Why Does Education Reform Happen Where and When It Does?

Education reform fundamentally changes the quality, composition and demands of a workforce. It does so in a way that does not benefit all sections of society equally. This post attempts to outline a simple model to help us think about the winners and losers of education reform, in order to explain why reform happens when and where it does. Doing so will reveal the curious relationship between land reform and education reform, which offers a clue as to why the timing and extent of reform differs so greatly between countries.

A Model of Education Reform

In economic models, we often make crude abstractions which simplify reality. We do this to make our analysis workable and to remove irrelevant details which risk obscuring the main message we wish to convey. These abstractions are often criticised as being ‘unrealistic’. However, the relevant criterion is not whether such abstractions are realistic but whether they are useful. Maps provide a good analogy to this: a map which detailed every single crack, pothole and tree along a road would be realistic but ultimately useless. By contrast, an ‘unrealistic’ map which only detailed the most salient features of a road (such as the name, type and direction the road is headed) would be far more useful.

In the same way, ‘unrealistic’ Economic models can nonetheless greatly aid our understanding of the world. For example, in the context of 19^th century Britain, a crude (but useful) abstraction to illustrate the timing of education reform is to categorise people into three separate groups: landowners, capitalists and workers. Landowners own land (e.g. farms), capitalists own capital (e.g. factories) and workers own their labour time, which they can sell to either landowners or capitalists. In this model, both landowners and capitalists make up the political elite, who must decide on a variety of public sector measures including education policy.

Above: A cartoon parodying the dynamic between the three actors in our model. Source: Henry Devon George Society

Crucial to the timing of reform is the idea that landowners and capitalists demand fundamentally different things from their workforce. Crudely, landowners desire a workforce that is predominantly rural and immobile, so they can extract rent from tenants who have little in the way of ‘outside options’ to recourse to. On the other hand, capitalists desire a workforce that is educated, so that there are engineers to fix their machines, architects to build their factories and at the very least literate factory workers who are able to read instructions. Faced with these contrasting incentives, the pace and timing of reform is dictated by the political clout of capitalists relative to landowners at any one moment in time. When landowners are more powerful, education reform is likely to stall, as such a policy would likely require tax increases and threaten the immobility of their workforce.

To tie this back to land ownership, consider that the political salience of the landlord class is more pronounced when land ownership is more concentrated in the hands of an elite group: the landed aristocracy. Thus, land reforms which equalise land ownership will reduce the power of landlords relative to capitalists, increasing the likelihood for education reform to take place. Not only do they make landlords less important as a political class, but they can may also prompt landowners to diversify their portfolio away from land and towards capital, lowering their economic incentive to block education reform.

Historical Evidence

History provides us with many instances of this sequence taking place. For example, in Japan in 1871, an Imperial Decree initiated the abolishment of the feudal system. Decisions on land utilisation and choice crops were transferred from landlords to farmers and prohibitions on the sale of farmland were removed. These reforms had the effect of greatly reducing the power of Japan’s landed aristocracy. Education reform soon followed: in 1872, the Education Code established compulsory and locally funded education. While in 1873 only 28% of school-age children attended schools, this ratio increased to 51% by 1883 and 94% by 1903 (Gubbins, 1973).

This pattern was mirrored in Russia a few decades later. As the Tsar’s grip on power weakened during the early 1900s, the political power of the wealthy landowners gradually declined leading to a series of agrarian reforms initiated by the Stolypin in 1906. Restrictions on the mobility of peasants were abolished, fragmented land-holdings were consolidated, and the formation of individually owned farms was encouraged and supported through the provision of government credit. As a result, the land holdings of the aristocracy declined from about 35-45% in 1860 to 17% in 1917. As their political power correspondingly weakened, the Duma began to initiate a series of education reforms, leading to the education share of the Provincial Council’s budget increasing from 20.4% in 1905 to 31.1% in 1914 (Florinsky, 1961).

Interestingly, this converse relationship between the concentration of land ownership and the extent of education delivery remains visible today. In Costa Rica and Colombia, where coffee is typically grown in small farms, education expenditure and schooling outcomes are significantly higher than in Guatemala and El Salvador, where large plantations still dominate.

From this simple model of landowners, capitalists and workers, we can derive several interesting conclusions. First, anything that reduces the political power of the landowner class should speed up education reform. Land reform is one way to do this, though certainly not the only way. Electoral reform and a gradual diversification away from agriculture should both have similar effects. Second, in countries where the boundary between landowners and capitalists is more fluid, this should increase the likelihood of education reform, as it enables landowners to diversify away from land in response to political change. Finally, the model implies that while land abundance may initially be a positive thing, it may eventually hamper education reform (and ultimately growth) to the extent that it intensifies the political power of landowners. This may help explain what Acemoglu and Robinson refer to as the ‘reversal of fortune’: the observation that many historically rich civilisations (e.g. the Aztecs) have moved towards the bottom of the income distribution since the industrial revolution.

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References

The model outlined in this article was devised by Galor et al. (2009).

•         Florinsky (1961), ‘Encyclopaedia of Russia and the Soviet Union’
•     Galor et al. (2009), ‘Inequality in Land Ownership, the Emergence of Human-Capital Promoting Institutions, and the Great Divergence’
•     Gubbins (1973), ‘The Making of Modern Japan’