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Tuesday, July 26, 2011

Creation Ex Nihilo

Marx famously thought that capitalism was the engine which drove the creation of class differences in society. Simply spread out the capital, he said, and the class differences would disappear.

Now, Marx was a raving lunatic, a man who never held a job in his life. He was a man who was, in fact, incapable of holding a job. His wife and whose wife and children nearly starved to death because of his incredible incompetence. But, as historians like to point out, personal peccadilloes really aren't relevant to the importance of a man's insights.

This is why no one listens to historians anymore.

In any case, as Lincoln might have said, but didn't, for the last forty years American government has been engaged in a great civil war, testing whether this economy, or any economy conceived on socialism can long endure. That is to say, it has been trying as hard as it can to "spread the wealth around a little bit", become Robin Hood, take from the rich and give to the poor, spend other people's money because they can't be trusted with it, etc.

As part of this important and selfless work, the government takes tax money and loans it to students so they can go to college. The selflessness of this generosity is enough to make one weep.

Unfortunately, as commentators are beginning to realize, the inherent generosity of an essentially socialistic program has actually helped to create the very classes that socialism is supposed to destroy.
...the tuition-scholarship relationship to the higher-versus-lower-school choice constitutes an allocation matrix that uniformly funnels wealthy applicants to the higher school, securing the attendant advantages, while people with less financial means divide between higher and lower. Multiply this out by tens of thousands of like decisions each year and the effect is large. The pricing structure of law schools thereby helps the wealthy in America further consolidate their grip on elite legal positions.
And, of course, tuition has been sky-rocketing precisely because federal aid is so ubiquitous. Indeed, the increase in college tuition tracks precisely with the increase in available federal college aid. These two numbers have tracked identically together for the last thirty-five years.

Now, this increase in federal aid has come at no small cost to the United States. In the last three years, the increase in aid has contributed no less than $504 billion to the US national debt. And that's just the last three years.

Worse, the increase in federal aid doesn't just create the very class differences that the program is meant to eradicate, it adds injury to insult. Because those student loans cannot be avoided apart from avoiding college entirely, nor can they be gotten rid of through normal relief mechanisms (e.g., Chapter 11), they constitute an enormous additional tax burden on the aspiring graduate.

To sum up: the federal college student loan program artificially raises college tuitions. Because of the radically increased tuition, poor students cannot possibly work enough to make up the tuition cost of a high-ranking school on their own. The enormous cost difference between the tuition of a "high-ranking" school versus a "low-ranking" school stratifies society into different educational classes based on wealth.

Those who take out the loans necessary to avoid being forced into a lower social class will now be TAXED AT A PREMIUM for daring to attempt to enter the upper class.

America, the society famous for having virtually no permanent social classes, has now got a government which creates permanent social classes out of nothing.

Well, that's not entirely true.

Those permanent social classes are created out of your tax dollars.

The government is now in the business of creating a class system, and the people who run the government are, of course, the upper class.


scotju said...

"This is why nobody listens to historians anymore." Not all historians ignore the connection between personal peccadilloes and a man's "insights". Paul Johnson in "Intellectals" and E Michael Jones in "Degenerate Moderns" both draw a clear line to both. Jones, IMHO, says it best, when he says, modernity is nothing but rationalized sexual misbehaviour.

Patrick said...

I was just reading a study that found that a modern day masters degree is becoming the equivalent to a bachelor degree from 10 years ago in percentages of the working population due to students staying in school longer because they can't find jobs. If the current trend continues, a PhD or equivalent will become so devalued in less than 5 years that it will be less than half its salary value of a decade ago. If it becomes true that a total of 20+ years in schools becomes nearly meaningless in salary value, the entire educational system will eventually collapse on itself. The government needs to re-think its current strategy on investing in education at the same time as unemployment grows.

Kevin said...

Adam Smith was a champion of public investment in education. True story. yet I think he would probably want to re-think that old idea, or at least seriously reform it.

As has been pointed out, the costs have skyrocketed. In direct corrolation with that increase in cost, has been a dramatic decrese in quality.

It isn't just as Patrick points out how common (and near worthless) degrees are becoming. It's why. The quality of the education has declined precipitously. Having a degree in gender studies or comparitive religions isn't really going to help people advance in the real world.

If we are going to have a welfare state, I hate to say it, but we could learn from FDR. he designed most entitlement programs to deny federal funds to unwed mothers for example. If we have to subsidize education, the federal government should start saying you have to go into this or that program.

I'd just as soon get the government out of it, but right now I'm not sure how practical that is. So this would be a meaningful first start.

Right now we have a situation where the price of something increases, and the value decreases. In lay economic terms, a bubble. Eventually the bubble bursts.

Then what do we do? at least with the housing crisis, people defaulted. You can't with student loans.

Good post Steve, and interesting questions all around.

Steve Kellmeyer said...

Well, one of the reasons you can't default on a student loan is there is no equity that can be seized and sold to pay the debt if you do.

Default on a house loan, at least the house can be seized and sold at auction. But education? How do you seize the contents of their minds?