Four Reasons to Enroll in Your M.B.A. Program Now: Matthew Lynn

Commentary by Matthew Lynn

Oct. 28 (Bloomberg) -- The credit crunch is already reshaping lives and forcing people to plan new careers.

In both the U.S. and the U.K., the two big countries most affected by the financial-market turmoil, more and more people are signing up to do a master's in business administration.

The days when arts graduates made good money doing public relations for hedge funds are over. There won't be so many jobs for lightly qualified bankers or private-equity executives as there have been in the past five years.

The times are getting serious, and anyone who wants to prosper within a much tougher global economy will have to get serious as well.

A few years ago, it was possible to argue that the M.B.A., long regarded as the gold standard of business education, was in decline. The McLean, Virginia-based Graduate Management Admission Council tracks business schools around the world, monitoring the number of students applying for the course. By 2004, it was reporting a drop in applications to business schools.

Fast-forward to 2008, and that has turned around as bankers lose their jobs.

The Council in August reported that M.B.A. applications were rising at the fastest pace in history. According to the Application Trends Survey of full-time programs, 77 percent of business schools had an increased number of applications in 2008, the highest rate in five years. That compared with 64 percent a year earlier. Part-time and executive M.B.A. programs also had higher numbers. The survey covered 521 graduate management programs in the U.S., Europe and other parts of the world.

European Demand

There are signs of a similar trend in the U.K.

``Demand from home and European Union students for business and management courses is up, particularly M.B.A. courses,'' says Vicky Robinson, the head of marketing communications at the Association of Business Schools in London.

So what's going on?

``Going to business school is one of the best ways to improve your marketability and expand your options anytime -- but especially in this challenging economic climate,'' David Wilson, president of GMAC, said in a statement on the latest survey.

Business education is booming for several reasons.

First, people are rightly nervous about the future. They are brushing up their qualifications in preparation for a far more competitive global labor market.

Business Schools Benefit

``Evidence from previous recessions shows us that business schools and universities tend to benefit as people undertake courses to ride out the recession and improve their own CVs,'' Robinson says.

Two, if you get fired, the M.B.A. is going to help you find a new job. The GMAC survey found that three months before graduation, 57 percent of M.B.A. students already had employment, the highest rate since 2001. In a tougher job market, early offers will be even more of a bonus than in the past.

Three, studying just got cheaper, not in real terms, but compared with what else you could be doing. In a bubble economy, it makes sense to be working because you can earn a lot of money. Students, meanwhile, make nothing and they have to pay for the course. In a recession, that equation is reversed. If you weren't going to be earning much anyway, it's better to study instead.

Four, the global economy is now experiencing an earthquake that needs to be analyzed by business schools. It might be a decade or more before we fully comprehend the credit crunch, just as it took a long time to grasp the reasons for the Great Depression of the 1930s (and maybe we haven't got there yet).

Inverse Relationship

One thing is clear: The world is a lot more interconnected than it has ever been. A mortgage turns sour in Ohio, and six months later the Hungarian forint collapses. Anyone running a business in the next decade will need a deep understanding of how all the connections in the global economy hook up -- the kind of thing they should be learning at business school.

There is an inverse relationship between the M.B.A. and the real economy. In 2004, applications were waning while the economy was about to boom. Last year, the student numbers started to rise, just as the global economy was about to fall off a cliff. As they would say in the classroom, it's a contra-indicator. Perhaps they should put that in the curriculum.

(Matthew Lynn is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net.