Historical Context: Investing in Education, In Spite of Economic Woes

We have seen the importance of education time and time again: from preventing polarization in politics and combating the over reliance on authority figures whom we deem infallible through the Halo Effect, to improving political engagement and increasing the lifespan of the educated.  However, in today's world with soaring tuition costs it can be difficult for many people to accept the insurmountable burden that obtaining a college degree can place on a family; especially when it's no golden ticket to employment after graduation.

Add to this the fact that we exist, in a world where congressmen believe that wind is a finite resource, homeopathic remedies are touted on a daily basis in lieu of medicine, and junk science has become an international export - can we really afford to have a polarized political environment that's too busy fighting over the existence of evolution (in the House Committee of Science no less) to enact meaningful change? If increasing education reduces the number of believers in an absurd theory (e.g. astrology), even without specifically addressing that theory - then an increased number of educated members in our society leads to a healthier, more engaged, and less susceptible to junk science populace.

So when graduating seniors are faced with the inability to go to college without taking on an unsustainable amount of debt, it affects the country in far more ways than just the job market. In fact, as the former Secretary of Labor, Robert Reich, points out it may start a self-fulfilling prophecy where an underemployed workforce hurts the economy, which affects tax revenue, which drives down government programs.  A lack of government programs drives up tuition in schools and drives down political engagement, polarizes the political spectrum, and causes future generations to be underemployed as well. 

These slides came from the documentary Inequality For All, and while the documentary is an awesome introduction to the problem of wealth inequality, it doesn't capture the entire historical context that has led to our current political situation.  For example, End of the Road discusses the shadow banking scheme on which our economy is actually built; and both documentaries discuss how the rise in globalization has created a global economy in which the entire house of cards has been built - to the detriment of the American middle class.  The gist of the shadow banking scheme can be summarized in this YouTube video:

Granted, even with the lessened economic (and by extension, political) power of the American middle class, we still have it pretty good compared to the emerging powers of countries like India and China which are expected to become the world economic superpowers by 2050.  However, while our comparative edge economically might be shrinking, the global economy isn't - the crunch that America has been feeling can only have a small minority of it attributed to globalization.  The benefits of globalization have far outweighed the negatives for the American people and has brought numerous countries into the twenty first century.  As a result, it been characterized as the "single greatest transfer of wealth in history."

Fun fact: Globalization was only made possible through the United States Military because of the invention of the Internet and the stabilization of the South China Sea.

Arguably, a larger culprit in the middle class crunch would have been the rise in technology, but technophobes tend to forget that the economic crunch started in the late seventies when families needed to have dual incomes to maintain their standard of living; and the crunch came again in the late nineties when families started borrowing against homes and increasing their debt. Technology to replace large amounts of workers didn't start until the early 2000s (manufacturing not withstanding). However, technophobes are right to be worried as technology is quickly eliminating jobs (of all collar shades) at an alarming rate.

That robots, automation, and software can replace people might seem obvious to anyone who’s worked in automotive manufacturing or as a travel agent. But Brynjolfsson and McAfee’s claim is more troubling and controversial. They believe that rapid technological change has been destroying jobs faster than it is creating them, contributing to the stagnation of median income and the growth of inequality in the United States. And, they suspect, something similar is happening in other technologically advanced countries.

While this leads to a whole mess of economic and social issues for the generation that does find itself "jobless," the current generations have to navigate an job market unlike that of their fathers'.  A market with a gender-equal (one day soon, hopefully), globalized, and technologically advanced climate.  However, even with this job market being as hyper-competitive as it is, unemployment is still holding at a pretty steady trend of about seven percent except following an economic recession.

So if recessions happen before unemployment spikes (rather than after), it follows that the largest driver of employment is the economic climate, not the other way around.  This is an important distinction because many proponents of "trickle down economics" would argue that when middle class workers are unemployed, recessions occur. However, the data clearly shows that recessions occur before spikes in unemployment; so something else must be causing the recession.

Maybe it's being underemployed or underpaid.  After all, the main argument of trickle down economics is that the rich create jobs, which employ the middle class, who then purchase products, which then create jobs.  Except for when the rich create jobs, which employ the middle class at low wages, who then can't purchase products, which cuts jobs.  This downward spiral of economics is known to Reich as the "Vicious Cycle."  Reich goes into a lot of detail about how/why the rich get away with creating lower paying jobs in his documentary, so I recommend giving it a watch; but for brevity we'll brush that discussion under the proverbial rug.


And you'll notice that education has a step in that cycle.  As tax revenues decrease, so too do government investments (subsidies) in education, which raises tuition costs to the point that students must enter unsustainable debt to attend college; and a college degree is a requirement to avoid ending up in one of those underpaid jobs.  

Where fathers spent the last decade underwater on mortgage payments to fight the erosion of the middle class buying power, sons and daughters are fighting against student loan debt in an attempt to reclaim that power.  And all the while we're blaming institutions for high tuition rates, when we fail to consider that while the college bubble is living pretty happy at our expense, the larger driving factor for tuition hikes may be simple supply and demand where a lack of government subsidies cuts demand in a way as to make it lag behind the unbelievable demand.

Understandably this is pretty damning for the job market, but the social benefits of education need not disappear. While the primary benefit of education is generally the credential that enables better competition for work, the tangential benefits (political engagement, health, polarization) of education can maintain through the process of actually being educated.  The silver lining to this cloud may be that we're seeing multiple revolutionary shifts in the educational process where education is not only less standardized, but free.

Places like Stanford, Berkley, and MIT are releasing free courses (without the credential) to online participants every semester; and you can see a few of them over on LifeHacker.  I'm not optimistic that we'll shift from a credential-based to knowledge-based economy any time soon, but perhaps our generation can see a dramatic decrease in uneducated voting, polarized politics, and some of the ills of inequality as education becomes more accessible even as colleges become less.