1 Education and Global Challenges

Education and Global Challenges
West Coast Economic Forum on Early
Childhood Investment
Santa Monica
February 28, 2008
Michael Milken
Chairman, Milken Institute
Co-Founder, Milken Family Foundation
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The Response
“We choose to go to the moon
in this decade and do the other
things, not because they are
easy, but because they are
hard … because that challenge
is one that we are willing to
accept, one we are unwilling to
postpone, and one which we
intend to win.”
-- John F. Kennedy
Sept. 12, 1962
1969: “The Eagle has landed.”
The global economy has
changed.
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The World’s Top 10 Economies
(Percent of World GDP)
Today
U.S. (26.7%)
Japan (8.4%)
Germany (6.0%)
China (5.9%)
U.K. (5.2%)
France (4.7%)
Italy (3.9%)
Spain (2.6%)
Canada (2.5%)
Brazil (2.3%)
2050
China (18.5%)
U.S. (16.5%)
India (12.0%)
Brazil (4.8%)
Indonesia (3.5%)
Japan (3.1%)
Mexico (3.0%)
Russia (2.7%)
U.K. (2.3%)
Germany (2.3%)
1820
China (28.7%)
India (16.0%)
France (5.4%)
England (5.2%)
Prussia (4.9%)
Japan (3.1%)
Austria (1.9%)
Spain (1.9%)
U.S. (1.8%)
Russia (1.7%)
Sources: World Bank/Angus Maddison, “The World Economy: Historical Statistics” (OECD)/
PricewaterhouseCoopers/Milken Institute/Goldman Sachs
Economic Growth in Developing
Countries
• Developing countries produced
52% of global growth in 2007
• China alone produced 17.8%
• The U.S. produced 14.6%
Source: David Hale / The Wall Street Journal 2-25-08 / The World Bank
Economic Growth in Developing
Countries
• Developing countries produced
52% of global growth in 2007
• China alone produced 17.8%
• The U.S. produced 14.6%
Economies of developing countries will grow 7.4%
in 2008, compared to 2.2% in older industrial
nations.
Source: David Hale / The Wall Street Journal 2-25-08 / The World Bank
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Capitalization of Stock Markets in
Developing Countries
Asia and the Middle East
$17.8
trillion
U.S.
$17.5
trillion
2007
2007
$2.2 trillion
2002
Source: David Hale / The Wall Street Journal 2-25-08 / The World Bank
Developing countries have an
aggregate current account surplus
of nearly $2.5 trillion.
In 2008 alone, the surplus will
exceed $625 billion.
Source: David Hale / The Wall Street Journal 2-25-08 / The World Bank
Hundreds of billions of dollars in
excess liquidity
Norway
Kuwait
Qatar
Taiwan
Singapore
Abu Dhabi (UAE)
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How will they invest their capital?
• Medical research
• Better medical treatment
• Hospitals and facilities
• Education
• Completely paperless facility
• Joint project of Abu Dhabi government
and Imperial College London
• Combines research, treatment, training & public health
nd-highest incidence of type-2 diabetes
• UAE has world’s 2nd
P=ΣFti*(ΣHCi+ΣSCi+ΣRAi)
P
Ft
HC
SC
RA
=
=
=
=
=
Prosperity
Financial Technology
Human Capital
Social Capital
Real Assets
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The 21st Century will see
an increasing worldwide
competition for
human capital.
Human capital is the largest
asset class.
2007 U.S. Household Balance Sheet
$72 Trillion Total
Shares
Shares and
and
Securities
Securities
20%
20%
Loans
Loans
1%
1%
Insurance
Insurance
Reserve
Reserve Funds
Funds
29%
29%
Deposits
Deposits and
and
Currency
Currency
9%
9%
Other
Other tangible
tangible
6%
6%
Real
Real Estate
Estate
32%
32%
Other
Other Financial
Financial
Assets
Assets
3%
3%
Source: Source: Federal Reserve Flow of Funds / November 2007
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2007 Human Capital
Financial
Assets
26%
Human and Social
Capital
74%
Per Capita GDP
1960
2007
Singapore
$1,900
$32,000
$1,900
$3,400
Jamaica
Source: IFS, WEO; in 2007 USD
Human capital is required for
increased productivity. It has two
key components:
Education
Health
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Skilled and Unskilled Jobs
1950
Today
65%
60%
Skilled
Unskilled
20%
Semiskilled
20%
Skilled
15%
Unskilled
20%
Semiskilled
U.S. Reading Skills in Urban Districts
% of 4th Graders Below “Basic” Levels
District of Columbia
69%
Los Angeles
65%
Atlanta
63%
Chicago
60%
Houston
52%
New York City
47%
Central City
National Public
10%
45%
38%
30%
50%
70%
Source: NAEP 2004
How 15-Year-Olds Score in Math
• South Korea
550
• Japan
547
• Canada
529
• France
519
• Germany
513
• OECD average
500
• Spain
482
• United States
477
Source: OECD Programme for International Student Assessment 2003
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South Korean families spend 22%
of family income –- more than any
other household item -– on
education.
There are 600 million
children in India and
China whose future
buying power will grow
at least as fast as their
rapidly improving
educations.
English texts are now
the fastest-growing
sector of education
books in China.
Xin Guangwei
Publishing in China
Source: The Financial Times 4/13/05
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We must not be scared of
competition.
We must be ready to
compete.
Unionizing the Grandmas?
California Senate Bill 867 would
unionize family members caring for
children, and give them the ability to
negotiate salary, benefits and working
conditions.
Eddie “The Eagle” Edwards
• 1988 Calgary
Olympics
• Britain’s first (and
last!) ski jumper
• Last place finish
with a jump of 253
feet
Matti Nykanen of Finland wins the
gold with a jump of 412 feet.
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Eddie “The Eagle” Edwards
• 1988 Calgary
Olympics
• Britain’s first (and
last!) ski jumper
• Last place finish
with a jump of 253
feet
Eddie “The Eagle” Rule:
Olympic qualifiers must compete in international events
and place in the Top 30 percent or Top 50 competitors.
Return on Human Capital Investment
Preschool
Programs
“The
“The rate
rate of
of return
return to
to aa
dollar
dollar investment
investment made
made
while
while aa person
person is
is young
young is
is
higher
higher than
than the
the rate
rate of
of
return
return to
to the
the same
same dollar
dollar
made
made at
at aa later
later age.”
age.”
Nobel
Nobel Prize
Prize Economist
Economist
James
James Heckman
Heckman
Return
School
Opportunity
Opportunity Cost
Cost of
of Funds
Funds
Job Training
Age
Source: James Heckman, University of Chicago
Spending on Early-Childhood and
Post-Secondary Education
Early Childhood
Education
U.S.
China
Post-Secondary
Education
$3,900
$14,200
$6,000 - $10,000
$1,200 - $1,500
Source: Knowledge Universe Education
60
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“The most important
determinant for high
achievement in mathematical
achievement in school was
‘readiness to learn’ when
children entered
kindergarten.”
Victor Fuchs
Economist Stanford
University
“These results suggest that
more emphasis be given to
the pre-school years, even if
this requires re-allocation of
resources from formal
schooling.”
Addressing the Challenge
• Opening new 140,000square-foot Life Connections
facility for early childhood
care and employees services
• All workers get equal access
to corporate early childhood
education benefits
Addressing the Challenge
There are 110,000 early childhood
centers nationwide, operating at
60% capacity.
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Building Human Capital
(Non-Profit Organizations)
Milken Family Foundation (1982)
• Strengthening Education (National Educator Awards)
• Advancing Medical Research
The Milken Institute (1991)
• Develops policy recommendations and holds conferences on
economics, capital markets, human capital and demographic issues.
Prostate Cancer Foundation (1993)
• Seeks controls and cures for prostate cancer through research awards,
consortia, recruiting scientists, public awareness/policy initiatives.
FasterCures (2003)
• Focused on faster cures and improved treatment outcomes for the
most deadly and debilitating diseases.
National Institute of
Excellence in Teaching
Teacher Advancement
Program (TAP)
• Multiple career paths
• Ongoing applied professional growth
• Instructionally focused accountability
• Performance-based compensation
Milken National Education Award
More than 2,300 teachers
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Human capital is required for
increased productivity. It has two
key components:
Education
Health
Lifestyle Makes a Difference
70% of health-care spending
– about $1.5 trillion – is spent
on lifestyle-related diseases.
U.S. Economy
$13.2 trillion
Date: 2006
There is a
“staggering
cost for failing
to contain the
containable.”
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Chronic Disease Study
• Diabetes
• Cancers
• Heart disease
• Hypertension
• Pulmonary
conditions
• Stroke
• Mental disorders
Obese U.S. Children Ages 6 to 11
9M
6M
3M
1970s
Today
Source: Institute of Medicine
Obese U.S. Children Ages 6 to 11
As a result, there has
been a ten-fold increase
in type-2 diabetes in
children in just 10 years.
Source: Institute of Medicine
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Obesity Rates: U.S. vs. World
U.S.
2002MEN
2005WOMEN
36.5%
41.8%
Mexico
24.0%
U.K.
21.6%
24.2%
20.9%
20.4%
Germany
France
China
Japan
34.3%
7.8%
6.6%
1.6%
1.9%
1.8%
1.5%
Source: World Health Organization / Estimated obesity rates for people aged 15 years and older / 2005
Physical Inactivity
26% of U.S.
children ages 8-16
watch TV four or
more hours a day.
29% of U.S. high
school students
participate in physical
education classes
Chronic Disease Study
Recommendations
• Provide incentives in the healthcare
system to promote prevention and early
intervention.
• As a nation … renew our commitment to
achieving healthy body weights.
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Afghanistan
• 26 million people.
• Among the world’s
highest rate of
female illiteracy.
Afghanistan
LeapFrog sending 20,000 LeapPads to
teach pre-natal/post-natal care, health
and reading skills.
We are creating a legacy for the next
generation.
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