Here’s the Secret Ingredient to Success in Capitalism
“…if an equal proportion of people were educated at the public expence, the competition would soon be so great, as to sink very much their pecuniary reward.” Adam Smith, The Wealth of Nations, p. 151
An all-too-predictable headline blared from the front page of the Wall Street Journal recently, this one about education. Though the article was titled “India Graduates Millions, But Too Few Are Fit to Hire”, it would be easy to put the “U.S.” or some other country with a politically correct worship of the college degree where “India” is, and the story wouldn’t change much at all.
Much as politicians in Illinois long ago heard of the “correlation” between books in the house and intelligent children on the way to a state-run program to put books in underprivileged homes, the oft-cited correlation between a college degree and higher income has driven politicians on the left and right to make attending university a “right” to be enjoyed by everyone. That knowledge gained in college on its very best day has little to no relationship with the work individuals around the world perform once graduated has not deterred a mad political rush to make a college education as universal as healthcare.
Though politicians, educators and their media enablers would have us believe that the act of earning a college diploma makes short people tall, turns bad writers into Somerset Maugham, and the mathematically challenged into highly-paid engineers, reality is happily intruding. What’s going on in India is a good example.
As Geeta Anand reported in the Wall Street Journal, though call-center company 24/7 Customer Pvt. Ltd is eagerly searching for “recruits who can answer questions by phone and e-mail”, it’s found that “so few of the high school and college graduates who come through the door can communicate effectively in English, and so many lack a grasp of educational basics such as reading comprehension, that the company can hire just three out of every 100 applicants.” This is our future.
Indeed, with politicians aggressively promoting advanced education with the taxpayers’ money, the inevitable result will be universities handing out more and more worthless diplomas to marginal attendees who will enter college with no skills, and who will similarly depart without the skills prized by employers. Worse for the victims of this supposed compassion, many will emerge with a great deal of debt as their reward for having wasted four years.
As for those who emerge debt free, they won’t be much better off either. Having spent four years daydreaming through classes on Greek mythology and feminist art history, they’ll have lost four years of real work that actually teaches them how to get by in an advanced society.
Taking nothing away from the fun that is college, the idea that advanced education is anything more than a high-priced union card is hard to countenance. If college does in fact serve a purpose, it’s as a source of talent for private companies eager to grow.
Importantly, there’s not much learned in college or graduate school that is applicable to what’s done in the working world, so the real purpose of both is to serve as a signaling device. Put simply, the thesis written senior year at Harvard on the rise of Cinema verite in the ‘70s is not what appeals to Goldman Sachs (NYSE:GS), Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT), but the fact that the student got into Harvard means this person is most likely both hard working and smart. Companies figure they can train individuals with both attributes to do any number of productive, wealth-creating activities in the real, working world.
Some will of course point out that college isn’t only about courses on medieval literature, and that some students take accounting and finance classes with an eye on working in those areas. No doubt that’s true, but if so, it would be even more worthwhile to skip the nosebleed tuition and simply get to work on passing the CPA and CFA exams.
Passage of the above two exams surely means more to businesses than does a college degree, and it does so not so much for what’s learned in achieving each designation, but for what it says about the person. Any individual willing to put in the time and effort to earn two very difficult-to-get credentials must once again be both smart and hard working, thus very appealing to businesses looking to expand.
Back to college education, just as over-issuance of a currency relative to demand ultimately reduces its value, the drive to make college a pedestrian right has made the diploma increasingly worthless. If not already, soon enough the wage disparity between those with and without degrees will be hard to discern.
As for India, the story of untalented college graduates is a reminder that rather than something that makes us smart, college is at best what smart people have traditionally aspired to. Try as we might to make everyone above average, these attempts as revealed by the Indian experience are vain on their best day.
After that, and back in the real world, the attributes that make us successful will be the same as ever. Individuals who work hard and smart will achieve no matter the schools attended, while those who are lazy and work ineffectively will fail regardless of the degrees or lack thereof on their resumes.
John Tamny is a senior economic advisor to Toreador Research & Trading, a senior economist with H.C. Wainwright Economics, and editor of RealClearMarkets and Forbes.