Competition between schools combined with test-based accountability to hold schools accountable for predetermined knowledge standards have become a common solution in educational change efforts to improve the performance of educational systems around the world. This is happening as family and community social capital declines in most parts of developed world. Increased competition and individualism are not necessarily beneficial to creating social capital in schools and their communities. This article argues that: (1) the evidence remains controversial that test-based accountability policies improve the quality and efficiency of public education; (2) the current practice of determining educational performance by using primarily standardized knowledge tests as the main means of accountability is not a necessary condition for much needed educational improvement; and (3) there is growing evidence that increased high-stakes testing is restricting students' conceptual learning, engaging in creative action and understanding innovation, all of which are essential elements of contemporary schooling in a knowledge society. Finland is used as an example to suggest that educational change should rather contribute to increasing networking and social capital in schools and in their communities through building trust and strengthening collective responsibilities within and between schools. This would create better prospects of worthwhile lifelong learning in and out of schools. Based on this analysis, the article concludes that education policies should be directed at promoting more intelligent forms of accountability to meet external accountability demands and to encourage cooperation rather than competition among students, teachers and schools.