EKIP– Expert Club for Economics and Politics A Different Opinion
Last week, during the national campaign "Economy in Light for a Better Future", organized by the Confederation of Employers and Industrialists in Bulgaria (CEIB) and the Confederation of Bulgarian Trade Unions, Finance Minister Vladislav Goranov announced that "in the 2016 Budget, hundreds of millions more will be allocated for secondary education". Here we will examine the macro environment in which the promise was made, as well as what effects a possible increase in funds for education would have.
The effects of speaking
We cannot avoid the macroeconomic context of the statement. It comes against the backdrop of planned budget deficits for this and the next three fiscal years. [1] In this vein, we cannot interpret the minister’s words as anything other than a complete retreat from the idea of eliminating the budget deficit and accumulating more debt. As of the middle of this year, it amounted to 28.4% of GDP, and is expected to reach 30.9% of GDP by the end of 2018. We should not forget that low levels of government debt (or eliminating it altogether, which is the better option), as well as a predictable business environment, are extremely important indicators for investors when making business decisions. What the minister is doing with this move [2] is to state in a straightforward manner that the Ministry of Finance (MoF) is willing to increase its spending by millions on a general basis. Which cannot be a positive signal in the eyes of entrepreneurs and threatens to debunk the idea of one of the country's competitive advantages - the relatively small budget relative to GDP compared to many other European countries and the low public debt.
The feeling of chaotic spending and the threat of increasing government debt to more than the stated 30.9% of GDP is reinforced by the fact that Minister Gornov’s promise comes without any assessment of the impact of the additional millions on the education system. And if the Minister is so generous to educational institutions, what could guarantee that the Ministry of Finance will not be favorable to other problematic areas or industries, for example, to BDZ, the Roads Agency [3], municipalities, etc.? We should not forget one more thing - the analysis of the effects of spending is a mandatory element of all bills. Although the Minister is not actually making a legislative reform, it can be said that to some extent he is breaking the rules of his own game, since he promises funds without having calculated the benefits/harms of them and seemingly without pursuing a specific goal.
What educational problems will the additional millions face?
Even if we had limited our analysis only to the macroeconomic aspects and the effects of the minister's promise on the business environment, they would have been negative enough. Alas, the bad news for the economy will not be limited to this, Minister Goranov kept his word. Although it is not obvious at first glance, increasing funds for secondary education will have the opposite effect on education itself.
As we pointed out above, the promised “hundreds of millions more” are simply thrown at the general public, without being in any way tied to an assessment of their impact on education itself. The worrying thing here is that this line may divert attention from the real problems of education and the urgent need for reforms. And teachers and students need not so much money as a fundamental change in the environment.
Since Minister Goranov seems to have failed to address the real problems of education, we will point out some of them to him. [4] One disturbing trend is that after 12 years (as is the general case) of studying literature, young individuals aged 25 and 35 do not read books. Data from the National Statistical Institute show that in 2011 – the latest year for which information is published – as many as 49.3% of respondents indicated that they had not read a single book in the past year. This is a weaker result compared to 4 years earlier, when this percentage was 46.3%.
But perhaps the most important problem is that a significant percentage of students, especially at the secondary level, are functionally illiterate. This means that they recognize letters and mathematical symbols and can read, but do not understand the meaning of what they read, are unable to extract information presented to them in the form of tables and graphs, or cannot solve logical problems. The results of the 2012 international PISA study [5] indicate that as many as 39.4% of ninth-grade students are functionally illiterate, and 43.8%, or almost half, cannot perform basic mathematical calculations after 8 full school years of studying mathematics. [6] Moreover, the change in the results over the past 15 years is marginal. This is just further evidence of the systemic nature of the problems in Bulgarian education. Such data cannot be disturbing - they unequivocally show that regardless of the party in power, education, which has hardly been radically reformed since 1989, is completely failing in one of its main functions: to teach adolescents critical thinking and the ability to understand and explore the world around them.
Education and economic calculation
Merely pointing out some of the problems is not enough to understand how we can eliminate them and to see whether the promised “hundreds of millions more” will solve them. [7] First, we must bear in mind that education in Bulgaria is extremely strictly regulated by the state, even to the point of micromanagement. [8] Second, education at all levels is dominated by state funding and a centralized mechanism for determining teachers’ salaries. It is striking that in this model the free market is rather absent; [9] moreover – education in Bulgaria almost resembles a socialist structure in which the consumer “pays” nothing and the entire process is regulated by officials.
It is precisely these features of the way education is provided in our country that give rise to the above-mentioned problems. Even if we assume that the goal of the lawmakers who created the current Public Education Act was selfless and that they really sought to establish a structure that would care for children and their needs, in fact they achieved the opposite effect. As a result of all the central planning in education, officials operate “in the dark”. They do not have prices to show them what is wanted and what is not, so they do not know what prices for teaching labor should be established for each subject, course and level. For this reason, we are witnessing a drastic discrepancy between the needs of the market and what officials want students to learn. On the other hand, however, the financing of the system creates incentives for waste of funds, no selection among students (almost everyone who enters graduates from education), and fictitious competition between educational centers. [10] And since the qualities and performance of teachers have absolutely no bearing on their salary, they simply disappear as targets; i.e. the system guarantees low quality, not the other way around.
But what is worse is that bureaucrats have no feedback from the users of the service: the students. Therefore, administrators do not know what they want children to learn, nor what skills they need; they do not know when a subject should be taught, nor at what level. Thus, educational plans are a completely arbitrary mixture of subjects that are supposed to arm students with a “general culture” for real life outside of school. But in fact, the programs are simply a unitary model that does not take into account the differences between individual students, but simply obliges them to listen to things that are uninteresting to them and simply fails in the set goal. [11]
Therefore, no matter how many millions more are poured into education, the quality of the product (students' qualifications) will not increase. Minister Goranov can promise that the Ministry of Finance will finance the equipment of every school and every educational center with interactive smart boards; that he will provide money to increase teachers' salaries by 50%; that students will study in the most modern conditions, etc. But even if he turns schools into palaces, the problems of education will not be solved, because they are structural. On the contrary, they will become more severe, because then taxpayers will have spent even more money on children who are functionally (and sometimes actually ) illiterate and have absolutely no practical skills. The only way to solve the problems described above is to eliminate state funding and all strict regulations in education and replace them with a market principle, in which service providers (schools) really teach what satisfies the needs of consumers (students and parents).
[1] According to the plans of the Ministry of Finance itself, the budget deficit is expected to be 3% of GDP this year and to fall by half a percentage point each year until 2018, when it should reach 1.5% of GDP. In short, we can neither expect the GERB government to reduce state spending (quite the opposite!), nor will it bring the budget to a surplus. You can read more about the medium-term budget forecast here.
[2] The promised "hundreds of millions" for education are a minor problem against the backdrop of negative ideas for tax reform and increasing social security contributions.
[3] Whose deficit as of last year amounted to 81 million leva.
[4] For a more detailed picture of the problems and goals of education, defined (implicitly or explicitly) by the Ministry of Education and Science, see " Desires and Realities in the Sphere of Education ".
[5] This is the last year for which the Organisation for Economic Co-operation and Development (OECD) has published data on its website. All PISA results can be viewed here.
[6] For a detailed analysis of the PISA results, as well as an analysis of other studies of student performance, see “ PISA 2014: Nothing New in Bulgarian Education”.
[7] For more details, see Daniel Vassilev's lectures " Economics of Education " and " Alternative Education ", and for more details on economic calculation and the problems of implementing it in an over-regulated environment, see Ludwig von Mises, Economic Calculation in the Socialist Commonwealth and Socialism: An Economic and Sociological Analysis.
[8] Art. 16 (of the Public Education Act): “State educational requirements shall apply to: 1. pre-school education and training; 2. the level of education, the general educational minimum and the curriculum; 3. the curriculum; 5. the assessment system; 7. the acquisition of professional qualifications; 9. textbooks and teaching aids; 10. documents for the public education system; 11. extracurricular and extracurricular activities; 12. teacher qualifications and qualifications…”
[9] Even private schools must be licensed by the Ministry of Education and Science to provide teaching; i.e., they must meet state educational requirements.
[10] To the extent that schools compete with each other to attract subsidies, rather than on the level of quality product.
[11] The cost of this failure is a topic that deserves to be addressed in a separate article.
