View from City Road: Education will not solve all our ills

Impassioned calls for greater investment in education and training are two a penny throughout the industrialised world. Robert Reich, the US Labor Secretary, and Gordon Brown, the shadow Chancellor, yesterday argued that they are crucial to national economic success and competitiveness in the global economy, a sentiment that will be echoed in today's OECD jobs report.

Certainly it is the case that workers need to be increasingly adaptable to cope with accelerating technological progress. All Western countries are seeing demand for unskilled labour shrink. Employers are prepared to pay a premium for educated and flexible employees.

As Messrs Reich and Brown pointed out, the West finds it increasingly hard to compete with the low- cost manufacturers of the developing world. Its response should be to take its industries and services upmarket. This may well be the best hope for the old industrialised economies, but education and training may not be the panaceas that they are sometimes painted.

Remember how in the 1960s and 1970s it was blithely assumed that Japan's future role in the world economy was simply to produce cheap and cheerful cars and consumer electronics, while Europe and the US would produce goods and services on the cutting edge of technological advance? Instead, Japan has passed the torch of cheap and cheerful mass production to less developed countries and is now competing on equal or superior terms with the West in high technology.

The same may happen with the 'knowledge-intensive' industries which Reich and Brown envisage the West dominating in years to come. Educational institutions in Europe and the US increasingly attract students from less developed countries, while the geographical location of these institutions is anyway becoming less relevant with the growth of multimedia education and distance learning.

Better education and training are important, but they cannot protect Europe and the US from relative decline for long.