| Chapter 2: | Poverty and the Knowledge Economy |
fits into one of these stages (Rostow 1960). Because, according to this model, developing societies were in the earlier stages, vocational education was seen as the most useful investment in terms of training—that is, manual, practical, and usually nonacademic training. This focus on vocational education was exclusive, and as a result, IGOs—including the World Bank—did not lend any money for the support of university education.
The approach to development which arose in the 1980s was closely related to the advance of neoliberalism and characterized by an emphasis on SAPs, which used loan conditions to promote privatization and the reduction of public expenditures. SAP loans used quite stringent conditions, such as reducing public expenditures like health and education costs, in order to move developing economies in the desired direction. This model of development was most prevalent during the Thatcher-Reagan alliance, but it remains a dominant policy for the IMF and the World Bank even in the twenty-first century. Under SAPs, public expenditures were reduced. At the same time, rate-of-return analysis became a prevalent method of measuring the impact of education, and Psacharopoulos, an economist for the World Bank, found that primary education had a better rate of return for a developing government's investment than higher education (1981, 1987, 1988). As a result of this analysis, primary education became a priority and was allotted the majority of funding and attention within the education sector. Higher education, by contrast, was characterized as a personal responsibility and as beneficial only to the individual student, an evaluation which, again, led to required reductions in state support. Peters and Besley described the structural adjustment policies of neoliberalism as “disastrous” for the third world and for higher education (2006). These two eras of development and their respective dominant schools of thought (discussed in greater detail in chapter 3) were influencing development policy before the advent of IGO emphasis on the knowledge economy and its connection to higher education.
Development organizations today tend to identify higher education as a high priority. The significant role of higher education in the knowledge