Johan Fourie's blog

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It’s World Economic History Congress time

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Kyoto

Next week, economic historians from across the globe will descend on Kyoto for the triennial World Economic History Congress. The previous time the event was held, Stellenbosch played host. (Despite a very successful academic programme, most visitors seem to remember the bitterly cold weather. Fortunately, we won’t have that problem with Kyoto next week. I arrived in Tokyo on Wednesday, and it is hot and humid.)

So what happens at the World Economic History Congress that justifies flying half-way across the world? First, there are lots and lots of paper presentations. I don’t have the exact number, but I would guess close to 1000 papers will be presented over the five days of the conference. To give you a sense of the size, there are 18 parallel sessions (sessions running concurrently) at a time. This is an ideal opportunity for scholars to see what’s  new in the field, what topics are of interest, which methods are popular, and who is carving out a name for themselves. Second, it is an opportunity to mingle. Many research ideas are molded in conference corridors and refined over dinner drinks. The most fruitful comments and critiques on my research I’ve received during teatime. Third, it is an opportunity to showcase your own work. A conference deadline is fixed, so it structures your research. And conferences are a great way to test new ideas and possibly gain the interest of an editor.

So here is my pre-conference marketing: I’ll participate in four sessions next week. First up I’m involved in the dissertation sessions on Monday morning. Here I’ll present a brief outline of my dissertation, completed at Utrecht University in 2012. That afternoon, I chair a session on the history of wealth and health in South Africa. The session includes papers on fertility, intergenerational mobility, concentration camps, credit markets and my own work (with Kris Inwood and Martine Mariotti) on white living standards during the mineral revolution. On Thursday morning, I chair another session on microdata in African history. Here I present a (very much working) paper with Dieter von Fintel on the precolonial roots of structural unemployment. Finally, that afternoon, Alfonso Herranz-Loncan will discuss work on Cape Colony railways. The full programme is available here.

A number of other LEAP members will be in Kyoto too: Sophia du Plessis and Dieter will present, as will our research associates Martine Mariotti, Leigh Gardner and Alex Moradi, and our honorary professor, Jan Luiten van Zanden. But I’m most excited for the four Stellenbosch students that will join us in Kyoto, because it was at the World Economic History Congress in Utrecht during August 2009 where I first experienced what can best be called an ‘optimistic vibe’ within the field of economic history. Economic historians, perhaps because they harbour no ambitions of making money or impressing anyone with their math skills, are a placid tribe. Not submissive, but placid. We know data sources have constraints, we understand that context is as important as numbers, we are skeptical about big theories of anything, and we are careful to propose big push policy interventions. And so we help, guide, support and, when necessary, critique with kindness. In short: economic historians tend to be a bunch of nice people.

MountFuji

But the WEHC is not only about the people, but also the place. And there are many wonders to explore in Kyoto. It tops the 2014 Travel+Leisure list of the world’s best cities to visit and, much like the rest of Japan, is steeped in history and mystery. Like Mount Fuji. I write this not having slept for 28 hours. Dieter and I climbed The Land of the Rising Sun’s most famous mountain last night to watch, well, the sunrise. Take my advice: don’t believe any of the online guides who describe the climb as ‘easy’. It’s not. I’ve done some pretty strenuous things in my life (like marking second-year papers), and this was easily in the top two. Maybe top three; I’ve marked first-year papers too. Maybe our experience was worse because we did fly in from South Africa the day before (another sleepless night). But still, don’t bargain on just sprinting up the steep slopes of a volcano. It ain’t happening. (For those actually interested in more detail: roughly 6 hours up. Start at around 9pm. Arrive at 3am. Hang around in the dead of night at very low temperatures till sunrise at 4h30am. Then hike down for another 3 hours. It can all be made worse by torrential rain and loud Americans. Fortunately we only had one of those.) But despite all the strain and swearing, it was great to make it to the summit. Teary-eyed special. I’m selling the movie rights.

I need some sleep. See you in Kyoto on Monday.

Written by Johan Fourie

July 31, 2015 at 07:51

The new Bantu Education?

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girls-at-meal

When Hermann Giliomee made the claim at the recent South African Historical Society conference that it is time to review the Bantu Education Act of 1953, the audience cried out in disgust. How could anyone have anything but contempt for an Act that have arguably had the most profound negative effect on South Africa’s economic fortunes, and still does? The Bantu Education Act of 1953 nationalised education for black South Africans (away from missionary education) and delineated spending on education according to race, with budgets heavily biased towards white education; in the 1970s, the per capita spending on black education was one-tenth of the spending on whites, for example. But the Act is probably most remembered for the following quote by Hendrik Verwoerd:

There is no place for [the Bantu] in the European community above the level of certain forms of labour … What is the use of teaching the Bantu child mathematics when it cannot use it in practice?

I was reminded of this quote when Basic Education Minister Angie Motshekga said in parliament last week that one in four schools do not offer mathematics in grades 10, 11 and 12 because of teacher shortages and a low pupil enrollment. Let’s consider that again: 25% of the poorest schools cannot equip even their brightest kids with mathematics, a subject that is required to enter almost all technical fields, i.e. science, commerce, medicine, and engineering. Each of these schools might as well put a sign outside their classroom saying:

THERE IS NO PLACE FOR YOU IN THE SOUTH AFRICAN ECONOMY ABOVE THE LEVEL OF CERTAIN FORMS OF LABOUR!

The reasons for these schools not teaching maths are multifaceted. A culture of ‘liberation before education’, poor teacher quality and poor school management persists in many of these schools, a legacy of the Bantu Education Act and other apartheid policies. But there are other reasons too. Equal Education treasurer Doran Isaacs blames a too dogmatic focus on the matric pass rate:

It is a direct result of a narrow and single-minded pressure for schools to increase the matric pass rate at all costs. It is compulsory to either do maths or maths literacy. So these learners are doing maths literacy, which is basic arithmetic. The two are not comparable. Schools either push kids out or they stop offering maths altogether as a way of increasing the matric rate. This results in a new form of Bantu education where the richer kids do maths and the poorer kids do maths literacy.

Sadly, it is getting worse:

The basic education department’s reports indicate a 17% decline in the number of candidates who wrote mathematics between 2009 and 2013 (from about 290 400 to 241 400). At the same time, the number of candidates writing mathematics literacy rose sharply to 58% of the 2013 cohort.

And it is unlikely to improve fast, given the poor performance of kids at a younger age:

…less than half the learners in each cohort show foundational competence in mathematics, as indicated by the 61% of grade six learners who failed to score 50%.

It remains an awkward fact that South Africa’s highest matric pass rate for black students (writing the same exam as whites) was in 1976, the year famous for the Soweto uprising. Granted, many black kids did not reach matric and in many schools not the full curriculum was covered. But compared to the situation today, were the outcomes any worse?

This is not to say that the Bantu Education Act should be labeled anything other than unjust. It not only had massive psychological effects on black South Africans, but real consequences for the economy and society too; as Miriam Mathabane asks, if Verwoerd had not taken over black education as he did, “if black children had had the same educational opportunities as white children, would there be less crime, fewer murderers, carjackers and rapists in the New South Africa, and more teachers, lawyers, writers and nurses?” Even with the budgetary constraints and political climate of the 1950s and 1960s, a different policy was possible.

But perhaps Giliomee has a point too: we should weight the impact of Bantu Education not against the single quote of a deluded man, but against the statistical evidence of its outcomes, and, in particular, the outcomes that were to follow. When historians meet in 2051 at the South African Historical Society conference, how will they compare the South African education systems of the two decades before and the decades after democracy? Which system will be considered more unjust?

Who are most hurt by South Africa’s new visa regulations?

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No buyers, no job: Women at the Khayelitsha craft market rely on large numbers of tourists to make a living

No buyers, no job: Women at the Khayelitsha craft market rely on large numbers of tourists to make a living

At the beginning of June, South Africa imposed two new visa regulations for families traveling to South Africa. The first was that any child who exits the country must have an unabridged birth certificate if they are to enter the country. The second was that tourists from countries that are required to have a visa now have to appear in person during the visa application process in order to obtain a biometric visa.

New data published by Statistics South Africa at the end of last month show that these policies are beginning to have an effect. A notice about the new regulations issued more than a year ago resulted in a decline in tourist arrivals between March 2014 and March 2015 of 68 323 travellers, or 20%. Air China cancelled a planned direct route between China and South Africa. To put these numbers into perspective: the 2010 World Cup in South Africa generated approximately 300 000 additional (non-SADC) tourists in the year of the event, or an increase, controlling for the trend, of 18.7% (Peeters, Matheson and Szymanski 2014). The notice warning travellers about new visa regulations – note: not the actual regulations themselves, the impact of which we will only know later this year – has thus already nullified the impact of the 2010 World Cup, a mega-event that cost us several billion to host (and continues to be a burden for tax payers). That is an absolute travesty.

Whether the decline in tourist numbers can be entirely attributed to the new visa regulations is of course not clear. Last year’s Ebola epidemic in West Africa (and, dare I add, the United States) would have affected foreign travellers’ plans, while the xenophobic attacks a few months ago in Durban and Johannesburg certainly changed visitor itineraries. The latter was perfectly illustrated by an international winter school I teach at Stellenbosch University: almost all of the Singaporean students (half the class) who would have attended the course cancelled their trips in the week following the xenophobic attacks. The sad reality is that the revenue we generate from these courses go to Stellenbosch students applying for exchanges in Europe and elsewhere; the xenophobic attacks has denied dozens of South African students the opportunity to study abroad.

And on top of all this comes the new visa regulations. The aim, according to the Department of Home Affairs, is to prevent child trafficking across South Africa’s borders. When questioned about the number of trafficking cases that the new policies has prevented, department spokesperson Mayihlome Tshwete said yesterday: “Child trafficking is difficult to detect but whether the number is five or 10 or 30 000, there is no denying that child trafficking is a reality in South Africa and we can’t tell the parents of trafficked children that their children aren’t important.”

Child trafficking is an incredible injustice. The stories of those caught in its grip are traumatizing. But so, too, are the stories of mothers who lose their jobs. The new visa regulations will result (or have already) in the lay-off of thousands of mothers (because the tourism industry mostly employ women and often poor, rural women). These mothers will be unable to feed and support their children, the very same children that are supposed to benefit from the policy. But will we hear stories about these mothers? Probably not. The causal link between the new policy and their job security is vague; the only message they get is that they don’t need to come to work anymore because ‘in the light of the current business climate, the company is forced to retrench’.

Everything has a price. Yes, even the life of a child trafficking victim. (Bear in mind that since 2012 the South African Police has only opened 23 cases of child trafficking.) Politicians and bureaucrats continually have to decide between spending on hospitals (which clearly reduce deaths) and other types of spending, like teacher salaries. If human life is infinitely valuable, then we should spend our entire budget on clinics and hospitals. But we don’t. We trade off lives saved in hospitals versus other priorities, like maintaining a well-functioning economy.

Similarly, we cannot price two dozen child trafficking cases more valuable than protecting thousands of jobs in the tourism industry. If we do, many more children will suffer as a result.

Why you should study Economics (at Stellenbosch)

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Stellenbosch

The applications for Honours or Masters degrees in Economics at Stellenbosch University have just opened. Early next year, about 80 or so students will arrive for the quantitative boot camps which kick off the year. The Honours students will get their first taste of graduate studies. And let me be honest: it is tough. Core modules like macroeconomics, microeconomics, econometrics and mathematical economics make the first semester a long and arduous affair. And then there are several electives to choose from, including international trade, development economics and economic history (where you’ll find me). The second semester has more choice but is no less rigorous: labour economics, industrial organization, public economics, environmental economics, the economics of education, the economics of technology, institutional economics and more.

These modules reflect the primary reason why I think studying Economics is worth the effort: it provides graduates with a set of analytical tools which allow them to make meaningful contributions in many spheres of society. For some, the immense inequality and high levels of unemployment that we witness in South Africa draw them to the field, eager to find solutions. Economists want to make the world a better place, and hope to use their rigorous methods to do so. Whether it is in education policy, or health policy, or trade and industrial policydevelopment policy, or competition policy, or monetary policy, economists at Stellenbosch apply the methods they learn to real-world evidence and make suggestions on how to improve society. That, I would argue, is real job satisfaction.

Some want to use the analytical tools of economics to, well, make money. They use the analytical tools of economics to start innovative companies like Custos Media Technologies, a company co-founded by a recent Masters graduate in Economics that hopes to reduce internet piracy. Others become business strategists of large corporations: Michael Jordaan, former CEO of First National Bank, and Jannie Mouton, founder and CEO of the PSG Group, have degrees in Economics from Stellenbosch.

Almost all of our graduate students find work immediately. Salaries for economists in South Africa and abroad compare very well with other professional occupations. This is why consultancies like KPMG, PwC and Bain are beginning to recruit economics graduates in larger numbers. In earlier years, our best students would have found a place within the public sector, most likely Treasury or the Reserve Bank. Now, although they’re still head-hunted by government, our best prefer the top dollar of the consultancies. In addition, there are many smaller economic consultancies that employ former students: Econex (based in Stellenbosch), Genesis Analytics (who sponsors an annual graduate prize) and NKC (now owned by Oxford Economics), to name a few.

I think graduate students from Stellenbosch are particularly attractive in the job market because of the exposure they get to quality graduate training. Graduate lecturers are generally young and almost have studied abroad for an extended period of time. As all classes are taught in English only, classrooms are also diverse. About half the students that enrol for Honours obtained their undergraduate degrees from Stellenbosch; the other half join from universities in other Southern African countries (approx. 20%) and from European countries like Germany.

Most Honours students continue into the Masters degree programme. Thanks to better funding, it is increasingly likely that the best Masters students, after perhaps spending a year abroad, return to begin a PhD. The skills they gain here make them exceptionally well qualified for research and academic jobs, in South Africa and internationally.

Alfred Marshall said that Economics is the study of people in the ordinary business of life. I cannot agree more. I also liked this summary: Studying economics will develop habits of careful thought, the application of mathematics, and practice in clear writing. Economists engage the world of current affairs. Studying economics includes learning to use statistics and to read critically. Economics graduates are interesting people both because of their skills and because they can explain why economic phenomena occur and how economic performance might improve.

So, if you are a final-year undergraduate undecided about what to do next year, why not make a great decision and enroll for an Honours at Stellenbosch? Or, if you’re currently doing an Honours somewhere else in South Africa, why not consider Stellenbosch for a Masters degree in 2016? To put it in language you might understand: the marginal returns of studying Economics at Stellenbosch, in monetary and non-monetary terms, are exceptional.

*If you want more info on Economics at Stellenbosch (including funding information), visit the Department’s website here. If you want more information on Economics in general, visit the AEA website.

**I am often asked how to best prepare yourself for an Honours degree in Economics. I would suggest that you, aside from doing third-year economics of course, also enroll for good courses in statistics and mathematics (at least up until the second-year level). And if you have more undergraduate time, do history and philosophy too. Here are some other random thoughts on what to study.

Discrimination on the job market

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Interviews

Job market discrimination has been at the centre of the last few months’ furore about the lack of transformation at universities across South Africa. On the one hand, those appealing for faster transformation believe, I surmise, that black candidates are not hired or promoted because of discrimination by the panels making the appointments. In contrast, those citing practical difficulties of hiring black staff believe, I surmise again, that the constraint rather lies with a shortage of black candidates.

I suspect both these premises are true. To solve the second – i.e. to increase the supply of black candidates – is a time and resource-intensive process that universities have neglected for too long but which the events of the last few months have certainly hastened. Perhaps that is the topic of a future blog post. Instead, I’ll focus on the former: discrimination at the hiring and promotion level. If this is indeed happening, and I think there is some evidence to suggest that it is, what can be done to forestall such discrimination and speed the much-needed transformation of universities? I should note that discrimination in the workplace may be overt through an undisguised preference for a specific race or gender. When and where this happens, there should be immediate action through the correct channels. But my suspicion is that it more commonly manifests unconsciously – a preference for the culturally familiar (“he went to the same school as I did”, or “she speaks the same language”) which reduces transaction and decision-making costs. Discrimination is then borne through a rational desire to hire the best candidate in a world of asymmetric information.

This type of discrimination was most famously demonstrated by Claudia Goldin and Cecilia Rouse in a 2000 American Economic Review paper. They showed that a change in the auditioning procedures of symphony orchestras – adopting a ‘blind’ assessment with a screen to conceal the candidate’s identity from the jury – increases the probability that a woman will be hired. Because conductors are often male and orchestras male-dominated, male musicians were considered (by the judges, also male) to be better than their female counterparts. Anonymous assessment (playing the violin behind a screen so that the candidate’s gender could not be seen) reduced the bias and meant that more females joined the orchestra.

There is a long history of studies showing similar biases for race. In the US, studies have repeatedly found that résumés with traditional white names are substantially more likely to lead to job interviews than identical résumés with distinctively black names. Roland Fryer and Steven Levitt have found that these effects, though, are not causal for later life outcomes: “we find no compelling evidence of a causal impact of Black names on a wide range of life outcomes after controlling for background characteristics”. Instead, black names better predict life outcomes for the parents than the children.

But given the evidence that people discriminate on race or gender, how does one mitigate the possibilities of such (unconscious) discrimination? Of course, it would help to have more diverse appointment and promotion panels, but given the much-highlighted current racial profile of staff, this will either not be feasible or it would impose heavy costs on black staff who now would have their days filled by sitting on appointment and promotion committees. Another option is to have anonymous résumés and promotion applications. Anonymous résumés or CVs would, theoretically, allow all candidates to be judged according to the exact same criteria, with the top five chosen for the interview process. It is difficult to imagine how to conduct anonymous interviews, but it is not entirely impossible: technology may allow each interviewer and interviewee to create a digital avatar, with the conversation through a Skype session and a mechanical voice transformer. It sounds silly, but it may be the only way to rid the selection committee of any biases (good or bad) they may have towards the candidate. Similarly, promotion applications could be done anonymously, with theoretically only the best candidates making the grade.

So why aren’t we seeing more of this? Well, a new paper just published in the American Economic Journal: Applied Economics suggests we should be cautious. The authors

evaluate an experimental program in which the French public employment service anonymized résumés for firms that were hiring. Firms were free to participate or not; participating firms were then randomly assigned to receive either anonymous résumés or name-bearing ones. [They] find that participating firms become less likely to interview and hire minority candidates when receiving anonymous résumés.

They ascribe their surprising results to two things: 1) self-selection into the voluntary programme and, 2) anonymization prevents the attenuation of negative signals when the candidate belongs to a minority. The latter may be most revealing for South Africa: it simply means that making things anonymous makes it harder for the adjudicators to account for the poorer performance of some candidates at a younger age. Here’s one example: the high school marks of a black South African who attended a poor school may be lower than a white South African who attended a better school, despite the two of them having the same capabilities. An anonymous panel – where school names are removed – would not allow adjudicators to see the high school marks in the context of a poor-performing school. (Education economists in South Africa know that a 80% math score for a kid in a poor school is a much stronger signal than a 80% math score for a kid in a wealthy school.) Instead, anonymous procedures do not factor in past inequalities. Anonymization perpetuates past inequalities; everyone is treated equally but unfairly.

The French government, having hoped that the system would lead to greater representation of minorities, actually abandoned the system as soon as the results became known. It just shows again that what might sound plausible in theory is not always the policy reality. The equal treatment that anonymity provides does not result in equal opportunity. That’s why policy evaluation is so important, and why addressing inequality so difficult.

Written by Johan Fourie

June 29, 2015 at 07:09

Dinner at my place

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Dinnerforone

If you could invite anyone to dinner (and they were forced to accept), who would you choose?

This is the type of thing you think about when you should be marking. But it was interesting enough that I entertained the idea for a while. Who would I really like to meet, and why? Would it be to simply bask in the fame and popularity of my guests? A selfie with Meg Ryan (that gives away my age, right?) or Mesut Özil (a fan since the 2010 World Cup in South Africa)? Would it be to wine and dine with the powerful and prosperous? (Maybe I can convince Bill Gates, Aliko Dangote or Oprah to fund LEAP…!) Or would it be for the engaging conversation with the intellectual elite, debating ideas with Nobel prize laureates Paul Krugman, JM Coetzee or Stephen Hawking?

I decided to make two lists: five South Africans I’d like to invite to dinner, and five people from across the world. I started with the South African list: Cyril Ramaphosa seemed an obvious choice. He might not be our next president, but he is sure to influence the decision. I also included Thuli Madonsela, a pillar of moral clarity the country so desperately needs. I considered former politicians and activists: Desmond Tutu, Thabo Mbeki, Trevor Manuel and Phumzile Mlambo-Ngcuka, now Under Secretary-General at the United Nations. And then there are the businessmen and women, of course, people like Koos Bekker, who transformed a stale South African media company into a multinational giant, or Herman Mashaba, who built up his own cosmetics company and now is a director of several leading South African companies.

Writing down these names, though, made me wonder about the purpose of my dinner invitation. Yes, it would be great to meet powerful and impressive people, and ask them questions about their careers and experiences. But it would be equally wonderful to meet young people who will shape our future societies. Do I want to discuss the past (you don’t need much to convince an economic historian), or do I want to dream about the future, as young people inevitably do?

So I instead made a list of the top five people younger than me I’d like to invite. This turned out to be even more difficult: how do you choose between Taylor Swift, global music icon, and Catherine, Duchess of Cambridge, for example? (Catherine was disqualified on a technicality because, despite being born in the same year as I, her birthday is in January.) Or between Julius Malema and Mmusi Maimane, two men whom I suspect will have a long-term impact on South African society? (Again, both were disqualified because they are older than me, but only just.) And then there are the dozens of tech gurus already creating the future: from South Africans building satellites and platforms and apps and drones to the tech geniuses of San Francisco like Mark Zuckerberg (who is, miraculously, still only 31!), Marissa Meyer (CEO of Yahoo and 40) and Sergey Brin (founder of Google and 41). So, after some tough decisions (and many hours of not marking papers), here are my two lists. I’ve included a short explanation and my first question to them:

  1. Trevor Noah (31): He’s funny, he’s engaging and he’s taking over America. Q: How will we laugh at ourselves without you?
  2. Mark Zuckerberg (31): Facebook has connected the world. Who knows what it will do next. Q: What will Facebook do next?
  3. Taylor Swift (25): Global music icon. Q: Do you have a blank space in your diary?
  4. Mesut Özil (26): He has more than just a cultured left boot. Q: Who should Arsenal buy to win the league?
  5. Elizabeth Holmes (31): She started her own company when she was 19. It’s now worth more than $9 billion. Q: How do we create more Elizabeth Holmes’s?

Surprisingly, the global list was slightly easier. The first three were certainties: Elon Musk is the most innovative and confident person on the planet, Obama the most powerful. The Queen is a walking library (and it would just be pretty awesome to have the Queen over for dinner). Arsene Wenger is a legend at Arsenal, and an intellectual in the sport world. He’s also a trained economist. That’s a killer combo. It was really only the last slot that caused some deliberations. How do you not invite the Pope, for example? I reckoned there might be a language barrier (my Spanish and Latin is pretty poor), so instead I decided to invite someone else with an enormous following: Tom Hanks. He is not only a brilliant actor but also collects old typewriters. Sold.

  1. Elon Musk: The Thomas Edison and Nikola Tesla of our generation. Q: We have an energy crisis in South Africa. Perhaps you have some ideas?
  2. Barack Obama: US president. Q: We have a leadership crisis in South Africa. Perhaps you have some ideas?
  3. Elizabeth II: Surely the only living person to have met the last 12 British Prime Ministers (including Winston Churchill) and the last 12 American presidents, from Herbert Hoover to Barack Obama. She also met Jan Smuts, Nelson Mandela and Jacob Zuma. Q: How are the corgis doing?
  4. Arsene Wenger: The reason I support Arsenal (and have spent too much money on supporters gear). Q: Who will Arsenal buy to win the league?
  5. Tom Hanks: Second highest all-time box office star. Q: Can you bring along Meg Ryan?

Wait, did I just write a whole blog post about imaginative dinner guests? This is what marking does to you.

The cheapest way to fix South Africa’s education catastrophe

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A muppet a day will make you clever one day: More funding for early childhood education is the cheapest solution to improve education

A muppet a day will make you clever one day: More funding for early childhood education is the cheapest solution to address South Africa’s harrowing education outcomes

There is little doubt that one of the main constraints to South African economic development and prosperity has been the failure of our education system. The new government in 1994 inherited an intolerably unequal system, with white kids receiving world-class education while black kids obtained such a poor quality of education that only the really talented ones could escape the poverty cycle. Two decades later, while the racial inequality has abated with many more black kids in good-performing schools, the sad reality is that too many poor South Africans are stuck in schools where they learn basically nothing.

But the problem runs deeper than the sorry state of South Africa’s schools. As Nic Spaull points out, our poor performance in matric (the final year of high school in South Africa) is rooted in weak foundations in grades 1-3. And in truth, those weak foundations in school are often rooted in weak foundations at home.

The field of early-childhood development is an exciting and challenging new area of research. More and more studies show the large gains from investments in the early years of a child’s life. James Heckman, probably the leading scholar on education economics, writes:

A critical time to shape productivity is from birth to age five, when the brain develops rapidly to build the foundation of cognitive and character skills necessary for success in school, health, career and life. Early childhood education fosters cognitive skills along with attentiveness, motivation, self-control and sociability – the character skills that turn knowledge into know-how and people into productive citizens.

HeckmanHeckman investigated the Perry Preschool programme in the United States and calculated a return on investment of between 7 and 10% per year through better school and career achievement as well as reduced costs through remedial education, health and criminal justice system expenditures. The graph above shows how the returns to education investment falls as the level of education rises. While Rulof Burger’s research shows that these returns may not be exactly true for South Africa (the quality of education for many kids is so poor that they don’t gain anything from an additional year in school), my expectation is that South Africa’s return on investment will be much higher at these very early levels.

But what are these early investments? They can be many things: providing mothers with tool-kits containing basic necessities for newborns (an ongoing study within the Economics department at Stellenbosch University is testing the effect of exactly this), providing young mothers with information about early childhood nutrition and health (see, for example, the Ilifa Labantwana programme), improving the way teachers interact with kids in nurseries with limited resources (my mother-in-law is doing her PhD on this topic!), or something as simple as a television programme.

The latter, at least, is the finding of a new NBER paper on the effects of Sesame Street, a well-known television and radio programme that has expanded across the world, including to South Africa, in the guise of Takalani Sesame. Melissa Kearney and Phillip Levine, the authors of the new study, show the large gains from something as affordable as a TV programme for kids: not only in terms of immediate outcomes but, as Kearney and Levine show, also later in life:

Sesame Street is one of the largest early childhood interventions ever to take place. It was introduced in 1969 as an educational, early childhood program with the explicit goal of preparing preschool age children for school entry. Millions of children watched a typical episode in its early years. Well-designed studies at its inception provided evidence that watching the show generated an immediate and sizeable increase in test scores. In this paper we investigate whether the first cohorts of preschool children exposed to Sesame Street experienced improved outcomes subsequently. We implement an instrumental variables strategy exploiting limitations in television technology generated by distance to a broadcast tower and UHF versus VHF transmission to distinguish counties by Sesame Street reception quality. We relate this geographic variation to outcomes in Census data including grade-for-age status in 1980, educational attainment in 1990, and labor market outcomes in 2000. The results indicate that Sesame Street accomplished its goal of improving school readiness; preschool-aged children in areas with better reception when it was introduced were more likely to advance through school as appropriate for their age. This effect is particularly pronounced for boys and non-Hispanic, black children, as well as children living in economically disadvantaged areas. The evidence regarding the impact on ultimate educational attainment and labor market outcomes is inconclusive.

Early childhood development is one of the few expenditure categories that would win support across the political spectrum. National and provincial funding should therefore not be an issue. Trade unions that plague the transformation of the education system are less involved at the preschool level: there is thus no reason not to rapidly expand early childhood programmes across South Africa, particularly in poor areas.

I also see a lucrative private sector opportunity, although Curro has already entered this space with its Curro Castle model. What we really need, though, is an affordable model for millions of poor families unable to afford preschool. Why can government not institute a voucher scheme for every kid to attend a nursery of their choice and let the private sector provide the services?

A national nursery scheme won’t have an immediate effect on South Africa’s growth or prosperity. But a new generation of kids will grow up without the inequalities in cognitive abilities that are already entrenched when they reach school. Instead, a successful national preschool system can show voters and bureaucrats (and hopefully trade unions) the benefits of private sector participation, which will allow the system to be expanded to primary and perhaps even secondary school.

Perhaps it’s just wishful thinking, but, in my opinion, this is the most effective (and affordable) way we can begin to address the massive inequalities so persistent at present.

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