UK business appears to have an insatiable appetite for employees brandishing MBAs, but when the going gets tough it might find that such qualifications really aren't worth the paper they are written on. Alan Shipman reports.

George W. Bush, America's first MBA president, may have landed himself a job and a half, but the latest graduates to emerge from US business schools are less fortunate. In what Business Week calls "one of the worst MBA job markets ever", less than one-third have found work, despite a more than 10 per cent drop in starting salaries. Those still struggling to pay annual course fees of up to $50,000 (?32,000) will find scant reassurance in latest research by management professors Jeffrey Pfeffer and Christina Fong. They find no firm evidence that those who stay the course manage better or earn more in the long run.

UK business schools seem in substantially better shape, and not just because economic slowdown has yet to hit the graduate labour market. While demand for homegrown MBAs continues to rise, any downturn in this core product is shielded by diversification into research, undergraduate and doctoral degrees, shorter courses for practising managers, and consultancy. Business and management have won the fight for "market share" of Britain's students, with one in eight now enrolled in more than 7,000 degree and 1,000 postgraduate courses, according to the Association of Business Schools.

Having defied a generally gloomy academic climate at home - often by capturing students and staff from shrinking social sciences and engineering departments - UK business schools are advancing internationally. Eight have entered the world's top 50 in the latest Financial Times rankings, with the London Business School number four in Business Week 's top ten. The executive education boom has forced even Oxbridge to renounce longheld resistance to management studies and prompted the London School of Economics to draw up plans for a doorstep rival to the London Business School.

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But, like the dotcom ventures that crammed their casebooks in 2000 and abruptly vanished in 2001, business schools' pride risks preceding a fall - into the kinds of traps that their own strategy briefings make all too familiar. Success rates for their premium products - total quality, knowledge management, process re-engineering, culture change, emotional intelligence and performance pay - remain so low that any regulator might by now be probing mis-selling accusations.

Sometimes the failure is catastrophic, as when Nick Leeson's rogue trades went unsupervised under Barings' "matrix management" and Marconi ditched profitable "old economy" assets for a bet on booming telecoms. More often it is death by a thousand hasty masterplan adjustments as erstwhile curriculum-fodder from Reuters to Equitable Life watches profits slide - their downward path strewn with contradictory urgings towards focus and diversity, leanness and agility, creativity and consistency, core competence and outsourcing everything that moves.

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Underlying these customer frustrations is business schools' appetite for grand managerial visions in growing isolation from the marketplace reality. Pursuing "excellence" for a tiny top rank, while thousands below are denied basic technical and vocational skills, maintains a long UK tradition of overeducating an elite that then has to troubleshoot for an undertrained general workforce. Management centres have never had much incentive to tackle the UK's low-skills culture. It is precisely because graduates so often feel wasted, stooping to fill gaps left by fast-disappearing craft skills, that increasing numbers seek to restore their status - and keep their hands clean - with a newly minted MBA.

So while its business schools boast of rivalling the world's best, Britain's productivity deficit with Western Europe and North America remains as wide as when management first styled itself a "science". The country's ability to invest in complementary public infrastructures, through well-run state agencies, is equally inferior if the push for private partnerships is anything to go by. Likely causes - adversarial industrial relations, high long-term capital costs, absentee owner-driven concern for immediate financial returns, persistent neglect of public investment - remain largely unaddressed, not least because they are not what business-school bosses believe their sponsors want to hear.

The resultant widening wealth gap between the UK and its main competitors reinforces the skewing of learning opportunities. Hence the rush to implement Lord Dearing's scheme for cheap expansion of higher education and equally quick burial of Baroness Kennedy's call for further education to be similarly resourced.

Even as they urge executives to roll up their sleeves and stroll the shopfloor, most business schools have followed the London Business School's example in fleeing the central business district for the landscaped ivory tower. Detachment may be vital for acquiring fresh perspectives but there are dangers in failing to practise the customer-centrism they preach. Academic business research has become a conversation among professional students of management, whose subjects are neither encouraged to participate nor empowered to listen in.

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Few practitioners have the technical preparation to tackle a typical Academy of Management Review or Journal of Marketing Research article. Even fewer can spare the time, relying on pared-down newsletters such as Bulletpoint to decode the jargon and distil the essential statistics.

Big businesses' (and MBA chasers') current discomforts hardly alarm the business schools' rising academic stars. Typical of these are Cambridge's Noreena Hertz, whose Silent Takeover condemns multinationals for subverting democracy and poisoning the planet; London's Laura Tyson, whose early work on building high-tech through "strategic" trade has helped legitimise politicians' protectionist instincts on both sides of the Atlantic; and Hertford's Geoff Hodgson, whose original call to arms was for a "democratic economy", where managers would have plenty of time to polish their credentials, the staff having stripped them of decision-making power.

The UK's financial sector has survived for centuries in splendid isolation from its "real" economy, unaffected by relative industrial decline. Its management educators and researchers, while tapping the City for custom and sponsorship, may find it harder to sidestep their subject matter's suffering in the same way.

With management consultancy, advertising, direct marketing and other business services mired in their worst recession for two decades, business schools have yet to prove they are more than an embellishment of the long boom and the new technology bubble. Should they fail, the class of 2002 could soon discover how fast a de luxe MBA can depreciate in a market still questioning the quality of its basic GCSEs.

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Alan Shipman is a freelance economist and author of The Globalization Myth (Icon Books).