The passing of Steve Jobs has focused my mind on something I haven’t thought about for a while: American capitalism is so vibrant, so creative, so much a creator of wealth and happiness, while higher education is far less so on all scores. Perhaps this explains why, when we tax capitalists and their suppliers (including employees) to support higher education, we actually often lower our nation’s output and, arguably, gross national happiness.
Starting 35 years or so ago out of a garage, Steve Jobs provided Americans with thousands of great jobs and created a lot of wealth, including $8 billion or so for himself and more than $300 billion more for countless shareholders. The stockholder gains Apple created roughly equal one year’s worth of spending on American higher education.
Apple rose to the top tier of American corporations based on market capitalization in little more than a generation. Yet Jobs was once fired from the company for so-so performance. Success came–but along with that came disappointments, risks, and sticks as well as carrots. Google, Intel, Facebook, Wal-Mart–America is replete with great companies that were essentially non-existent half a century ago and succeeded by building a better mousetrap or the equivalent–with enormous positive consequences. For example, I think Wal-Mart has done more to…
…help poor people than most federal poverty programs. As Adam Smith famously said in 1776, “by pursuing his own interest he [the capitalist] frequently promotes that of the society more effectually than when he really intends to promote it.”
Such stories of providing great pleasure to the public, such innovation, such risk-taking, are virtually non-existent in higher education, except in the vibrant for-profit sector. Tragically, we have a federal government that is hostile to the one part of higher education that has the same motivations that produced us creators of so much good, persons like Bill Gates and Steve Jobs (both college dropouts).
There is no question Apple’s “bottom line” has been highly favorable during most of Steve Jobs tenure, but high-flying companies one day may be casualties the next. Eastman Kodak and American Airlines were once big successes–but now teeter precariously close to bankruptcy. What Joseph Schumpeter called “creative destruction” is part of the reason for capitalism’s success.
But what about the bottom line for higher education? Probably the closest thing is reputation, as measured by college rankings. If college rankings existed, Harvard would have been at the top of them in 1711, 1811, 1911, as it is in 2011. It is insulated from failure by an obscenely large endowment and literally hundreds of millions in government research grants. The same is true for dozens of other top schools. This has all led to a lack of innovation, a complacency, a disdain for risk, and an insolence and contempt for the “real world” that is not healthy, either for higher education or for America.
America is now filled with jobless Americans–14,726,000 according to the latest employment report for September The two reasons, in my opinion, are simple: first, investors and consumers are afraid, scared to do the things that Steve Jobs did, including taking risks, investing heavily and innovating. Second, there are powerful incentives created by government to NOT work–such as 99 weeks of unemployment benefits, a major cause of the persistence of an unemployment rate over 9 percent.
The 1 DuPont Circle (Higher Education Establishment) version of the economy’s impact on higher education no doubt goes something like this: high unemployment creates a great opportunity for persons to obtain the job skills they need for economic advancement and job security. The reduction in government support for higher education makes it difficult for us to carry out this vital mission. The unemployment rate among college graduates is less than half of that of the general population. We therefore need to step up our investment in higher education to reduce unemployment and promote economic growth.
The alternative view, more in keeping with the lessons from the life of college dropout Steve Jobs, is this: unemployment is lower among college graduates in large part because college graduates are smarter, more disciplined and harder-working than those with lesser education, for reasons unrelated to their degree. Our nation’s precarious public finances mean we need to rely more on Steve Jobs-like approaches to higher education, with more innovation, more risk-taking, more private-sector involvement, fewer government subsidies (Apple’s “subsidies” are decidedly negative, given the huge amount of corporate income and other taxes they pay) and more productivity enhancement. We need more Apples and fewer high-cost institutions training relatively few college graduates who learn little.
In a policy sense, we need to stop harassing for-profit higher education with such things as 90/10 rules, state certification requirements, federally defined definitions of credit hours, “gainful employment” regulations, etc. In general, we need to reduce government involvement in higher education (something even the for-profit schools are probably uneasy with, given the reliance of their students on federal loan and grant funds). We need to let markets operate more in higher education as they work in computers and related information technology fields.
We need to level the playing field between participants, we need to radically change accreditation rules, etc. For example, why should for-profit schools pay taxes that go to subsidize their competitors? Why should accrediting organizations have the right to prevent new entrants into higher education unless there is a very large possibility that they are fraudulent? No one “accredits” Apple, the Mac, or the iPad. Is the quality of the iPad any less than that of, say, Slippery Rock State University or Chicago State because the iPad is not accredited but the latter schools are?
Steve Jobs’ passing reminds us of the strengths of human ingenuity and the effectiveness of market forces. Let’s bring more of both to higher education.