Jean Pisano-Ferry has a very interesting piece in the Financial Times entitled Europe’s Eroding Wealth of Knowledge (also can be found on MSNBC). In it, he looks at some of the assumptions behind the 2000 Lisbon summit goal of making the European Union a knowledge based economy. One of the prime underlying assumptions is that the EU has a relatively highly skilled work force, and that this provides a competitive advantage in a knowledge-based world. He shows, however, that the average adult in the EU is “significantly less educated than adults in other industrialized countries”. In terms of number of adults who have experienced some tertiary education, the US is in the lead with 25% of the global total, the Bric countries (Brazil, Russia, India and China) follow with 20%, while the EU can claim less than 15%. This poor showing of the EU can be attributed to historic reasons, and the flow of EU students into tertiary education now has increased greatly. However, growth in tertiary education in many other parts of the world has grown even more rapidly. For example, the Bric countries now have one-third of the world’s students in higher education, while the EU has 16% (and the US has only 15%!).
Pisano-Ferry then draws a comparison between this distribution of intellectual capital, and the distribution of physical capital(buildings and equipment). Here the EU is in good shape, possessing one-quarter of the world’s physical capital, exceeding even the US. He concludes, “Europe is much better endowed with buildings and machines than brains.” Since the US shows an imbalance in the opposite direction, this leads to different trade positions for the two areas. US exports focus on skill-intensive goods (e.g .high tech), while the EU is best at goods with high capital intensity and medium skill intensity (e.g. cars and chemicals). In the short run, that provides the EU with a winning hand in globalization, because few other countries have the wherewithal to compete in the production of capital intensive goods. However, Pisano-Ferry argues that other countries (including the US) now are accumulating capital much more rapidly than the EU. Capital flows, he says, “to the countries with good economic institutions, infrastructures and human capital” - areas where he says that the EU is lagging.
Pisano-Ferry’s conclusions regarding the Lisbon goals are simple:”The upshot is that the focus on knowledge is right but that the sense of urgency is lacking. Europe’s prosperity will not last if it does not address its underinvestment in human capital.” Given the relatively low percentage of the world’s tertiary students who can now be found in the US, one might ask if a similar conclusion might not apply right here at home (see Report from the Secretary of Education's Commission on the Future of Higher Education, Aug. 10, 2006).
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