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U.S. Fails International Competitiveness Test: Schools (Rightfully) Blamed

06/19/2009 05:12 am ET | Updated May 25, 2011

On February 1, 2008, President George W. Bush said "the fundamentals of the economy are strong; we're just going through a rough patch right now" (UPI). Even while the economy was crumbling all around him, presidential candidate John McCain insisted on September 15, 2008, "the fundamentals of our economy are strong."

Perhaps these "fundamental" misperceptions by our national "leaders" are why the U.S. just failed the Global Competitiveness Stress Test from the Lausanne-based Institute for Management Development's World Competitiveness Center. Perhaps "failed" is not the right word, but the U.S. did finish average -- 28th among the 57 ranked nations. Yet, similar results in international comparisons with math and science tests have led to the use of that particular f-word as applied to public schools. The Stress Test evaluates how well countries will cope with the current global recession.

The U.S. finished behind such nations as Qatar, Malaysia, Chile, Thailand, Jordan and Kazakhstan. Denmark is #1, but India (13th) and China (18th) are ahead of us, too.

If this result came from an international comparison of young people (9- and 13 year-olds) on math and science tests it would make front page news of most newspapers, but I'm betting it doesn't get any coverage at all (this is being sent just after the embargo hour has passed, EDT). But I'm also betting that the people who sent the economy over the cliff were not people who couldn't do the arithmetic.

The stress test included four factors, Economy Forecasts, Government, Business, and Society each made up of about a half-dozen sub-components. The United States' lowest ranking, 33rd, was on the Business component. That component itself is comprised of ethical practices, credibility of managers, corporate boards, corporate values and entrepreneurship. It appears that the Business Roundtable, National Association of Manufacturers, and independent businesses, don't have much to offer in these areas.

These results confirm allegations in the April 24th, 2009 Wall Street Journal that the principal culprits in the present debacle are indeed the schools, namely, the business schools. "What have business schools failed to teach our business leaders and policy makers?" asked Walter Jacobs, himself a B-school professor. As the U. S. Chamber of Commerce and the Center for American Progress put it in a different context, "the measures of our educational shortcomings are stark indeed."

First, everyone agrees that "incentive systems that rewarded short-term gain took precedence over those designed for long-term value creation." A proper B-school education would inoculate against such folly.

Second, "as Washington scrambles to restructure the financial regulatory system, those who still believe in the private sector are asking why corporate boards were AWOL as institution after institution crumbled. Why did it take rumors of nationalization and a drop in Citicorp stock to below $2 a share to inspire Citigroup to nominate directors with experience in financial markets?" Jacobs reports giving a speech at a B-school after which one student, only weeks away from her MBA, said she'd never heard any discussion of the responsibilities of boards or the rights of shareholders.

Third, while B-schools taught the value of a diversified portfolio, they did not examine the notion of "agency cost." "The concept is simple: When money provided to homeowners or businesses comes from an anonymous source, possibly half way around the world, there are serious challenges to operating a functioning system of accountability... It should come as no surprise that financial institutions amassed securities that consist of a diversified portfolio of deadbeats."

Jacobs thinks we could have avoided the problems we now face had we attended to the three items noted above. "America's business schools need to rethink what we are teaching -- and not teaching--the next generation of leaders."

Now there's something Bob Wise, Roy Romer, Eli Broad, and Bill Gates and the rest of the professional K-12 fear mongers should pay attention to. It's much more important than how well 4th and 8th graders bubble in answer sheets on math and science tests. But it's doubtful that the fear mongers will let go of their lucrative propaganda machines.