Dr. Simeon Djankov:

Senator Conway-Walsh is completely right. Let us take the example of east Asia, which is a fiscally conservative region. Many countries in that region, including Malaysia, Singapore and Korea, have the equivalent of a rainy day fund that cannot be used except in the case of natural disasters or education. These countries make an exception for education because they know that every euro spent today on education will yield multiples tomorrow. The figures are in our latest report. I am an economist and a former finance Minister, so I believe in numbers and economic rates of return. We have calculated that, in a best-case scenario, the rate of return on investment in physical infrastructure like roads, ports, bridges and so on will be 1:6. By the time the project is fully utilised, we will have gained €6 for every €1 invested. In the case of primary education, the rate of return on investment is 1:40, and it is even higher for preschool. A number of studies by the World Bank demonstrate that the rate of return on investing in education for seven to 11 year olds is 1:40. If we invests €1 now, we will get €40 back in ten years. The rates of return on education are huge. The rate of return on education overall, including secondary and tertiary education is between 1:15 and 1:20, which is three times higher than the returns on physical capital. This is why a number of countries make two exceptions for their rainy day funds, namely, for natural disasters and for education.

Another area which I referred to briefly earlier but which is dealt with in great detail in our report is social inclusion. To have educated children one must have healthy children. Being healthy involves not having emotional troubles, being well fed, sleeping well and so on. In that context, we must look after families as well, and this is an area that is being worsened by technology. While income inequality is not rising, on average, as I have mentioned, a significant proportion of the population is not captured by the standard social protection system. People who work part time or who have flexible work arrangements do not have adequate resources to take care of their children properly. This is an issue in Europe, even though many European countries have relatively expensive social protection systems. These systems are not ready for the future.