The Institute of Directors said decades of the policies had produced a generation of unemployable graduates and school leavers who could not read, write or cope with basic maths.
They were the result of the belief that it was unfair for the cleverest to succeed; of trendy teaching methods; and of exams so easy that no one could fail.
In a report based on a survey of members, the institute condemned politicians of all parties for turning a "politically correct" blind eye while academic standards fell. It called for the clock to be turned back - to revive grammar schools, written exams, emphasis on the three-Rs and elite higher education - before Britain fell irrecoverably behind its economic competitors.
The IoD's complaint drew a furious response from teachers' leaders. Nigel de Gruchy, general secretary of the National Association of Schoolmasters Union of Women Teachers, attacked "boardroom fat cats who have taken profits from the same tax cuts that have starved schools of money".
He said that the changes in courses which employers were now condemning - more practical skills and less formal academic education - were exactly what they had demanded 20 years ago.Reuse content