Journal Issue

Better Planning for Educational Finance

International Monetary Fund. External Relations Dept.
Published Date:
March 1965
  • ShareShare
Show Summary Details

George Tobias

TODAY more than 25 countries are helping to educate the children of other countries by supplying teaching materials or teachers or fellowships or equipment or cash in the form of grants and loans. They are joined by literally hundreds of philanthropic organizations and foundations which also export, or otherwise provide, educational assistance. Such aid in one form or another has been supplied for many years, and the United Nations, especially its Expanded Program of Technical Assistance, has now developed permanent machinery for collective educational assistance on an international basis.

In many countries it has been customary for the government to meet the capital costs of educational plant and equipment by pledging general or specific government resources to education. In Europe such pledges were often in the form of revenue-producing lands whose income could be used by universities. In the United States, since 1862, national lands have been turned over to state universities (the land-grant colleges) as a source of funds for their capital and recurrent needs, in exchange for agreements that the universities would give practical instruction in agricultural, mechanical, and scientific disciplines, and in military training.

Borrowing to meet educational capital needs is also standard practice in many countries. In the United States, for instance, in each of the last five years, more than $2.5 billion has been borrowed by states and municipalities to meet the capital expansion costs of primary and secondary schools alone, with great additional sums being lent for the building of higher education facilities. But the international lending of large sums for education is a new departure, a reflection of the almost universal importance attached to educational development.

Importance of Education

As a capital asset, as a tool of production, formal education and training in the classroom represents only one element of human resources development. Formal education and training has done its job if it makes a student a “trainable” individual, more apt to perfect his professional and technical competence in the labor force than he would have been without it. A well-rounded program for the development of human resources, if it is to attract the new type of international capital support that is now available, will have to include programs aimed at assuring the necessary mobilization, utilization, and training of high-level human resources as well as their formal classroom instruction. When the costs of long-term, on-the-job training are added to the costs of formal education and to loss of income while the student is in school, the ratio of the total costs so measured to the benefits of formal education obviously becomes smaller than if it is taken to be only the classroom costs divided by the worker’s later increase of earnings.

Mr. Tobias served as an economist in the US. Government, specializing in manpower problems, for 28 years following his graduation from the University of Oklahoma. He served also in the Foreign Service and the Naval Service of the U.S. before joining the World Bank as Manpower Advisor in 1963.

At the same time, it is clear that education is an integral part of a country’s culture and has a value in itself. It is an objective, as well as a means, of economic development. Education cannot be considered merely in its utilitarian role as an instrument of production. We must balance utilitarianism against the civilizing function of education and its contribution to preparation for citizenship. Education should fit harmoniously into a chosen pattern of change, progressive enough to produce the technical leadership required, while at the same time not isolating from the mainstream of the national culture those who are privileged to receive it in its advanced forms. The elite may acquire a professional outlook and new skills within one generation, but as human beings its members cannot readjust so quickly as to skip many decades of slow evolution. Educational planners must blend the hardheaded and businesslike approach with sensitivity and imagination when they teach a people to swim in cultural, social, and economic crosscurrents.

At the university and technical level especially, educational systems themselves have a research and development responsibility to the community. They serve as research centers, centers of learning, centers of “organized worrying,” to which the community’s complex questions of all kinds can be referred. A few hundred educated persons in centers of learning, working together on the real and current problems of the nation, can make a great difference in the rate and direction of its economic growth.

Finance Available

Governments of developing countries nowadays are accordingly very much concerned with attracting international finance for education, and they know that to succeed in this aim they must do their utmost to present coherent and balanced plans for the development of human resources to ensure that educational and training needs for economic development are systematically determined. Sums available for international investment in education are now much greater than in the past—but, paradoxically, the money may be harder to get hold of than ever before, since donors and credit sources insist that their support goes to specific and justified needs. The extent of the needs and the size of the funds cause sharp pangs of apprehensive caution in those responsible for providing the money.

It has been during this stage of the development of international educational aid that the World Bank Group has, over the last few years, entered the picture. The Bank’s own lending experience has demonstrated that economic development projects often cannot be devised, or if devised cannot be efficiently operated, without the trained executives, engineers, technicians, and administrators so sadly lacking in the underdeveloped countries and, indeed, not abundant anywhere. The only adequate answer is for the underdeveloped nations to educate and train their own nationals for these important jobs, because it is neither economically nor politically feasible for them to depend permanently on expensive expatriate personnel.

As one of its first undertakings in the educational field, the Bank joined with the United Nations Educational, Scientific and Cultural Organization (UNESCO) to establish an International Institute of Educational Planning, with a financial contribution from the Ford Foundation, to develop and supply educational planning techniques and methods for underdeveloped countries. More recently, the Bank and UNESCO have established a relationship under which member countries desiring help in identifying their priorities in educational needs or in designing projects, including financial arrangements, to satisfy those needs may obtain such services from UNESCO, with the Bank sharing the costs. The International Development Association (IDA) has now made credits available to Tunisia and to Tanzania for secondary school construction, to Afghanistan for secondary vocational schools, and to Pakistan for agricultural universities. Now, the Bank itself has stepped into educational lending for an agricultural college in the Philippines, and it has further educational lending plans under active consideration.

Flexibility and objectivity are most necessary in the field of education, since standards such as those by which engineering projects are assessed do not exist, and the standards that do exist must be applied with practical discretion to situations peculiar to a given country. The Bank and IDA, in all their lending, try to do more than simply supply funds; they have tried to create the environment and implant the attitudes which ensure that the funds are well spent. In the words of the U.S. Senate Committee on Foreign Relations: “Those organizations are peculiarly fitted to test projects scientifically and objectively by virtue of a trained staff and long experience in appraising projects.” The Committee said further that because the Bank and IDA are known to have no ulterior motive, they can exert more influence over the use of a loan than is possible for an individual country. They can insist that the projects for which they lend be established on a sound basis, and—most important—they can make their lending conditional upon commensurate efforts being made by the recipient country. Over the years, the Bank’s practice in other kinds of lending has come to be accepted as a norm; it tends to set the standard of performance demanded by many other international lenders. What would it mean if that precedent were followed in educational financing, and the standards of the Bank and IDA were adopted by other educational lenders?

Need to Satisfy Lenders

While there exist some external sources of local currency financing—the Bank and IDA in particular have recently followed an increasingly flexible policy in this regard—most international lenders limit their contribution to foreign currency requirements, which are usually only a small fraction of educational costs. The initial investment, and almost all the recurrent costs, must be found from local resources. It is useless to lay out capital for education unless there is a dependable local source of revenue for operating expenses. Prospective lenders need to be reassured that operating costs can be met, and also that earmarking funds for education will not cripple some other equally important effort of the government.

Countries or institutions providing international finance will want to test the capacity of the educational organization to plan, innovate, manage, and use what it already has. Every country in the world already has an educational system of one sort or another. A reasonable test of how well borrowed funds will be used for extending and improving the system is the way in which present funds are being used for running it. International lenders will wish to examine not only internal controls, methods, standards, and procedures of the educational system; they will also want to make sure that educational planning is properly related to the country’s total economic and social development programs, both public and private, and that the educational system is flexible enough to accommodate to changing needs and new methods.

Again, lenders for educational projects will wish to be assured that the students to be turned out by the projects are genuinely and urgently needed in the labor market to satisfy the practical requirements of economic development. If the school is to do its job well, research workers must supply the administration with fuller information on what the labor market really demands. School output should be closely correlated with industry’s needs.

Few countries have sufficient knowledge for educational purposes of the capacity and ability of their present labor force to move to other occupations with minimum retraining. Failure to take these possibilities sufficiently into account, or to check theoretical needs for manpower against actual market demands, has resulted in substantial overestimates of high-level manpower requirements.

Every curriculum in every school system represents the point of temporary balance between educational technique, level of culture and aspiration, and the facilities available for education. Those who are providing the finance will wish to participate from the earliest stages with the responsible educational planners in order to assure that a given educational proposal is reasonably calculated to advance economic progress without detracting from the other objectives of education which educationalists will wish to protect and preserve. Entire systems of research projects are involved.

The Need for Planning

The essence of any kind of planning is to decide how to share visible shortages, to anticipate and accommodate conflicts, and to allocate what is available among those claimants whose needs are most valid and urgent. Planning demands deliberate choice between requirements which are to be satisfied in full or in part, immediately or later. This is as true of educational planning as of any other form of economic and social planning. Standards and values appropriate to a given country need to be chosen among the wide variety of educational practices that have been adopted in one part of the world or another. Too often the educational administrator is not adequately supplied with those research services that set out for him as plainly as possible the consequences that follow alternative decisions of educational coverage, content, duration, pedagogy, curriculum, and construction.

Through the assembly and observation of known experience, reasoned speculation on behavior in the future can be made, to give a basis for administrative decisions needed in planning. To carry out the research projects needed by the educational administrator calls for consistent and dependable administrative, social, and economic statistics. They may not be available in many countries today; indeed they may never be available unless a start is made now by research workers to standardize and stabilize statistical definitions and collection methods.

The Research That Planners Need

One system or cluster of research projects must be concerned with the child’s progress through school and on to university. When should a child start school? There are often valid social reasons for schools to give daytime care, shelter, feeding, and mother-substitution at very early ages. But this kind of education perforce reduces the facilities available for more intensive teaching at later ages. Which should we settle for?

At what ages should the shifts be made from elementary to secondary and from secondary to college levels? How many years does a child need to prepare for his career, including university? Fourteen? Seventeen? What is the real difference in learning acquired if a child goes to school for ten years, from seven to seventeen, as opposed to twelve years, from five to seventeen?

At another level, what light can research throw on the problem and the real costs of sending university students abroad? Can research provide the answers to the financial and technical questions of establishing regional universities instead of national or overseas university education?

Another cluster of research projects must be concerned with the method and content of education. What, year by year, is the optimum ratio of students to teachers? For how many hours a day can the student absorb and produce? For how many months a year? How well used is the teacher’s time, and how well used is the student’s? How effective are examinations in testing the student’s progress? Can we devise better kinds of examinations, or find substitutes for examinations?

What composes an acceptable and suitable curriculum—from elementary school through university? How challenging can the curriculum be without frustrating and depressing the child? How closely should it be associated with the child’s current environment? Should the curriculum vary and, if so, to what extent, to accommodate local folkways or local economic needs? Or does national feeling, and the need for national unity, require a standardized curriculum throughout a country?

Then there is the relationship of education to future occupation. How should education be geared to the training and job experience to produce an effective practitioner? From studies of such questions, the research worker will be better able to advise the educational planner about the age at which the student can most effectively shift into preparation for a specific occupation, and as to the kind of education that would be most helpful.

How is the present labor force used in the key occupations? How productive is it? Is there lateral mobility in the labor force that permits workers to shift from one occupation to another requiring a similar level of attainment? What is the hiring employer’s attitude toward the value of the education and training being given in schools and colleges? How mutually respectful are the educational authorities and the employing establishments?

There is another cluster of unanswered questions which are perhaps the most important of all. Not every child in any educational system will be educated to the same level as every other child, because there are not enough resources to go round. The aim is to bring each child up to the optimum level of his own capacity to live his adult life fully, yet some children in fact will receive a “better education” than others. Some—and only some—will receive what many prize. What difference does it make to society as a whole if we choose on the basis of intelligence or on the basis of the child’s place of residence, family background, family income? What kind of education-denial does least damage?


We have come to the point where the benefits of education for economic development are universally recognized. The propriety of long-term financing of educational growth is accepted. The availability of external aid for such financing increases. It is necessary for the dialogue between educational borrowers and lenders to continue to grow closer and more confiding at all stages of educational planning, so that the requirements of each will be the better understood by the other. Research can provide important clarifying elements and lead to better planning of educational finance, in which the common objective of borrowers and lenders, the development of human resources, is not obscured in the cultural distance between the two groups, or made unattainable because of their separate esoteric vocabularies.

Other Resources Citing This Publication