The consequences were highly damaging. Britain entered the 20th century as the most ignorant country in Europe, having neglected basic education on the basis of a political doctrine which held public education to be inconsistent with the imperative of maintaining low taxes. By 1850, when countries such as Holland, Switzerland, France, and Germany had achieved virtually universal primary education, Britain had fewer than half of its children in school, and was spending far less per pupil. By the end of the century, educational under-attainment was seen as the principal cause of Britain's failure to keep pace with of technological innovations in growth industries such as metallurgy and chemistry, and as the main factor responsible for the loss of markets to rival exporters. The lessons of the 19th century have been rediscovered in the second half of the 20th century, notably in the form of the 'human capital' growth theory, advanced by the Nobel Prize economists Theodore Schultz and Gary Becker.
Human capital is a difficult concept to define.
But it refers to the sets of skills, the knowledge, and the institutions which enable individuals and countries to increase productivity, and thus their incomes. Some of the most compelling evidence that knowledge is central to the growth process comes from East Asia. According to the World Bank, between 60-90 per cent of the growth achieved in Japan and other East Asian industrialising countries is explained by human capital, rather than natural resources or finance. Detailed econometric analysis identified primary education as the single most important factor accounting for the differences in growth rates between East Asia and sub-Saharan Africa. While such findings must be treated with caution, for the obvious reason that economic factors cannot easily be separated from wider social and institutional factors, they underline the crucial importance of education.