According to a new report by the International Monetary Fund (IMF) published this week, we're all in big trouble. Western economies' growth rates have left the motorway and are now stuck behind a big red tractor on a single-track road - with no passing places. Potential employment growth is set to decline and low productivity means government and private debt will be hard to reduce.
So what's going on? It's no secret that we're all facing what the IMF snappily calls 'a demographic crunch.' In some developed countries such as the UK, the total proportion of people working is going down as birth rates decline and we all live longer (hopefully). In other economies such as China, India and Turkey, the proportion of people working - the participation rate - has reduced as people get richer and choose to spend longer studying or less time working. Indeed in Russia and China, potential employment growth fell by 0.2% every year between 2001 and 2007. That represents a lot of Chinese and Russian people who could be contributing to global growth who are choosing not to.
Productivity growth is slowing down worldwide, that's a fact, and it's something the majority of us are just not used to hearing. We're conditioned to believe that emerging economies in Asia have huge growth rates and always will because, well, they make stuff - and lots of it. But the reality is that their productivity rates have been slowing for some time, which limits how fast they can grow so in Asia, at least, barring any significant technological advances, exponential growth rates are unlikely to be seen ever again.
But what about in the UK? In advanced economies such as ours we're also used to boom - and bust. We have just had a bust, so boom is next, right? Not so this time. The rapid productivity growth of the late 1990s and early 2000s is now gone, possibly for ever.
It's true that productivity is pretty mysterious: all economists agree that it is fundamental to growth, but there is little consensus on how to make an economy more productive. Technological advances often make processes and economies more productive - see the motor car, the internet or the PC. But it's a challenge to keep getting more productive at the same rate year after year. The IMF says starkly that 'productivity growth is not expected to pick up under current policies'. If productivity does not increase, it is difficult to see how growth will increase.
In summary, the IMF report talks bleakly of a 'spent world' in which we're suffering from a 'host of pathologies'. It's a grim picture in which the 'low hanging fruit' of global growth has been plucked and innovation withers and dies. However, there is hope and I firmly believe the UK could exit the single-track road, lose the big red tractor and get back into the fast lane on the motorway. To do this we must commit ourselves to quality enterprise and financial education in schools, colleges and universities. This will nurture, develop and release the untapped potential of the 12 million or so young people that are in our education system each year. At least 50% of this population, (our future), are withering away on the academic vine, demotivated and unrecognized by the exam factory syndrome that we insist on perpetuating.
This view is backed up in a new UNESCO report on the state of global education. In it, they say that 'governments should gauge which kind of education or training - including on-the-job and apprenticeship programmes - is most effective and equitable for skill acquisition'. And I agree - with one caveat: we need to focus not only on apprenticeships, great though they are, but also invest in enterprise and financial education in both primary and secondary schools. By doing this our students will be much better equipped to make the right work and life decisions. If we do not develop their thinking and aspirations this way, coupled with meaningful career guidance, all we are offering is an 'either or' choice - further education or an apprenticeship. This is not acceptable when young people's whole futures are at stake. It is a systemic failure, leading to wasted lives and we already have 740,000 of those (16-24 youth unemployed, February 2015).
Enterprise and financial education unlocks the potential of students by improving their creativity, productivity and business acumen. It teaches them how to be productive and entrepreneurial employees, or indeed entrepreneurs themselves. There is little doubt that in the UK it can help create the jobs we so desperately need to stop the decline in living standards that comes along with low productivity growth. By harnessing this massive untapped potential in young people, our nation will have a sustainable annual output of better skilled, ambitious, motivated workers coming out of our schools, colleges and universities.
At Young Enterprise, we know that enterprise education delivers real, measurable results and we do it every year with 250,000 students. Our research shows that 42% of those young people who go through our Young Enterprise Company Programme start a business by the age of 30, compared to 26% of those who do not. Even when a young person does not start their own business, through enterprise education they gain the practical skills that employers need to expand and grow their company. Research from the FSB in 2014 shows that 50% of their 200,000 members do not believe that schools or colleges prepare young people to a sufficient standard for employers and that access to skilled staff was the third biggest barrier to growth, behind the domestic economy and consumer demand Employers no longer pay for what young people know, but what they can do with what they know.
Enterprise and financial education in schools is vital if we're to have a chance of improving our economic prospects. If implemented now, a national initiative for enterprise and financial education could help us to produce future generations of motivated, confident, work-ready young people with the skills to succeed, innovate and increase the UK's productivity. Surely this is an investment worth making.Suggest a correction