Passing the Books, But Holding the Oil

I spent a morning hour trying to organize my thinking about Fareed Zakaria’s ground-breaking work, The Post-American World and its direct relation to Sunday’s Tom Friedman’s column, Pass the books. Hold the oil. Friedman’s column was eye-catching, well-crafted and exceedingly relevant.  But a quote near the end of the column, by K. R. Sridhar, the founder of the Silicon Valley fuel-cell company, Bloom Energy, stopped me in my tracks:When you don’t have resources, you become resourceful.Zakaria makes the point that countries with significant oil resources tend not to diversify and not to create jobs outside the oil industry. The long-term result, of course, is that unemployment in those countries is a terrific problem inevitably resulting in huge inequalities and social unrest. The pragmatic monarchies, like Saudi Arabia, buy off the population with their wealth. That, of course, will eventually come to an end. So rather than oil resources becoming an advantage, they will become an eventual disadvantage.  Friedman follows Zakaria’s thesis, making it immensely relevant by focusing on two nations that have no significant resources, but became very resourceful: Taiwan and Israel. The Program for International Student Assessment (PISA) exams test math, science and reading skills of 15 year-olds in 65 countries every two years. And, uniquely, it compares the kids’ results with total earnings on natural resources as a percentage of GDP.  In short, “how well do your high school kids do on math compared with how much oil you pump or how many diamonds you dig?” Obviously, these are correlations not causations. But they are damned significant correlations.The results indicate a significant negative relationship between money extracted from natural resources and the knowledge and skills of their high school population. Israel and Taiwan, along with several other nations lacking natural resources, but high in educational resources, enjoy a standard living most of the oil-rich countries of Arabia are unable to offer.  That’s why, says Friedman, that the foreign countries with the most companies listed on the Nasdaq are Israel, China/Hong Kong, Taiwan, India, South Korea and Singapore—none of which can live off natural resources. So the CEO of Bloom Energy has got it right. When you don’t have resources, you become resourceful.The summary is telling:Among the 34 OECD countries, the U.S. ranked 14th in reading, 17th in science and 23rd in mathematics.The U.S. fell particularly short in the share of students achieving the highest level of math performance. Only 2 percent of U.S. students reached the top rung. By comparison, more than 4 percent of students in Canada, Finland, Korea and eight other OECD countries attained that level—as did 11 percent of the Hong Kong students and 27 percent of the Shanghai pupils. (Conversation with Lori Taylor, Federal Reserve Bank of Dallas) Andreas Schleicher, who oversees the PISA exams says that knowledge and skills have become the global currency of the 21st century, not natural resources. But, he goes on, there is no central bank that prints this currency. So, Israel and Taiwan are printing a lot of their own currency. It’s great to have oil and gas, because they can buy jobs. But over the long run unless they’re used to build schools and a culture of lifelong learning, they’ll weaken your society. Exactly the point that Zakaria makes. Looks like the good old US has got some work to do.   Flickr photo: Audubon Images
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