P. Rose – Education and the post-Washington consensus.

Draft

Education and the post-Washington consensus: The triumph of human capital

Pauline Rose

Pauline.rose@uea.ac.uk

School of Development Studies

University of East Anglia
Norwich NR1 2HT

Paper prepared for the conference

‘Towards a New Political Economy of Development. Globalisation and Governance’
Political Economy Research Centre, University of Sheffield, 4-6 July 2002

First draft. Please do not cite without permission.

Comments welcome

Abstract

Education is receiving ever-increasing priority in the post-Washington consensus era, which

views education as both a means to and end of development. Despite the broader objectives of
the post-Washington consensus, justification for the attention given to education continues to
be centrally focused on the notion of human capital which considers education primarily in
relation to its role in promoting economic growth. By consequence, marketisation and
privatisation of education are becoming increasingly significant. With the World Bank and
WTO joining forces to create a vision for a ‘global education industry’, emphasis is being
placed on free trade in educational goods and services. The paper examines critically the
implications of this global education agenda for developing countries.

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1. Introduction

It is widely recognised that the World Bank, along with other Washington institutions, has
dominated development practice over the past two decades. This dominance is evident both in
the intellectual role it has sought to play,1 as well as the policy prescriptions it has placed on
borrowing countries since the 1980s. World Bank operations have continuously been
influenced by economic considerations which determine the activities of a bank. Its role has,
however, evolved and expanded over time to incorporate the perception of itself as a
development agency during McNamara’s presidency in the 1970s, to being a self-styled
‘knowledge bank’ in the 1990s (Mason and Asher 1973; Stern with Ferreira 1997; World
Bank 1999a). Although the appropriateness of this expanded role has been criticised (see, for
example, Mehta 1999; Standing 2000), and tensions between its different activities as a
development agency on the one hand and a bank on the other hand are evident, it is
undeniable that the World Bank has played, and continues to play, a catalytic role in
determining and reinforcing a particular development agenda. While there are differences of
opinion of the extent to which the World Bank is a creator of ideas, its influential role in
disseminating, promoting and applying a particular dominant view of economic development
is generally acknowledged (Stern with Ferreira 1997; Waelbroeck 1998; Wade 2001,
Standing 2000; Fine et al 2001).

Dominance of the World Bank in setting the development agenda is clearly reflected in the
education sector, given the intellectual and financial role it has attained over the past two
decades (Samoff 1992; Rose 2002).2 The paper examines changing debates in World Bank
educational priorities, with emphasis on the financing of education, in the context of broader
shifts in the development agenda. These shifts are illustrated by examining the experience in
Malawi. The Malawi case is of particular interest because it was the first country in which
primary school fees were increased in the 1980s based on World Bank advice. As this paper
will show, while shifts in World Bank policies towards education are evident, one thing has
remained consistently resilient to change – an uncritical faith in the notion of human capital.

The paper begins by indicating the origins of the concept of human capital in the 1960s. It
then illustrates how human capital has risen to prominence since the 1980s in conjunction
with the Washington consensus neo-liberal agenda. It examines the implications of the
adoption of human capital for national educational policy and practice in Malawi, particularly
in relation to advocacy for user fees. This is followed by an investigation of the shift in
development agenda in the 1990s to address governance issues to facilitate implementation of
Washington consensus principles, and the implications of this for the education sector. In
particular, it explores the emphasis on the marketisation of community participation for
education. The paper then examines more recent trends towards a global education industry.
The paper concludes by considering the need for an alternative approach to human capital
theory for the analysis of education systems.

2. The human capital revolution

Initially adopted by T.W. Schultz in 1960,3 and rising to prominence with its further
development in particular by his own work and that of Gary Becker throughout the 1960s and
onwards, human capital has allowed an economic approach based on the calculation of costs
and benefits of education to predominate. According to the notion of human capital, people
acquire skills and knowledge which is perceived as a form of capital, and a substantial part of

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this acquisition is a deliberate investment (Schultz 1960; Schultz 1961). Human capital,
therefore, provided education with an explicit economic value, seeing it as an important
explanation for economic progress. Increased productivity as a result of education was
perceived to benefit individuals as well as society as a whole. In particular, Schultz (1960)
and Becker (1964) illustrated the importance of investment in human capital through the
application of rates of return showing that, taking total costs of education into account
(including earnings forgone as a result of time spent in school or college), rates of return to
education are relatively attractive, and larger than returns in physical capital. Since the 1960s,
proponents of human capital have continued to use calculations of rates of return as empirical
justification to show that education is a good investment. Thus, the rise of human capital
theory grew out of the more specific application of cost-benefit analysis to calculation of rates
of return. As such, it has nothing to do with education specifically. Exactly the same
methodology can be applied to any factor with an economic effect (Fine and Rose 2001).

From the early 1960s, simultaneous with Schultz’s discovery of human capital, the World
Bank began a cautious exploration of possibilities for involving itself in education.4 From the
outset, it was made clear that only economic factors should be taken into consideration for
Bank lending in education, despite acknowledgement of its social and cultural objectives. In
1960, the prospect of introducing lending for education projects was initially dismissed, on
the grounds that it was neither revenue-generating nor capital-intensive (Kapur et al 1997).
Schultz’s work, however, allowed this view to be refuted, as education could now be seen as
an investment. However, the human capital revolution initially had little impact on the World
Bank. World Bank staff were still reluctant to get involved in education, on the basis of the
World Bank’s perceived comparative advantage in other areas, the ‘inherent subjectivities of a
soft sector,’ and the potential for political issues (Kapur et al 1997: 168-9).

Gradual acceptance that certain types of education were productive resulted in approval of
investment in vocational and technical training at higher and secondary levels. This was based
on needs identified by manpower gaps revealed by other Bank projects in the country. An
initial antipathy towards support for primary education was apparent, based on the ‘bizarre
rationale’ that it would make unlimited demands as far as finance was concerned, and self-
provision should be relied upon because of the high demand for it (Jones 1992: 99). It was
only by the 1970s, with the expansion of the Bank’s identity as a development agency and
adoption of the basic needs approach under McNamara’s presidency, that education began to
be taken more seriously, with a shift in emphasis to primary education. Proponents of the
basic needs approach were, however, expected to justify their proposals in terms of cost and
economic return and to show that economic growth would not be impaired (Kapur et al 1997).

The increasing emphasis on education over the 1970s is evident by changing priorities in
World Bank lending. There was a notable expansion and diversification of lending for
education during the early 1970s. Commitments for education increased from an average of
$154 million between the years 1963-69 to $528 million per annum on average during the
period 1970-74, and continued to increase during the latter half of the 1970s (Table 1).5
Furthermore, greater priority to primary education was also apparent, with its allocation
increasing from four percent of education lending in the 1960s to almost one-quarter by the
late 1970s.

Table 1: Trends in World Bank lending to education (US$ million, average per year)

1963-69 1970-74 1975-79 1980-84 1985-89 1990-94 1995-99

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 P. Rose – Education and the post-Washington consensus. Draft

Total education 154 528 794 977 1091 2024 1878

(constant $)
Education as % total 3.0 5.1 4.4 4.5 4.5 8.2 7.6
lending
% of education lending 4.2 10.6 23.6 22.9 26.3 36.1 37.8
to pre-primary and
primary

Source: Mundy 2001: Table 1

3.1 Washington consensus and education: The rise of human capital

The term ‘Washington consensus’ was coined by Williamson (1990) to define the set of
policy instruments associated with World Bank structural adjustment programmes and IMF
stabilisation programmes in the early 1980s, the main objective of which was to stabilise
economies in severe disequilibrium and promote economic growth. These policy instruments
were advocated as a reaction against interventionist policies which were perceived to be the
cause of the economic crisis that many countries were facing. The policy instruments of the
Washington consensus were embodied in the conditionalities of stabilisation and structural
adjustment programmes imposed on countries accepting IMF and World Bank loans during
the 1980s. Market oriented principles and policies of neo-liberal economists were influential
in informing these programmes. 6

Williamson summarises the economic policies ‘that Washington urges on the rest of the
world’ as ‘prudent macroeconomic policies, outward orientation, and free-market capitalism’
(Williamson 1990: 20). The list of policy instruments includes ten elements of reform: fiscal
discipline, public expenditure priorities towards education and health (particularly primary),
tax reform to broaden the tax base and cut marginal tax rates, market-determined interest
rates, unified and competitive exchange rates, trade liberalisation, encouragement of foreign
direct investment, promotion of privatisation, deregulation, and securing of property rights.
Broadly, the Washington consensus believes that markets would work best if left to
themselves as they will allocate resources more efficiently than alternative mechanisms, and
polices aimed at privatisation and trade liberalisation are advocated. In the view of the
Washington consensus, the state is seen to reflect inappropriate economic interests, such as
rent-seeking, whereas the market is unaffected by such influences. Thus, the aim is to rely on
market forces and reduce state intervention and expenditure to a minimum (Fine 2001a; Fine
2001b).

Human capital took two decades to achieve prominence within the World Bank, finally
coming into its own from the early 1980s. The appointment of George Psacharopoulos to
head the Education Department’s Research Unit established in 1981 was instrumental in this
significant shift. Emphasis on the analysis of rates of return to education became increasingly
evident within the Bank, supported in particular by Psacharopoulos’s numerous surveys and
summaries of studies (1973; 1981; 1985; 1994). Investment in primary education was
promoted on the basis that estimates of rates of return to education were highest, and the
difference between social and private returns greatest, at that level, and particularly of girls.
Rates of return to investment in education were also estimated to be above the 10 per cent
yard-stick used as the opportunity cost of capital in developing countries (Psacharopoulos and
Woodhall 1985). As Jones (1992) suggests, Psacharopoulos brought to the Bank the type of
educational research that was organisationally necessary for research to have an influence
over the character and quality of lending in education.

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It is not coincidental that the ascendancy of human capital in conjunction with the application
of rates of return corresponded with the advent of the Washington consensus. Human capital
provided the opportunity for the neo-liberal agenda to be applied to education, allowing the
World Bank to continue its involvement, and even increase its influence, in the education
sector despite austerity packages adopted as part of structural adjustment programmes.
Although basic education and health were seen as areas for public expenditure priority even
during the Washington consensus era, in practice this conflicted with the principle of reducing
overall government expenditure. This meant that, in reality, education expenditure often
suffered, even though governments often made considerable efforts to protect the education
budget where possible (Stewart 1994; Woodhall 1994).

Productivity benefits associated with human capital permitted an expansion of World Bank
loans to education. World Bank lending to education increased dramatically, doubling
between the early 1980s and early 1990s (Table 1). Furthermore, World Bank lending played
an even greater role internationally, increasing from 16 percent to 30 percent of the amount
spent on education by bilateral agencies (which remained relatively unchanged) over the
period (Mundy 1998; World Bank 1999b) – indicative of the increasing financial dominance
of the World Bank in education internationally. The share of primary education remained
relatively stable over the 1980s at around one-quarter of total education lending, despite
proclamations of a focus on this level during the period (Table 1).

At the same time as the rise of human capital allowed the World Bank to justify its own
involvement in education, it also provided a rationale for the World Bank to reassess the
relative role of states and markets in education. World Bank-supported research put forward
efficiency and equity arguments to justify setting a price for consumers (see, for example,
Thobani 1984; Mingat and Tan 1986; Jimenez 1986; Jimenez 1987; Psacharopoulos, Tan and
Jimenez 1986). Thus, while the payment of fees for the use of education services was not
new, market principles were formally adopted in the 1980s to justify cost-recovery in public
education. A total retreat of the state was, however, never supported in education given the
acceptance of externalities, such as education’s benefits to society through improved health,
reduced fertility etc., imperfections in capital and labour markets, and inadequate information
about anticipated future benefits.

As Fine and Rose (2001) argue, however, acknowledgement of externalities and market
imperfections undermine the operation of the model in the first place. The appropriateness of
allowing the market to set the price for education, even once externalities and market
imperfections are accounted for, is further weakened once the validity of conditions
underpinning the application of the model are questioned, as the experience of Malawi
illustrates (see below). In particular, in order to justify the charging of fees, excess and
inelastic demand is required. Based on these conditions, it is proposed that unmet demand can
be met by expanding the coverage of education through the receipt of fees, and that the fall in
demand will be less than proportionate than the increase in price. Alternatively, additional
resources will be used to improve the quality of education. It is also argued that equity would
not be adversely affected, as the extended coverage would benefit those in more remote areas
of a country where coverage and quality of education are anticipated to be most constrained.

3.2 Washington consensus and education in Malawi

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Similar to many other African countries, the Malawian economy was in crisis in the late
1970s, resulting in its adoption of a structural adjustment programme in 1981. Conditions
were set according to Washington consensus principles, emphasising liberalisation in
smallholder agriculture in particular (see Harrigan 2001 and Gulhati 1989 for a description of
the programmes). Inadequate human capital was identified as one of the factors contributing
to the economic crisis at the end of the 1970s (Gulhati 1989). As a result, although the main
focus during the 1980s was on economic reforms, the education sector also received attention.
In principle, public expenditure on education was prioritised. However, in practice, recurrent
expenditure on education was a small proportion of total government recurrent expenditure
over the decade falling from around 14 percent in the mid 1970s to below nine percent in the
mid 1980s (Table 2).

Table 2: Malawian government expenditure on education, 1973/74-1997 (Kwacha, 1995

prices)

Total Primary
recurrent education expenditure Enrolment Recurrent expenditure Unit costs
as % total government
1973/74 16.2 481,461 140,503,467 292
1975/76 14.2 576,377 137,764,538 239
1980/81 11.4 754,590 154,874,450 205
1985/86 8.8 890,523 184,149,524 207
1990/91 11.6 1,267,009 233,341,409 184
1995/96 28.3 2,887,107 562,925,757 195
1997 21.9 2,905,950 556,049,062 191

Source: Author’s calculations from Ministry of Education Education Statistics, various years; and Malawi
Government Approved and Revised Estimates of Expenditure on Recurrent Account, various years. GDP
deflator (IMF 1999).

Despite the intended prioritisation of recurrent expenditure to primary education in the

structural adjustment programme, expenditure only increased at around the same rate as
enrolment. As a result, by the beginning of the 1990s, expenditure per primary pupil was
lower than at the beginning of the previous decade, and was substantially lower compared
with the early 1970s. During this period, public recurrent expenditure at the primary level was
almost exclusively allocated to teacher costs. The pupil/teacher ratio remained high,
fluctuating between 65:1 and 70:1 over the decade. Furthermore, despite nominal increases in
teachers’ salaries, these failed to keep pace with inflation resulting in their decline by one-
third in real terms over the decade. As a result, teachers’ salaries were just half of their real
value in the early 1970s (Malawi Government Approved and Revised Estimates on Recurrent
Account, various years).

Although it is often the case that development expenditure in social sectors was adversely
affected in countries undertaking structural adjustment programmes because this could be
most easily cut (Stewart 1994; Woodhall 1994), this was not apparent in Malawi in the 1980s
due to high levels of World Bank lending to the sector. Mainly as a result of the increase in
IDA funds, expenditure on the development programme increased at six percent per annum,
resulting in a doubling of expenditure over the decade (Rose 2002). The local contribution
remained at around 15-20 percent of the development programme (based on conditions set for
counterpart funds) and, therefore, also doubled in real terms. However, only one percent of
the government’s development programme was allocated to the primary level at the end of the

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decade, with primary school construction relying on self-help. Thus, the proposed
prioritisation of primary schooling by the World Bank and government in the 1980s was not
evident in their development funding commitments.

Given falling public expenditure per primary pupil, alternative sources of resources needed to
be identified in order to fulfil the objective of priortising primary schooling. According to
World Bank research, Malawi fulfilled the conditions the conditions of having excess and
inelastic demand, including at the primary level (Thobani 1984; Mingat and Tan 1986).
Thobani proposed that evidence of overcrowded classrooms (an average of 66 students
compared with the government’s target of 50) was an indication of excess demand for
education. Moreover, he noted that the enrolment rate was highest in the Northern Region,
which was perceived to be the poorest region, compared with the Southern and Central
Regions. He, therefore, suggested that, where children were not enrolled, this was not due to
inability to pay, but rather to insufficient school places in the South and Centre, which was
further evidence of excess demand.

Thobani also hypothesised that opportunity cost of time spent in school of the child in richer
households would be higher as the child could usefully be employed on the family farm so
their expected return to education would be likely to be lower than for a poorer person. The
proposed that an increase in primary school fees would discourage those whose opportunity
cost of time is high the most and, since they would not necessarily be the poorest, an increase
in fees would not be inequitable. It is notable that no attempt was made to estimate
opportunity costs in order to support the hypothesis. However, more recent estimates support
Klees’s (1984) view that it is far more likely that it is the poor who drop out or do not attend
school because of their higher opportunity costs. Furthermore, when unpaid household work
is included, opportunity costs of time spent in school are substantially higher for girls than
boys (Rose 2002). However, despite subsequent interest in promoting girls’ education due to
perceived social benefits, the implications for gender equity of a fee increase were not
considered by the World Bank economists in the 1980s.

Thobani (1984: 417) proposed that higher fees would improve internal efficiency of the
system in Malawi. In particular, he noted the high dropout in the first two years due to low
quality by which time children would not have achieved basic literacy and ‘their time could
probably have been better spent elsewhere.’ Thus, although he recognised that the higher fees
might discourage some from entering school, he considered that dropout amongst those who
do enter should fall as they expect higher returns from the improved quality. Thobani’s
analysis acknowledged that enrolment would decline, indicating that he was not concerned
with the need to increase enrolment in a country where half of primary school-aged children
were not in school.

Proposals for increasing primary school fees in Malawi was not based on an appropriate
analysis of the political, economic, and social conditions of the country. For example,
educational development was strongly influenced by missionary involvement in the North
(McCracken 1977). By contrast, expansion in the Southern and Central Regions was slower
partly due to deep-rooted cultural practices (Kadzamira and Chibwana 2000). Furthermore,
given that fees were increased at the same time as households were suffering from economic
crisis, excess and inelastic demand was not evident, as claimed.

As a result of the inadequate analysis primary school fees were increased based on World
Bank advice and education was adversely affected.7 In the two years following the increase in

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 P. Rose – Education and the post-Washington consensus. Draft

fees (1982-1984), enrolment fell by two per cent per annum. The initial decline in primary
enrolment affected standard 1 the most, where enrolment almost halved over a period of two
years (Figure 1). As a result, the primary gross enrolment ratio declined from 70 percent to 63
percent. Furthermore, enrolment declined in the regions where enrolment was already lowest
(Southern and Central Regions) suggesting that excess and inelastic demand was not evident
in these regions, as predicted, while it continued to rise in the North. Although enrolment
subsequently increased, so that by the end of the 1980s the gross enrolment ratio reached 84
percent, the government’s goal of universal primary education was not attained. Furthermore,
by the early 1990s, girls from poorest households were least likely to be in school, suggesting
that the payment of fees had not resulted in an equitable outcome (Table 3).

Figure 1: Primary enrolment in Malawi, 1971/72-1997

3500000

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enrolment

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standard 1 total

Table 3: Primary gross and net enrolment rates by income quintiles and gender

GER NER
1990/91 1997 1990/91 1997
Boys Girls Boys Girls Boys Girls Boys Girls
I – Poorest 65 51 115 106 34 31 70 72
II 83 69 125 111 50 45 75 75
III 88 83 124 116 52 57 76 78
IV 104 89 127 117 66 61 78 79
V – Richest 113 106 124 115 76 75 81 79
All 86 75 123 112 52 50 76 76

Source: Castro-Leal 1996; Al-Samarrai and Zaman 2000

Since publicly financed expenditure per pupil was declining, fee income was used to replace
public expenditure rather than supplement it. Thus, it was not used to create additional school
places or increase quality which was required for the intended efficiency and equity
outcomes. Contrary to Thobani’s expecatations, the proportion of children dropping out of

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school increased following the fee increase, indicating a deterioration in internal efficiency in
the system. Survival rates8 which were already low, worsened after the fee increase in 1982.
As a result, fewer children could be expected to complete the primary cycle (Table 4). By the
mid-1980s, only 13 percent of girls and 23 percent of boys enrolling in standard 1 could
expect to complete the primary cycle. The fall in demand for primary schooling and increase
in dropout was attributed to the combined effect of the fee increase together with the decline
real incomes of the poorest households due to drought, falling agricultural output and an
increase in price of maize as a result of the structural adjustment programme (Fuller 1989;
Moyo 1992).

Table 4: Survival rates by standard, before and after fee increase

Survival rates by Standard

1 2 3 4 5 6 7 8 Graduate Actual Implied %
Standard 1 number of repeaters
enrolment graduates
(a) (b) (a/1000 x b)
1981/82
(pre-fee increase)
Girls 1000 664 562 447 379 343 261 231 187 108,689 20,325 14.5
Boys 1000 716 615 511 457 434 369 440 365 126,125 46,036 14.9
1987/88
(post-fee increase)
Girls 1000 730 595 456 373 309 226 182 131 126,622 16,587 20.8
Boys 1000 780 630 491 420 359 287 312 229 139,368 31,915 21.4

Note: ‘Implied number of graduates’ is calculated as the survival rate of graduates (based on prevailing
repetition and drop-out rates in the base year) multiplied by the number of pupils enrolling in standard 1 in the
base year

Source: Author’s calculations from Ministry of Education Education Statistics, various years

4. Post-Washington consensus and education: Plus ça change?

By the end of the 1980s, policy instruments of structural adjustment programmes associated
with the Washington consensus were being severely criticised due to their observed negative
social impact (see, for example, Cornia, Jolly and Stewart 1987). In addition, there was
growing recognition by a range of writers that the success of East Asian Newly Industrialised
Countries (NICs) was due to an active role of the state including in relation to regulation of
trade and domestic markets and public ownership, as well as high levels of investment in
education. While NICs did participate in the world market, they did so on terms that they
manipulated in their favour (Fine et al 2001).

These factors contributed to the shift in the 1990s to what Stiglitz (1998), former Chief
Economist at the World Bank, has termed the ‘post-Washington consensus’. Rhetorically at
least, the post-Washington consensus proposes an extended focus from economic growth to
more instruments and broader objectives with a transition from a states versus markets
approach to a complementary relationship between states and markets. The transition to the
post-Washington consensus in the 1990s occurred due in part to an awareness of the need to
address the political realities of borrowing countries. However, the basic policy instruments
continue to be based on neo-liberal principles of free trade and privatisation, with the only
change being a reassessment of a role for the state to ensure that they can be implemented
effectively and humanely (Hildyard 1997; Gore 2000). While acknowledgement of market

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imperfections indicates an incorporation from development economics that preceded the

Washington consensus, the post-Washington consensus differs from this by reducing
everything to market and non-market imperfections, rather than looking at broad structures of
the economy and broad processes of development, and how these interact with each other
(Fine 2001b).

The notion of human capital continues to be the motivation for investing in education with, if
anything, the role of rates of return analysis in shaping World Bank educational priorities
increasing over time.9 Despite criticisms of the approach (see, for example, Bennell 1996), the
most recent World Bank (1999b) Education Sector Strategy continues to rely on evidence on
rates of return to justify investment in education, albeit with reference to popular issues such
as globalisation, democratisation and community participation. The Strategy paper indicates a
continued uncritical adherence to the importance of the notion of human capital and the
application of rates of return analysis in the post-Washington consensus era:
‘The rise of human capital theory since the 1960s, and its widespread acceptance now
after thorough debate, has provided conceptual underpinnings and statistical evidence.
Estimates by Nobel-laureate economists have shown that education is one of the best
investments, outstripping the returns from many investments in physical capital’
(World Bank 1999b: 6).

Despite the continued adherence to human capital, emphasis of the post-Washington

consensus on more instruments and broader objectives provides an even greater opportunity
for the prioritisation of education, seeing it as both a means to, and end of, development.
Stiglitz (1997: 22) proposes, for example, that promoting human capital can advance
economic development, equality, participation, and democracy and, as such, sees education as
‘the core of development’. Primary education has continued as a central priority for the World
Bank, with even greater emphasis given the focus on poverty reduction in the 1990s.10 This
focus supports the more general acceptance of the importance of primary education by
international agencies and national governments, as articulated at the 1990 World Conference
on Education for All in Jomtien, with both rights-based as well as economic-based arguments
used in its favour. For the World Bank, the latter continue to predominate. As a result, a
global consensus in education is evident, as articulated by the Millennium Development
Target of achieving universal primary education by 2015.

The priority towards primary education is evident in changing lending priorities of the World
Bank. Together with a doubling of total education lending between the 1980s and 1990s, the
proportion allocated to primary education has also increased from one-quarter to one-third
(see Table 1). However, a small number of countries (17) account for three-quarters of the
World Bank's education lending in the late 1990s (World Bank 1999b). Furthermore,
according to Colclough et al (forthcoming) total World Bank lending for education has fallen
dramatically over the 1990s (falling by 15.5 percent), with lending to sub-Saharan Africa
being the most seriously affected (declining by 44 percent), suggesting that it has not been
possible to sustain the growth in lending despite the fact that the goal of achieving universal
primary education is most elusive in this region.11 Furthermore, despite the increasing
importance of World Bank resources to education internationally, the 1995 World Bank
Review notes that World Bank spending is small compared with spending on education by
developing countries themselves, accounting for only 0.6 percent of the total. Thus, it
suggests without apparent irony:

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‘This low share of total spending means that the Bank should concentrate on providing
advice designed to help governments develop education policies suitable for the
circumstances of their own countries’ (World Bank 1995: 153).

The increased prioritisation of primary education, in principle at least, has allowed an image
to be presented of the World Bank being more attuned to welfare, poverty alleviation, gender
issues, and popular and community participation (see, for example, Ilon 1996; Puiggros
1997). In the post-Washington consensus era, participation is seen as a means of improving
educational outcomes, and education is perceived to improve participation (Stiglitz 1997).
The new focus is, however, integrated into the more traditional human capital dialogues, as
evident in recent Bank literature:
‘Since we accept human capital theory and the outcomes approach, then our focus
naturally becomes poverty reduction...Or in other words, empowering the poor by
improving their productivity … is the World Bank’s goal in education’ (Burnett and
Patrinos 1996, p. 276).

Although the World Bank and other international agencies no longer directly support payment
of fees, the reality for many poor countries is that the state faces problems in financing
education. This is particularly true in countries such as Malawi where, as a result of the
Education for All agenda, education systems have expanded rapidly in the 1990s, raising
challenges for the quality of primary schooling. Thus, the problems of pricing of educational
services have remained at the core of the World Bank’s research on education (Mundy 2001).
On the one hand, the view persists that household contributions to schooling are restricted by
the existing financing arrangements, resulting in under-investments in education and ‘an
untapped willingness of households to pay for education’ (Patrinos 1999: 6). On the other
hand, free public primary schooling is advocated, with demand-side financing mechanisms
(such as vouchers, matching grant schemes etc.) proposed to encourage contributions from
users of the service. The need to cushion those on low incomes is increasingly recognised.
Targeted stipends are advocated, paid directly to households that cannot afford to enrol their
children (Patrinos and Ariasingam 1997; World Bank 1995). Furthermore, for the World
Bank (2001b), financial incentives that make it affordable for children to attend school are
considered the most effective strategy for overcoming exploitative forms of child labour.

Thus, by the early 1990s, charging user fees at the primary level was considered
undesirable.12 This U-turn does not appear to be based on an acknowledgement of the
problems associated with the theoretical basis of the 1980s neo-liberal model or its
application. While the model is no longer explicitly referred to in World Bank documents, the
assumptions and concepts on which it is based are implicit in the more recent forms of cost-
sharing that are advocated. Investment in human capital continues to be the driving
motivation for the pricing policy. The role of the state, in this context, is unresolved and
uncertain. While increasing attention is placed on the role of the private sector in education in
the post-Washington consensus, a role for the state continues to be envisaged in the setting of
national objectives and maintaining educational standards (World Bank 1999b). Governments
are still expected to play a part in the financing of education, particularly at the primary level.
However, recognition that governments face financial pressures prevails:
‘Fiscal considerations, including competing claims on the public purse, make it
difficult for most governments – even those whose philosophies might push them in
this direction – to be the sole provider of ‘free’ education to all who seek it at every
level’ (World Bank 1999b: 18).

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 P. Rose – Education and the post-Washington consensus. Draft

In this context, a change in cost-sharing approaches has occurred from a narrow focus on
sharing of costs between the government and households in the 1980s, to more diverse and
indirect cost-sharing mechanisms in the 1990s. In particular, a shift in focus from the
individual/household to the community as the unit of analysis is evident. For the World Bank
(1995: 105, emphasis added):
‘Public schools should not, of course, be prohibited from mobilizing resources, in cash
or in kind, from local communities when public financing is inadequate and such
resources constitute the only means to achieving quality…Cost-sharing with
communities is normally the only exception to free basic education. Even poor
communities are often willing to contribute toward the cost of education, especially at
the primary level…Matching grant schemes may increase local involvement in
schools, create a sense of ownership, and encourage greater private contributions to
education.’

As Dale (1997: 275) points out, a role for communities in school governance and financing
has always been evident, with the state never solely responsible for funding, regulation and
provision/delivery of education. However, as he suggests, the respective roles for states and
communities is changing, with the role of communities becoming formalised and more
responsibility being passed to communities. Although the rationale for community
participation is couched in terms of ownership and accountability, the main objective is to
mobilise, and make more efficient use of, resources. It is proposed that schools which are
more accountable to the community they serve would need to provide the type and quality of
schooling that the community desires. In addition, it is argued that schools would have a
greater incentive to be cost-effective as they need to consider the effect of their behaviour on
the financial contributions of those living in the vicinity of the school (Jimenez and Paqueo,
1996). It is, therefore, suggested that schools could make better use of external and local
resources, including materials and labour, facilitated by the use of local knowledge and skills
in improving project design and implementation (Wolf et al, 1997). There could also be
incentives for the community itself to use resources efficiently, where they are providing a
substantial share of the costs. It is also argued that external efficiency could be enhanced as a
result of community support as additional resources would be raised for education, assuming
a fixed budget constraint for the government (Jimenez and Paqueo, 1996).

It is not coincidental that a more explicit emphasis on community participation has

corresponded with economic crises which adversely affected education systems in SSA
countries since the 1980s together with rapid expansion of school systems in the context of
the drive for achieving universal primary education and advocacy for the abolition of fees,
necessitating the search for alternative sources of resources (Bray with Lillis 1988).
Community participation is likely to be most strongly advocated where the demand for
schooling is high, but government inputs are inadequate, a situation which is evident in many
parts of Africa (Bray 1996). The post-Washington consensus era has adopted a particular
interpretation of community participation, formalising it through its inclusion in international
agreements and promoting it in national policy. Recent international agency interest has
changed the nature of community participation by integrating it into the market system as a
result of valuing contributions previously made by communities voluntarily. Such
marketisation is likely to affect the dynamics within a community which could result in
further fragmentation, as members compete for resources available, rather than encouraging
co-operation (Sayed 1999). As a result, a shift in the perception of community participation as
collective action to individual responsibility is promoted, contradicting the goals of
accountability, ownership and empowerment. This implies that the focus on education in the

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 P. Rose – Education and the post-Washington consensus. Draft

post-Washington consensus era continues to support neo-liberal principles of individual

responsibility for meeting social needs, as previously evident in the support for user fees in
the 1980s.

4.2 Post-Washington consensus and education in Malawi

While the World Bank played less of a direct role in Malawian educational policy in the
1990s compared with previously (partly because of an increase in involvement of other
international agencies), the shifts evident in the dominant international agenda continue to be
reflected in changes that have occurred in Malawi since the 1990s. There is general
acceptance, including by the World Bank and IMF, that reforms undertaken in the 1980s did
not have a positive impact on the Malawian economy. By the end of the 1980s, real GDP
growth was below the rate of population growth and, in some years, was negative. The lack of
success in implementing proposed reforms during the 1980s was attributed by the World
Bank to failure by the government to comply with the programme. Therefore, political reform
was considered necessary. Democratic elections were held in 1994, following pressure from
international agencies, including the World Bank, who were threatening to withdraw non-
humanitarian aid.

With the election of a new government, a World Bank-supported poverty alleviation

programme was established in 1994. The poverty alleviation programme placed attention on
the importance of education in reducing poverty. However, neo-liberal principles continue to
predominate. Despite the government’s hostility to the programmes, the country had little
choice but to continue with liberalisation and privatisation reforms supported by the IMF and
World Bank into the 1990s, given its dependence on balance of payments support (Harrigan
2001). An important aspect of the election promise was the abolition of primary school fees.
Following their election, the new government fulfilled this promise, implementing a
programme of fee primary education. Given that this corresponded with the international
agenda, support from donors was forthcoming. Following the abolition of fees, enrolment
increased by 50 percent (Figure 1), with a similar proportionate increase in the number of
teachers – the majority of whom were now untrained.

With the total abolition of fees in 1994, government resources faced the dual challenge of
needing to provide additional resources for the massive increase in enrolment, as well as to
compensate for the loss in fee income. The government met this challenge by increasing
resources available to education, particularly at the primary level. Total government recurrent
expenditure to education increasing from less than 10 percent in the late 1980s to 21 percent
by 1994, over 60 percent of which was allocated to primary schooling (Table 2). This was
largely achieved as a result of the support of international agencies, who were providing up to
40 percent of the resources for education. The increase in expenditure at the primary level was
not, however, initially sufficient to compensate for the increase in enrolment. This resulted in
a decline in expenditure per pupil by one-quarter, although it subsequently increased to a
similar level to the early 1990s (Table 2).

Although children are entering school in vast numbers, and almost all children now spend
some time in school, many leave before they are likely to have obtained basic literacy and
numeracy skills. Given existing dropout and repetition rates through the primary cycle, only
half of all children who start school reach standard 3, and less than one-fifth are expect to
complete the primary cycle. Fewer girls than boys are completing. As mentioned, low
retention rates were, however, evident even before the introduction of FPE, and worsened

13
 P. Rose – Education and the post-Washington consensus. Draft

after the fee increase in 1982. Therefore, despite these low survival rates, the absolute number
of children completing the primary cycle has increased dramatically (Table 5). Although
coverage improved, quality, which was already low, deteriorated even further. In addition, the
emphasis on primary schooling has implications for other levels of education where resources
have become even more constrained. Private schooling has grown at the primary level, mainly
because of low quality of government schools. However, the extent of growth is unknown
because many of these schools are unregistered and, therefore, unregulated by the
government.

Table 5: Survival rates by standard, before and after fee abolition

Survival rates by Standard

1 2 3 4 5 6 7 8 Graduate Actual Implied %
Standard 1 number of repeaters
enrolment graduates
(a) (b) (a/1000 x b)
1993/94
(pre-fee abolition)
Girls 1000 686 543 418 332 250 189 135 130 284,960 37,045 16.3
Boys 1000 708 559 437 358 285 237 192 182 273,287 49,738 16.8
1997
(post-fee abolition)
Girls 1000 651 527 405 332 264 213 188 175 433,710 75,899 15.1
Boys 1000 656 521 401 325 266 223 212 199 447,715 89,095 15.1

Source: Author’s calculations from Ministry of Education Education Statistics, various years

Community participation in education has been receiving increased attention in Malawi

through various routes, including the World Bank-supported cross-sectoral Malawi Social
Action Fund, the Poverty Reduction Strategy Paper (PRSP), DFID and USAID-supported
community school programmes, and the Education Policy Investment Framework. Concerns
about financial pressures following the abolition of fees have resulted in the national
education policy giving explicit attention to the role that communities can and should play in
delivering education. Paradoxically, the continued and intensified focus on community
participation in policy has occurred without the involvement of different stakeholders,
including teachers, parents, communities, local leaders and NGOs involved in education, in
policy formulation, with the Ministry of Education and international agencies continuing to
dominate decision-making and planning (Kadzamira and Rose, 2001). Thus, decisions about
the forms of participation are being made in a top-down fashion. As recent evidence shows,
rather than resulting in increased ownership and accountability as intended, community
participation in Malawi has continued to be a way to extract resources in the 1990s (Rose
forthcoming).

5. Post-post Washington consensus?: Global education industry

Education is increasingly seen as big business in the context of a global economy in the 21st
century. Presentations by World Bank staff, for example, point out that the global education
market place is equal to $2 trillion, with 15 percent of the global education market in
developing countries (Patrinos 2000). Most of the trade in education services has been in
foreign students attending higher education and training institutions in other countries and,
more recently, enrolled in distance education programmes at universities in other countries.
Despite the apparent prioritisation of primary education since the 1990s, the global education

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 P. Rose – Education and the post-Washington consensus. Draft

industry has placed a renewed emphasis by the World Bank on technical and higher
education. This is evident, for example, in the 1998/99 World Development Report on
Knowledge for Development which proposes that basic education ‘should not monopolize a
nation's attention as it becomes a player in global markets’ (World Bank 1999a: 42). Rather, it
is proposed that higher levels of education deserve increased attention because of the need to
adapt to and apply new information-based technologies.13

As a result of the focus on a global education industry, even greater emphasis has been placed
on privatisation of education in the international arena in recent years. This has occurred with
respect to the promotion of free trade in goods and services (WTO 1998; Patrinos 1999). The
World Bank (2000), for example, calls for a ‘lighter touch’ in regulating higher education
suggesting that countries remove restrictions of private provision of education services. The
World Trade Organisation’s (WTO) General Agreement on Trade in Services (GATS) is
influential in promoting the market in education. Its memo on Education Services (1998)
indicates the intention to create the conditions for greater liberalisation of the trade in
education and to create a market system of educational provision, particularly in higher
education. The WTO and World Bank consider that it is important for countries to remove
barriers to trade in education in order to promote competition (see, for example, Patrinos
1999). The WTO is defensive about its intentions in the education sector (WTO 2001). As it
points out, fewer than 50 of WTO members have made commitments to education which it
suggests, reflecting the fact that education is regarded as essentially a function of the state in
many countries. While little is known of the implications of the WTO’s role in the education
sector in practice, it is evident that it is reinforcing a discourse of a market for education
goods and services.

In Malawi, where there are only 4 telephone lines per 1000 people, a nine year waiting list for
a telephone, 1.2 personal computers per 1000 people (compared with an average of 9.2 in
SSA) and 15,000 of the population of 10,000,000 have ISP registered addresses (World Bank
2002), it is questionable whether ICTs will play a major role for the majority of the
population in the foreseeable future. This suggests that the international emphasis on the role
of ICTs in education could widen local and global inequality, an issue which warrants urgent
investigation.

6. Opening the ‘black box’ of educational provision

‘The flame of human capital theory has been kept alight in the corridors of the
Bank partially through the devotion of those analysts committed to manifesting
its pertinence through cost-benefit analyses of educational
expenditures…human capital theory has served a useful institutional purpose,
irrespective of its dated and limited theoretical character’ (Jones 1992: 234).

The notion of human capital through the application of rates of return analysis has permitted
the Bank to justify its role in education since the 1980s. This emphasis is not surprising given
that the Bank is regulated by the rules of a bank which means it has to find economic
justification for its loans. However, the narrow focus on economic aspects risks neglecting
important features of education. The processes of teaching and learning, which transform
inputs into outputs, remain outside the scope of the Bank's approach to education, leaving the
black box of educational provision firmly shut. For countries such as Malawi expansion the
emphasis on human capital and prioritisation of primary schooling has resulted in a
significant expansion of education systems. However, this has been at the expense of quality

15
 P. Rose – Education and the post-Washington consensus. Draft

which has not been adequately addressed. Furthermore, a focus on human capital has shifted
from a traditional view of education as cultivating social integration and cohesion, and
forging new notions of national citizenship and identity, to a means of individual and
collective economic advancement (Green 1997).

Although human capital theory has not been as uncontroversial as World Bank documents
imply (see, for example, Bowles and Gintis 1976; Blaug 1987), criticism has been less
forthcoming than might be anticipated. By treating educational provision as a stream of costs
and benefits, both to individuals and society as a whole, which ignores the social relations
within and around education, neo-liberal economists show no understanding of the
educational process. The black box of how education is provided remains firmly shut other
than in the labelling of financial costs and benefits.14 However, as noted, social factors have
been increasingly recognised in relation to education since the 1990s. However, the more this
occurs, the more human capital theory undermines its own analytical starting point in terms of
understanding education in terms of costs and benefits. However, rather than taking up an
alternative, human capital exponents have attempted to bring social factors back in, rather
than questioning the broader socio-economic determinants and the role of education itself.

This critique implies the need to open up the black box of educational provision. As described
in Fine and Rose (2001), education, as well as training and skills, is understood to be attached
to a ‘system of provision’15 with the following elements. First, education is, indeed, provided
through a series of economic and other activities from the building of schools, to the setting of
curricula, and the functioning of labour markets for teachers. Second, educational provision is
potentially interactive with the full panoply of economic, social, political and cultural
relations. Third, the educational process is heavily embroiled in social structures, relations
and processes and their associated conflicts which are themselves attached to underlying
economic and political interests. Finally, as a result, the formation and evolution of education
systems is historically contingent. In other words, as the example of Malawi illustrates,
national educational systems need to be allowed to define themselves and be understood in
the light of underlying economic and political interests. Interestingly, the post-Washington
consensus is, in principle, capable of accepting and analysing the presence of socio-economic
systems. Analytically, however, this depends upon reducing such systems to market and
informational imperfections. The reductionism attached to such principles continues to be
incapable of doing justice to the rich complexity of educational systems.

7. Conclusion

In summary, the dominant position adopted by the World Bank in international educational
policy-making, already evident in the 1980s as a result of the ascent of neo-liberalism and
associated demise of the role of UN organisations, has been reinforced in the 1990s, with the
World Bank’s influence broadening over time ‘from a role as the largest single financier of
international educational development to being its most powerful ideologue and regulator’
(Mundy 1998: 475). Just as the post-Washington consensus has permitted a populist notion of
neoliberalism more generally, within education, the terms ‘participation’ and ‘empowerment’
are touted to provide a human face to World Bank operations in education. However, the
notion of human capital has continued to permit an economic rationale for the World Bank’s
involvement in education based on cost-benefit analysis. The paper has argued that this
approach neglects the broader historical, political, economic and social environment in which
education operates, leaving the black box of educational provision shut.

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 P. Rose – Education and the post-Washington consensus. Draft

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 P. Rose – Education and the post-Washington consensus. Draft

1
The World Bank’s intellectual role has evolved and grown over time. According to Mason and Asher (1973)
until the mid-1960s, the economics department was small and had little influence on operations. By contrast,
Lancaster (1997) reports that the World Bank claimed to be involved in 90 percent of the analytical research on
Africa by the 1990s. Although this unsupported figure is probably an exaggeration as it ignores a wealth of
research taking place in a number of institutions within Africa and elsewhere, it signifies the role that the World
Bank perceives itself to play in research. Furthermore, before joining the World Bank as Chief Economist,
Nicolas Stern pointed out that the resources of the World Bank dwarf those of any university department or
research institution working on development economics (Stern with Ferreira 1997).
2
A focus on the World Bank in this paper does not intend to underplay the role played by other international
agencies, but rather to highlight the central role played by a key actor in the global development process. See, for
example, Mundy (1998) and Jones (1988) for UNESCO’s influence in international educational priorities.
However, by the 1980s, the World Bank had taken the lead both in terms of its own research and superior access
to other information and other research, as well as in relation to the volume of loans which had grown
substantially over this period. It is also recognised that the World Bank is not a monolithic organisation.
However, as Samoff (1992) points out, although there may be internal disagreements about approaches within
the World Bank, the general orientation and consequences of World Bank-supported research and funding have
important implications for developing countries.
3
Schultz (1961) acknowledged that Adam Smith had previously recognised acquired and useful abilities to be a
form of capital.
4
Jones (1992) suggests, however, that the timing of this was coincidental, rather than coming as a result of the
discovery of education by economists.
5
The proportion of Bank education lending commitment as IDA commitments varies from year to year. In the
early 1960s, the vast majority of Bank lending to education was based on IDA credits, decreasing to around 40
percent, on average, since the 1970s (World Bank 1999b).
6
Neo-liberalism is founded upon the intellectual foundation of neo-classical economics, although the former
gives less serious attention to market failure compared with government failure (Colclough 1990). The term
‘neo-liberal’ is, however, not easily defined and its use has been controversial and disputed. Williamson (1993)
initially rejects the use of the term to describe the Washington consensus (where he understands neo-liberal as
Austrian economics, monetarism, new classical macroeconomics, and public choice theory). In a subsequent
paper, he concludes that the Washington consensus is inadequate from a neo-liberal perspective, even once he
has understood how people instinctively use the term. He suggests that the Washington consensus does ‘espouse
developing and using the market rather than denouncing, redressing and distorting markets’ (1997: 49).
Although it incorporates privatisation, it does not go as far as saying that the only way to ensure fiscal discipline
is to slash government budgets, or to call for overall tax cuts. Thus, he suggests, ‘As a statement of the neoliberal
creed, the consensus was quite deficient’ (Williamson 1997: 50)
7
In reality, advocacy of fees as part of the first structural adjustment programme in 1981 predated Thobani’s
analysis (see, for example, World Bank 1982), implying that the technical model was developed post-factum,
and was undertaken to support a decision that had already been made.
8
Survival rates are calculated as the number of pupils who would be promoted each year of the primary cycle,
given prevailing dropout and repetition rates. If there were no repetition and dropout, survival rates would be 100
percent (or, of 1000 pupils entering the system, 1000 would complete after 8 years). However, some children
stay in one standard for more than a year, and some children leave school before completing due to dropout.
9
Bennell (1996) notes that the 1980 World Bank policy paper refers to rates of return to education only once,
whereas the 1995 World Bank Review refers to it over 30 times in order to substantiate, support and qualify a
number of key statements about different types of educational investments and the appropriate roles of the public
and private sectors. It could be argued that analysis of rates of return is used for internal advocacy purposes
within the Bank which members of staff do not necessarily believe themselves, a view put forward by World
Bank staff during informal discussions. This view is not supported, however, by public pronouncements of
influential Bank staff who are defensive about the reliance on rates of return to education as a diagnostic tool
(Burnett and Patrinos 1996).
10
It would appear, however, there has not been a consensus within the education department on these issues.
Mundy (2001) notes, for example, that some senior education staff in the World Bank considered the 1995
Review as too focused on primary education. However, the dominant view prevailed in the final version of the
Review.
11
Amongst the reasons advanced by the World Bank for this slowdown include political turmoil in some of the
larger countries, the weak absorptive capacity of key institutions throughout the region, and the reluctance of
some governments to introduce (education) policy reforms (World Bank 1999c). Thus, blame is placed on
problems within countries themselves.

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 P. Rose – Education and the post-Washington consensus. Draft

12
Ambiguities within World Bank documents continue to exist, however. For example, in the 1995 World Bank
Review (World Bank 1995: 132), while free primary education is promoted, elsewhere in the document it is
proposed that, even at the primary level, ‘charging of fees need not be incompatible with the principle of free
primary education, so long as those fees are regulated and are met by parents out of vouchers financed by the
state.’
13
It appears as if adult literacy is liable to continue to be neglected since it is very difficult to deploy as a general
rationale for making loans. See Jones (1992 and 1997).
14
See Blaug (1987) and Samoff (1996) for their discussions of schooling as a black box.
15
See Fine and Leopold (1993).

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