Austerity vs. growth: It's more about spending wisely than spending more
Source: Courtesy of INSEAD Knowledge , Author: Amine Ouazad
Posted: Wed May 16, 2012 5:06 pm

INTERNATIONAL. François Hollande implicitly assumes that austerity and growth are incompatible. Yet, a common misunderstanding nowadays is that austerity programs and high quality public services are inconsistent.

But countries spending the most on healthcare and education — the latter being essential to the competitiveness of European nations in international trade --  are not necessarily the ones with the best healthcare and the best schools. France ranks 11th in spending on education as a percent of GDP while Germany ranks 29th.

However, German students rank much higher than French students in reading, mathematics, and science in the latest international OECD assessments.

Also, Germany has a high performing apprenticeship scheme in secondary schools that contributes to the strength of German exports. In a word, it is more about spending wisely than spending more.

Note: Amine Ouazad is INSEAD Assistant Professor of Economics and Political Science.

This article is republished courtesy of INSEAD Knowledge

Copyright INSEAD 2012

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