American Aristocracy
American Aristocracy
Part 5 of the American Economy series shows how the rising cost of college has left people less prepared for their career, created an out-of-touch credentialed class, and threatens the American Dream
Author’s note: after a brief detour in Ukraine, Ad Astra returns to the American Economy series
Don’t miss Part 1: Introduction
Part 2: Legacy of the Great Recession
Part 4: Welcome to the New Gilded Age (monopolies)
Tl;dr
· Higher education has often been a focal point of American politics, with the Land-Grant Morrill Act (1862) and the GI Bill (1944) being two notable examples
· The cost of college has increased by 1200% versus just 280% for everything else since 1980; there is also an oversupply of college graduates in the labor market
· This system has led to credentialism, the rise and fall of The Experts, widening inequality, and the death of the American Dream
· If not reformed, the current system risks creating an American Aristocracy
I’ve been very fortunate to see a wide range of the American Experience. Growing up in small-town Kansas, going to the University of Kansas for college was a culture shock. There, I learned dinner etiquette and took lessons on how to be a gentleman. After a brief stop in Houston (rodeos and oil), I moved to a working-class Wyoming community. There, I worked with some of the smartest, hardest working people I have encountered, many with only high school educations. Then, I went to Harvard for graduate school with some of the bluest blooded families in America, and the world. Finally, I worked in a west coast, tech-obsessed culture at an aerospace firm in Seattle.
Along the way, I have worked with everyone from Ivy League graduates to GED recipients. My conclusion is that educational pedigree is not correlated with grit and intelligence. In the third decade of the 21st century, there is so much free information on YouTube, podcasts, and the internet more broadly that anyone with the discipline and desire can become an expert in anything. College’s monopoly on education has been broken and as a society, we’re in the midst of adapting to that new paradigm.
History of Higher Education in America
Higher education has often been a central political issue in the US. The Morrill Land-Grant Act was passed by Congress in 1862[i] in the midst of the Civil War, granting universities land if they taught topics like agriculture and the “Mechanical Arts”. These were the STEM topics of the day that were in demand across a burgeoning US economy. Today, you might know these schools as the land-grant “State” schools like Kansas State and Texas A&M.[ii]
The GI Bill was passed in 1944 to give US soldiers returning home from WW2 a college education, on the federal government. As a result, almost 49 percent of college admissions in 1947 were veterans, many of these from the working-class. By 1956, almost 10 million veterans had received GI Bill benefits.[iii] This led to one of the largest economic booms in US history and radically lubricated social mobility.
Figure 1: US veteran returning home from WW2
Higher Education in America Today
As mentioned in the Introduction to this series, from 1980 until today, the cost of higher education has increased 1200% versus just 280% for consumer inflation.
Figure 2: The rising cost of US higher education
As a result, students are taking out more and more debt to cover rising costs. Outstanding student loans surpassed auto loans, credit card debt, and all other debt at nearly $2 trillion, and have increased significantly after the 2008 Great Recession.
Figure 3: Growth of student loan debt[iv]
The causes of this cost growth are multifaceted, but things like bloated administrative structures, unnecessary landscaping expenditures, and well-intentioned but inflationary government grants are partly to blame.
At the same time, the labor market is oversupplied with college graduates.
In the 1990s—which wasn’t all that long ago—only about a quarter of American men and 18% of American women completed four or more years of college. By 2021, it was 36.7% of men and 39.1% of women
Meanwhile, private sector membership in trade unions, which once won living wages and benefits for high school-educated workers, has collapsed from a third to around 6% of the private sector workforce—lower than it was under President Herbert Hoover, before the New Deal.
The increasing polarization of the American class system along educational lines, along with a massive oversupply of college graduates for too few jobs that actually require college degrees, breeds conformity and submission in undergraduates.[v]
The result of all this is a student debt crisis in America and a skills supply-demand mismatch in the labor market.
Consequence 1: Credentialism
The first negative social impact is the need for individuals to spend money on degrees or certificates to obtain jobs where those skills are unnecessary or can be learned on the job. In the worst cases, these credentials resemble a “pay to play” scheme that grant the laborer the license to operate in a given field. This can also lead to the frivolous pursuit of more credentials in the hope of career advancement. We all know that annoying coworker with an alphabet soup of letters after the name in their email signature (Joe Smith, MBA, PE, CPA, DO). If you don’t know what I’m talking about, it might be you.
Figure 4: Lessons in email etiquette
Consequence 2: The Rise and Fall of The Experts
Sometime in the twentieth century, we decided that specialists should run the economy and every major institution in America. This led to the rise of the Professional Managerial Class (PMC) that rules over a hollowed-out US class structure. The PMC has all the right degrees and went to all the right schools. The PMC’s kids, the Millennials, are often second-generation members of the PMC and are assuming the reins of the US economy as this is being written.
The PMC, exemplified as The Experts, have had a rough time as of late. Starting with the 2008 housing crisis, two disastrous foreign wars, a botched pandemic response, and most recently “transitory” inflation, they’ve gotten a lot of major things wrong. The derogatory use of the term “woke” to describe norms and language out-of-touch with normal people is a direct result of an oversupply of the PMC. The recent phenomenon of critics tastes spectacularly diverging from average audience members on Rotten Tomatoes is a microcosm of what’s happening in society more broadly.
Figure 5: The Revolt of the Public
Consequence 3: Inequality
It may be amusing to see what the PMC comes up with from time to time but the impact on society has been severe. The current system has gotten to the point where you have to have money to go to college, which means you have to have money to get a good job, creating a permanent aristocracy and underclass. The rich get richer and the poor get poorer. Inequality in the US is at levels last seen in the Roaring Twenties, before the Great Depression.
Figure 6: Inequality in the US[vi]
Consequence 4: The Death of the American Dream
One of the most powerful mythologies in American Life is The American Dream: the idea that if you work hard, you can be better off than your parents. That Dream is at risk in the current system of ever-rising higher education costs. The PMC’s kids have the resources and know how to navigate the system their parents created. Everyone else is locked out. Social mobility, as defined by earning more than your parents, has declined from over 90% for someone born in 1940 to 50% for someone born in 1985.
Figure 7: Death of the American Dream[vii]
American Aristocracy
In the eighteenth century, several gentlemen had the radical idea of separating from Europe. Among their grievances was a frustration with the frozen landed aristocracy that ruled Europe and repressed common people. While these Founding Fathers were very wealthy themselves, after a couple of generations the nation they created was ruled by farmers and shopkeepers, a truly radical proposition[viii].
Three centuries later, America is at-risk of becoming the continent it fled. If we don’t make changes, the PMC will become a frozen American Aristocracy.
Up Next
In the next installment of the US economy series, Ad Astra will explore the economic effects of the COVID-19 pandemic, before turning to solutions.
[i] https://www.archives.gov/milestone-documents/morrill-act
[ii] Sorber, Nathan M. Land-Grant Colleges and Popular Revolt: The Origins of the Morrill Act and the Reform of Higher Education. Cornell University Press, 2018.
[iii] https://www.history.com/topics/world-war-ii/gi-bill
[iv] NY Fed
[v] https://www.tabletmag.com/sections/news/articles/new-gatekeepers-woke-michael-lind
[vi] WSJ
[vii] Stanford Center on Poverty and Inequality
[viii] Wood, Gordon S. The Radicalism of the American Revolution. Vintage Books, 1993.