Monday, October 06, 2014

Where did the money go for college?

I see in the news that Germany has scrapped tuition for college. I always thought that Germans paid significant fees for university education like we do here in the US. But it turns out that free education has been a part of Germany culture for centuries. By keeping higher education free, Germans have created an equal opportunity economy. Anyone who wanted to get a degree could get one provided that they work through the classes to get it.

In England, there is rising opposition to the neoliberal fantasy of a market based education system. That fantasy created a paradox: the people who could most afford the opportunity got one, but the people who could not, did not. As fewer people could afford a higher education, the fees grew to accommodate a shrinking market of wealthy students.

For much of the last century, American higher education had been either free or very low cost. As fees rose in response to the demands of the upper class, fewer people could afford to go to college. Fewer people were afforded the opportunities that a degree provides, and so, were not able to afford a seat at the table. As Elizabeth Warren has so famously pointed out, "If you don't have a seat at the table, you're probably on the menu."

The neoliberal fantasy is based entirely on the premise of competition. That depends on how you define what it means to compete. The original definition of competition is:
 "compete - Comes from Latin competere, "come together," but in later Latin, it developed the sense "strive together," which was the basis for the English term.
"To strive together". I like that. However, as I look at the history of American business, I see that the objective of many businesses is to eliminate competition altogether. Microsoft offers an instructive example. Microsoft has pursued victory over other competitors at any cost. They have been willing to lie, cheat and steal ideas, to lobby for the use of government force against competitive threats and have been largely successful in doing so. Since the 1980s, Microsoft has been able to defeat nearly every competitor except one: Linux, the free operating system. If Microsoft were in a baseball league, by the end of the season, there would be only one other team left, Linux.

I have wondered how we got here, with so many people unable to afford an education. There are several factors that I can see. The commercialization of college sports is a big one. In public education, the football coach is often the highest paid employee in the state. College sports are a huge source of revenue for colleges.

The next factor to consider is the slow erosion of public funding for colleges. Neoliberalism has taken root in many of our legislatures, with conservatives urging us to cut funding since we can't afford to fund public education any longer. Well, if you take away a free education, fewer people get degrees, creating more people who earn less money than before, paying less in taxes than before. Suddenly, finding ways to make money from sports seems like a reasonable idea.

The final driver I see in the trend of the last 40 years is Wall Street. Think about it. There aren't many of them relative to the size of our country, but there are people who have managed to save money for college for their kids. They keep that money in a retirement account. Since interest rates are so low now, it makes sense for them to invest the money. Wall Street just loves this trend! Trading fees are piling up as middle class investors, trying to build a nice tidy sum for their kids to go to college, are making trades on stocks to do so. The average investor lacks the sophistication and insider information that Wall Street has. So for many of them, their 401ks go sideways, building slowly, but not as well as an interest paying savings accounts, CDs and bonds used to pay.

Germany understands something that most Americans, particularly conservative Americans, don't quite fully comprehend. Maintaining a system of free education creates the soil needed for businesses to grow. On one hand, free higher education creates the educated and skilled workforce that businesses need to compete with the rest of the world in this globalized economy. Yes, they are more expensive, but because they've been to college, those educated employees have made most of their mistakes there, in college. Having made their mistakes in the computer lab or machine shop, these educated employees have a steady hand when they find their way to the office to work.

On the other hand, those same educated employees have degrees that can fetch more money, money that can be spent to support the growth of our economy. For the last 30 years, wage growth, adjusted for inflation has been stagnant or negative. If more people went to college, they would be more aware of such a trend and would take measures to reverse that trend so that the economy can grow again.

It is a fantasy to think that a small group of wealthy billionaires and millionaires are going to spend more money simply because they have more money to spend. You don't get rich spending money, you get rich investing your money wisely.

Germany is setting an example that we could learn from. Not only do they have some of the best universities in the world, those universities will be free by the end of this school year, as they were before, for centuries. Germany is a net exporter, even with a strong currency. Why? Because their educated workforce doesn't try to compete with the bottom of the barrel, high volume, low quality manufacturing competitor. Rather, they work on the high end, high precision products that are in demand around the world.

In America, we've spent the last 40 years creating a market-based education system, starving our schools of the funding needed to keep tuition low or even free. This has reduced the opportunities for our kids to get a seat at the table. Where are they headed now? To be on the menu for Wall Street executives. Maybe now is the time to divert them to a free higher education system.
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