled-worker ratios and migration rates by region. Appendices B, C, and D provide summaries of emigration by nation and comparative data on education, development and globalization metrics. These data show that nations whose economies are less globalized have the highest rates of emigration of skilled labor departing for OECD nations.
When the migration patterns of skilled workers are juxtaposed against the historic Gross Domestic Product of their nations of origin, the skill level of labor becomes an indicator of economic competitiveness. Nations with higher levels of skilled labor will continue to out-compete nations with lower levels of skilled labor, and less-developed countries with low levels of human capital will have difficulty retaining their human capital investments.
Human Capital and Developing Nations
Human capital is significant to a nation’s development for several reasons. Human capital expenditures, such as education and health care, raise earnings and improve health over a person’s lifetime. Yet these expenditures cannot be separated from an individual’s knowledge, skills, health or values in the way that financial and physical assets can. Thus, these assets increase a worker’s value to the economy, but are used at the worker’s discretion. For example, American middle-class women who receive a college education may choose to stay at home and raise children rather than apply in the market place those skills gained through their education. According to Gary S. Becker (2006), a professor of Economics and Sociology at the University of Chicago and a 1992 Nobel Prize winner, studies show that education and training greatly raise personal income, even after subtracting the direct and indirect costs of education and adjusting for the fact that educated people tend to have higher IQs, better education, and wealthier parents.
The gains realized by people with education are in fact larger in less-developed countries. However, according to Becker, the human capital literature also confirms that the propensity to invest in education is generational. A positive correlation exists between the number of years of education that a parent has and the number of years of education his or her child will receive. And while it is important to note that generational educational attainment and generational income levels do not show a strong correlation, this correlation of parents and children acquiring similar levels of education is significant when we consider the challenges posed by breaking cycles of poverty in developing nations. In nations where large segments of the population do not have even basic levels of formal education, a large-scale generational precedent for educational achievement may not exist. When people who value education leave a developing nation in large numbers, they take with them their propensity and ability to educate their children. Thus, the global brain drain compounds the challenges faced by less-developed countries in raising the human capital level of their citizens.
In applied terms, people with high levels of education start businesses, employ others and improve the efficiency of firms already in the market. Because the investment in the education of skilled workers travels with these highly-educated people, so too does their effect on markets travel with them. In addition to financial considerations, skilled-labor emigration raises significant social costs. Skilled-labor emigration removes the stabilizing political influence of the middle class. If the process happens consistently or quickly, it denudes institutional memory in developing nations. Skilled-labor emigration leaves fewer workers to pay taxes, fill pension accounts, or look after the elderly.
Neoliberal Reforms and the Education Spending Link
The World Bank’s model for market integration requires that countries applying for loans implement reforms to recalibrate overall spending on social services, including education. These reforms are designed to increase the effectiveness, efficiency and accountability of government services while spending less on these services over all. The World Bank recommends refocusing education spending on compulsory primary education for the entire population. Data from the World Bank show nations that are more integrated into the world economy have lower overall rates of spending on education than their less-globalized counterparts and yet achieve better results (Birdsall & Londono, 1998). Among least-developed and some middle-developed nations, education spending is frequently plagued by inefficiency, which impacts the quality, deliverability, and consistency of education (Birdsall & Londono 1998). Frequently, students attempting to achieve high levels of education must pay to get out of public systems and into private schools. According to the World Bank Development Education Program, spending on private education occurs in 20 to 60 percent of households with school-aged children in less-developed countries. In the Philippines, where state expenditures on public schools represent 3.1 percent of Gross Domestic Product, private school expenditures represent 1.95 percent (World Bank Edustats, 2005).
Families seem to choose private education as an alternative to public education because the quality and consistency of private education is viewed as superior to public education (West, 1995). This lack of public educational infrastructure creates a dual system where educational achievement is dependent upon class. Those who can afford a better education will get one, as well as the opportunities for advanced studies that better preparation provides. Families who send their children to private schools may finance this education through a variety of sources, including remittances from relatives already abroad (Adams 2003). These relatives may represent skilled or unskilled labor. Several World Bank papers find strong correlations between remittances received from abroad and increased private educational spending at home, with some rates of increase in marginal spending as high as 142.5 percent in Guatemala (Adams 2005).
Conclusion
Developing nations that reduce their overall spending on education and refocus the remaining spending on primary education have lower rates of brain drain. These same nations are also more integrated into the global economy. Many of these types of education spending reforms have been implemented as a condition of receiving loans from the World Bank or IMF, institutions dominated by a Neoliberal economic philosophy.
Neoliberal reforms, such as reducing overall spending on education or healthcare, are often characterized as a catalyst of globalization; however, the overall effects of these reforms on developing nations are still being evaluated. Significant questions remain as to whether the Neoliberal and structural adjustment policies of the World Bank and the IMF pose a net negative or positive impact on the developing world. However, recent data show that developing nations that implemented Neoliberal reforms in education spending have lower rates of brain drain than their peers. This implies that among other reforms, increasing the efficiency, efficacy and consistency of primary education reduces pressure on individuals with high levels of education to migrate to industrialized nations.
References:
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Appendix A
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Appendix B
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Appendix C
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Appendix D
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