Despite the highly favourable views that many neo-classical economists hold on the process of

government intervention during periods of market failure within education, the backlash against
government intervention continues unabated. E.g. the views of Physiocrat economists of the early 18th
century who believed deregulation was necessary to emulate a wealthier Britain (Mark Blaug, Great
economists before Keynes, 1986). Theoretically, the prime advantages resulting from a substantial
increase of government intervention within education include increases in equity as well as the
creation of dynamic efficiency in the long run (efficiency over time, where better quality
products/services become available in an economy). Over the duration of this essay, I will be
discussing these two arguments further and will attempt to analyse and evaluate how better education
as a result of equity/efficiency leads towards export led growth for an economy such as the UK;
perhaps justifying stable economic growth in the long run (an argument that can be seen evidently in
economies such as that of India). More specifically, I will be focusing on intervention within the
secondary sector of education in the UK. The UK is known worldwide, to have a much respected and
6th most reputable education market (Sean Coughlan, BBC News, 2012). The history behind the
policies implemented into creating such an impressive sector, is one which does have its flaws. For
the purpose of this essay, I will be drawing my attention towards the use of the new rights education
reform act of 1988 and the effects it has had on the promotion of stable economic growth. The
education reform act of 1988 is a key policy to discuss when relating to educations contribution
towards economic growth. The policy itself made quite a few changes to the system of education.
These changes were aimed at creating an education 'market' so that schools were competing against
each other for 'customers' (pupils), and that poorly performing schools would lose pupils and close,
leaving only the high performance schools open for business. All of this was an attempt by Margaret
Thatcher to create a better education environment leading towards a rise in enterprise culture which
would hypothetically promote economic growth. (S. Maclure, Education Reformed, 1992)
To begin with, one of the main advantages of government intervention within the education market is
increases in equity within not just education but the entire UK economy. According to Nobel Prize
winning economist Milton Friedman (2006), education is very much a public good which may
perhaps be under produced and under consumed if left to a free market. Many consumers of education
do not necessarily realise the benefits associated with education as it fails to provide short term
gratification which is sought by many in the postmodern society we live in today. As the government
is able to operate without a profit incentive and works entirely in favour of the public, education
which is provided by the government is arguably more likely to be fairer in comparison to free market
alternatives who are solely profit driven and do not necessarily care for the needs of the poorer
members of society. Evidence of equity being provided as a result of intervention can quite clearly be
seen with the introduction of the education reform act of 1988 as it introduced the principle of the
national curriculum. The national curriculum was put into place in an attempt to provide a general
nationwide curriculum for all in secondary education independent of an individuals social class,
gender or religious belief. According to the views of Margaret Thatcher, a nationalised curriculum
provides a great deal of equity within society as it allows everybody to benefit from a fair chance to
achieve educational success. Before Mrs Thatcher, universities were very similar to public utilities
run for the benefit of staff with government money. Now they are stellar (Terence Kealey, The
Times, 2013). This justifies how a governments decision to intervene in education provides the
greatest total welfare possible and therefore reduces inequality within the educational market.
Furthermore, the creation of equity as a result of the national curriculum is an important policy to
consider when discussing not just education but the entire UK economy as it could be argued that
equity leads towards economic growth for the UK. According to the views of Isabel V. Sawhill
1

(Brookings, The effects of investing in education on economic growth, 2006), the presence of
national curriculum in an attempt to create equity contributes heavily towards economic growth in the
long run as more members of the labour force are given an equal chance to be educated. A more
educated labour force is more mobile and adaptable in comparison to non-educated labour forces.
This statement suggests that a more adaptable labour force should be able to produce better quality
goods/services - which overall should lead towards the UK being able to benefit from export led
growth.
The national curriculum can also serve to reduce income and wealth inequality in the long run which
is one of the prime macroeconomic objectives of the UK economy. A more equal distribution of
income and wealth can interlock with other macroeconomic objectives such as higher standards of
living (SOL) available for members of society. A higher SOL contributing towards lower
unemployment levels all of which can lead towards economic growth e.g. lower unemployment levels
of 6.5% in the UK (BBC News, 2014) have led towards a greater degree of disposable income for
consumers. The more disposable income individuals have, the more spending in an economy which is
a key factor when discussing consumer led recovery which the UK has benefitted from dearly over
the past 5 years (Chloe Rigby, Internet Retailing, 2013). Figure 1.1 below illustrates AD/AS analysis
of how more spending in an economy leads towards a rise in Real GDP. A rise in consumer spending
raises the overall demand in the UK economy as firms are given an extra incentive to produce more,
therefore leading towards a rightward shift of the AD curve which increases Real GDP at the cost of
an increase in price level (inflation). All of this may potentially have been a result of the national
curriculum being introduced.

However, it can be countered that even if the national curriculum of 1988 does create an equitable
society, to say it leads towards stable economic growth is a controversial debate. The presence of
consumer led growth as a result of equity in education can be argued by many economists as not
being stable whatsoever. A recent article published by Larry Elliott, The Guardian, 2013 described
UKs economic recovery being built on shaky foundations. Growth will be dependent on easy
money, rising debt and a temporary fall in inflation prompted by falling food and commodity
prices. This statement clearly highlights the fragile nature of a consumer led recovery which could
potentially cause more harm than good as it is dependent on an individuals confidence levels which
thrives the UK forward. Keynes described a consumers unpredictable nature through the concept of
animal spirits. He believed instincts and emotions are what truly influence and guide human
behaviour in terms of whether or not to spend/save more thus justifying how growth as a result of
consumer spending cannot be relied upon as it is unstable (John Maynard Keynes, The General
2

Theory of Employment, Interest and Money, 1936). Nevertheless, if we are to take the argument in
question into consideration, we have to assume that Keyness discussion of animal spirits referred to
the UK economy as a whole and not just focused solely on the education sector. Education can
contribute towards growth for the UK as it can produce a higher quality work force as well as
encouraging consumer spending, but to say that it is education solely which leads towards drought
periods of GDP growth as well as unpredictable behaviour from consumers is a farfetched statement.
Moving forward, an additional branch of 1988s Education reform act, Ofsted was also introduced in
the distant future of 1992. Ofsted carries out independent, expert inspections and regulatory visits in
order to drive improvement across the full range of its remit, and reports to Parliament annually.
Ofsted also produces in-depth studies of curriculum subjects and aspects of provision in social care,
education and skills, to advise the government and inform the public on quality and standards, and to
provide evidence to Parliament and its Select Committees(Parliament.UK, 2010). The use of this
reference clearly provides evidence, that the purpose of Ofsted itself is not just to solely check quality
standards to make sure they imply with the law; but it is actually the creation of competition amongst
secondary schools as a result of quality standards being published on an annual basis which creates a
competitive market in the UK education sector. Schools are forced to provide better quality services
to students. Failure to do so can lead to a loss in educational market share as parents choose to send
their children to schools that hold outstanding Ofsted statuses. The creation of this dog eat dog
mechanism amongst competing schools as a result of Ofsted, justifies dynamic efficiency in the long
run as students who are coming through the secondary education system are better skilled and
equipped to produce innovative, high quality goods perhaps contributing towards a monopolist culture
within the UK which most likely would cause a rise in exports for UK goods - all of which leads to a
more stable form of export led growth.
On the other hand, it is important to acknowledge that better quality education as a result of Ofsted is
unlikely to be the sole contribution towards the so desired export led growth. Britain continues to
suffer from a persistent trade deficit which continues to widen over the past 12 months. The
widening of the deficit continues to reflect weak exports, the value of which fell by 2.5% between the
three months to August and November (in contrast, imports were broadly flat) (Angela Monaghan,
The Guardian, 2014). This reference provides a strong argument by Angela Monghan who provides a
clear picture as to why the UKs hopes of an export led recovery continue to be an inexistent dream as
long as the deficit persists. She also acknowledges several other implications which dampen UKs
hopes of an export led recovery. These include a stronger pound for instance, making British goods
more expensive for foreigners as well as tenacious trade weaknesses which continue to exist in the
Eurozone (UKs largest trading partner).
In conclusion, if we are to take all the arguments into consideration, it is fair to assume that in order
for the UK to benefit from stable economic growth, government intervention is necessary however it
cannot be implemented into education alone. The use of Thatchers education reform act of 1988 has
perhaps played a crucial role into the UKs hope of a stable growth period, but we cannot rely on
education related policies to be the sole base for growth in the UK as education only makes up a small
sector of the bigger problem itself. Continuing trade deficits, loose monetary policies, and a lack of
supply side innovations are all persistent problems which the UK faces and has failed to deal with
adequately. In order to promote stable economic growth in the UK, there must be a joint effort within
all sectors of the UK economy to overcome such issues and perhaps follow in the footsteps of some of
Asias leading tiger economies such as India, who have invested heavily in infrastructure renovations
which have allowed for India to experience persistent and stable economic growth in the long run
3

with growth rates peaking at 8.6% in 2010 compared to UKs 0.2% growth during the same period.
(The Guardian, May 2010)
END

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