(Editor’s note: What follows is the edited text of a speech given at an Arizona charter schools event on May 17 by Craig Barrett, who retired as chairman of Intel Corp. three days later.)

This will be my last speech as chairman of Intel, and I want to do three things tonight: (1) put education into the international context; (2) look at data and see if we are making progress; and (3) offer five suggestions to honestly improve American education.

At the outset, let’s contrast U.S. college education with U.S. K-12 education. America has a bi-modal system–we are generally regarded as having the best university system in the world, and we are generally regarded as having one of the poorer K-12 education systems in the world.

How do we explain this dichotomy? It’s simple: The university system competes–for faculty, for students, for research contracts, for everything. In K-12, there is no competition, for anything.
The difference in outcomes between those two approaches: simply dramatic.

I discovered a long time ago that the ultimate source of knowledge is Chinese fortune cookies, and my favorite one says, “If you want to win, you have to choose to compete.”

You all know the huge transformation the world has seen in the last decade or so. India, China, Russia, Eastern Europe, the Middle East, and Latin America have all entered the global free market economic system. In rough terms, 3 billion new capitalists came into the world’s free market economy in a span of about 10 years.

To compete and win in this now much more intensely competitive world, there are only three levers a country can pull to improve its position: smart people, smart ideas, and smart governmental policies.

Smart people. Every economic correlation you see–per capita income, gross domestic product, whatever you look at–is in direct proportion to the education of a nation’s citizens. If you don’t have a well-educated population, you cannot add value to what you do, and you cannot be globally competitive. Your economy will decline. Period.

Smart ideas. That’s a short way of saying you must invest in research and development. You must invest in innovation. You must invest in creativity. If you are going to add value to what you do for a living, you need to invest capital to add that value.

Smart policies. What is the right environment to invest in innovation? It includes important things like intellectual property protection, attractive corporate tax rates, a trustworthy judicial system, and a minimum of government bureaucracy.

Smart policies will accelerate new venture creation. They let smart people get together with smart ideas to do something wonderful, to start great new corporations, to add value to what they do, build the economy, build the wealth, build the gross domestic product, build the per capita income. This is what everybody in the world is striving to do today.

I travel to about 30 countries a year, talking to business leaders, government leaders, and education leaders–and everybody is talking about the same thing: how to stimulate growth … with the exception of one country.

You got it–America! We are talking about many other things, but not how to improve the standard of living for future generations.

An intellectual decline

Tonight, of the three levers, I am only going to talk about smart people. Fundamentally, if you do not have smart people, the other two levers don’t make any difference. You need smart people to be able to do great things.

Let’s look at college education. Because smart people are important, college education should be important, and a country should be focusing on graduating more of its people from college.

In the past few decades, the United States has gone from being No. 1–having the highest percentage of our population with a college education–to now 13th or 14th place in the world.

Guess what? You fall behind in this category, you fall behind in smart people, and you fall behind in the ability to add value to what you do. And how do you justify the highest standard of living in the world if you cannot add value? It doesn’t work.

Another important metric is what fraction of our students graduate from high school. On average, 30 percent of the young people in America do not even get a high school diploma–the dark secret of American education.

Our workforce is constrained by the fact that 30 percent of our adults do not get a high school diploma. I’m not arguing about the quality or the value of a high school diploma. I’m just saying, whether a high school education is valuable or not, 30 percent of our children never get there.

So, we have 30 percent of our workforce without even a high school diploma. At the same time, we see the rest of the world increasing the fraction of its workforce with a college education. This isn’t good news for Americans.

If you start to look at internationally benchmarked tests that measure the performance of U.S. students versus those of other countries, out of 30 industrialized countries we rank 25th in mathematics; in science, 21st; in reading, 15th; and in problem solving, 24th.

For a country that wants to maintain the highest standard of living, wants to be the most entrepreneurial country in the world, and wants to add value to everything it does, being ranked academically in the lower quintile compared with other developed countries just doesn’t work. Our position in the world is unsustainable–we don’t have enough smart people anymore, comparatively. It is a prescription for decline.

You would think that these data would make headlines in the daily newspapers. But in America, our intellectual and academic decline is a non-event.

Are we crazy?

Let’s look at the international data in more detail. Let’s look at our students’ reading and math scores from the early 1970s to 2008.

In reading, our kids scored 285 in 1971 and they scored 286 in 2008. That is nearly 40 years of flat performance, while competition around the world is increasing.

In mathematics, our kids scored 304 in 1973 and 304 in 2008–absolutely flat for the last 35 years.  And on an international scale, our ranking is in the bottom 25 percent of industrialized cuntries.

Looking at our own internal performance improvement over the last 35 years, you see exactly zero on average. I would think this would generate some comment from the press. Let’s put this in the context of what we are seeing today.

We have an investment banking meltdown, and hundreds of billions of dollars are thrown at the investment banks. An automobile company meltdown, and tens of billions of dollars are thrown at those almost overnight. The head of GM was fired, and total restructuring of two major industries in the United States occurred, on the basis of short-term results–and here we have 35 years of stagnation in education and not a whimper. It’s not a crisis; it is readily accepted by the press … readily accepted by the institution that creates it … and readily accepted by the population of the United States. Are we just crazy?

We have had quite a few studies on this topic. “A Nation at Risk” in the early 80s said our educational system was subpar, and we had to do something. That was the study that said if another nation wanted to destroy the U.S., it would do what we are doing to ourselves with our K-12 educational system.

In the early 1990s our governors met at the National Governor’s Association and said our math and science performance was subpar, and they made a pledge: Within 10 years, our kids would be at the top of the world in math and science performance. That was about 15 years ago.

“Before It’s Too Late.” That was the title of a report from the Glenn Commission, which met in the late 90s and issued its report in 2000. Regarding K-12 math and science, the report basically said, “We’re in big trouble; we ought to do something.”

“Rising Above the Gathering Storm,” a 2005 report from the National Academy of Sciences, reached the same conclusion: “K-12 education is in real trouble; we ought to do something.”

And “Ensuring U.S. Students Receive a World Class Education,” from the National Governor’s Association in 2008, made the same point as well.

So, America has had 30-plus years of high-quality reports, all saying the same thing: K-12 education is in serious trouble. Yet nobody has done a thing. The system has not done a thing. Our children are where they were nearly 40 years ago–with flat results and declining abilities relative to an increasingly competitive world.

No more excuses

So, what did these reports say? It’s no big secret: Your education system is only as good as the quality of the teachers in it. Makes sense, right?

Another conclusion from these reports is: If you don’t have high expectations, you get nowhere.  Sounds logical, no?

So you need good teachers, and you need high expectations, and what else do you need?

You need a little tension. What is tension? It comes from the feedback loops and performance metrics you have in place. If kids, teachers, or schools have problems, then you need feedback loops to help them. If teachers do a good job, you reward them. It’s like any other business on the face of the earth. You need a little tension to spur performance.

Unfortunately, America has become No. 1 in the world at one thing–making excuses for failure. Everybody has an excuse; everybody has to study the problem.

Before I came down here tonight, I wondered how many references there were in Google to educational reform. There were 22 million entries. Twenty-two million excuses out there for why American kids’ intellectual performance is flat over 40 years and declining relative to the rest of the world.

So here are my suggestions. No more excuses; the answer is simple: Put good teachers, high expectations, and a little tension into the system.
Good teachers

How do you get good teachers?

If you go to Finland or Singapore or Taiwan, any place that has a good K-12 education system, where do they recruit their teachers? They recruit them from the top 10 percent or 20 percent of the college graduates.

Where do we recruit our teachers? We recruit them from schools of education. Objectively, schools of education represent the lower quartile of our college graduates in intellectual capability.

I care less about the pedagogy of teaching than I do about the content they are going to bring into the classroom. This is what makes education successful: teachers who are content experts, first and foremost; that’s what makes them successful in the classroom. They are not education experts, first and foremost.
Teach for America is another way. Teach for America is a simple program, put in place to recruit top college seniors who are not education majors to commit a couple of years to teaching in poor economic areas in the United States.

Teach For America takes academic achievers–the top 10 percent to 20 percent in history, math, chemistry, physics, biology, English; kids with top grades from great universities–and in six weeks of boot camp turns them into very good teachers.

Here’s a suggestion: Maybe we should blow up all undergraduate schools of education in the United States and start over.

High expectations

Why does every state have its own measure of success when we are competing in an international marketplace? Why not have a national testing program we will use to measure progress?

Of course, if you talk about national testing in the United States, it’s a difficult conversation.  Republicans refuse to recognize the word “national”; Democrats refuse to recognize the word “testing.”

You cannot have a discussion of national testing in the United States. OK, so disguise it, call it “international benchmarking.” And doesn’t it make sense that if we want to compete with the rest of the world, we measure our educational performance on an internationally benchmarked test comparing our students to kids in every other country?

Olympic swimmer Michael Phelps does not say, “I am from the United States; I can swim slower and win.” In the business world, we do not say, “We are from Intel; we can make a crummier product and win.” But from an educational standpoint, we say, “We can set lower achievement standards and be OK.” It’s plain crazy.

Pay for performance

What could be more obvious: Put tension in the system, and pay for performance. I don’t know of any other business in the world where if you put forward a higher quality effort than your peers, you do not get rewarded for it…or quit.

We know there is no correlation between a high-quality education and anything other than a high-quality teacher. We can be like California and legislate smaller class sizes at a higher cost to taxpayers with no increase in quality, or we can do the opposite, which says higher quality teachers can have larger class sizes and still get great results…and also get paid more, because they have more students. The improvement pays for itself.

But until the system decides to pay for performance, why would anyone want to bust his or her butt to do a good job? There is always self-motivation, self-drive, and personal integrity–but eventually most people would say, “I am working hard, and that guy over there is not working at all, yet we are getting paid the same.” I tell you, that does not work in my business. It does not work in any business that I know of, other than the U.S. education system. Maybe Detroit, too, but…

Real incentive

I also think we need a stick in this country to get kids to finish high school. We have mandatory school attendance until age 18. That doesn’t seem to work very well, if 30 percent of students are dropping out. But if you think about it for a minute, what is it that would really drive kids to get a high school diploma?

How about this for motivation: To keep a driver’s license, you must either be in school or have earned a high school diploma. Let’s tell students we’re serious, and let’s tell them there are some ramifications–immediate ramifications, not long-term earning potential. You want a driver’s license, you either stay in school or graduate with a high school diploma, period. I can’t wait until I hear from the ACLU.

More competition

We need more charter schools, more alternatives to the public school system, and more competition to the public school system.

The most visible alternative education program in the U.S. was just killed: the scholarship program for the 200 or so students in Washington, D.C., who were given the chance to leave arguably the worst public school system in the U.S., which spends $14,000 a year to educate each kid. Given $7,500 scholarships to attend private schools, those kids are now ahead of their public school peers. Why did it get killed in the stimulus package?

We all know why it got killed…a political debt to a powerful constituent.

Even though our president and our secretary of education say, “Nothing will get in the way of giving kids a good education,” the first official act of the current administration was to kill the most visible alternative education program in the U.S., which was successful and saving money.

Political will comes in a variety of categories. It really helps if you have the president and the secretary of education on your side–not only saying the right words, but doing something. President Obama and Secretary Duncan are saying the right words, but their one and only act so far has been contrary to their words.

We need political will in the administration, but we also need political will among the 50 governors and their chief education officers. We need political will among the presidents of every U.S. college and university.

Most importantly, we need the will of the American people. We need the will of the American people to say, “Hey, there are only three things we can do to compete with the rest of the world–and one of them is to improve our educational system.”

The average American kid is sub-standard, performing below the average level of most other developed countries. How we–as the biggest economic power, with one of the highest standards of living in the world–can tolerate that is absolutely beyond me.