The common denominator uniting protests in Libya, Bahrain, China, Iran, and even Wisconsin is the mundane matter of money, Richard Fernandez says:
Social policy — things we wanted and thought we could afford — whether food subsidies, biofuel manias or higher education bubbles, have created shortages and gluts that cannot now be resolved without changing the underlying policies themselves. In an article entitled, How the Higher-education Bubble Is Fueling Revolts in Tunisia and Egypt, the New American Explains how supply and demand affect the price of everything, even wages for new college graduates.
Would you like your college education to be free? Sure, who wouldn’t? Better question: Would you like the results of free education? Well, the people of Tunisia and Egypt are learning that whenever the government supplies something, it is never really “free.”
In Tunisia, “free” university education is guaranteed to anyone who passes the government’s exams at the end of high school. Largely as a result of this, the number of Tunisians who graduated college more than tripled in the last 10 years. This may sound like a good thing, but it has produced a glut of graduates.
Fifty-seven percent of young Tunisians entering the labor market are college educated. This is while only 30 percent of Americans earn a college degree by the time they are 27. Recent Tunisian college grads have an unemployment rate approximately three times higher than the national average of 15 percent. This is up nine-fold from 1994.
But the higher education bubble is not just about the glut of graduates, it is also about the price of the education product. As Forbes put it, “Just 10 years ago the cost of a four-year public college education amounted to 18% of the annual income of middle-income families. Ten years later, it amounted to 25% of that family’s average annual income. … Over the past 14 years the average debt for a graduating college student has doubled.” More broadly, education — even primary and secondary education — is requiring more and more taxpayer dollars or parent fees, to sustain. As CNN puts it, the education funding crisis is expected to grow beyond Wisconsin.
This week’s growing controversy about funding public education in Wisconsin is hardly an isolated incident, as 40 states are coping with budget shortfalls totaling $140 billion, which will threaten America’s 14,000 school districts for the next five years, one analyst said Thursday.
Concerns about funding kindergarten through 12th-grade systems were evident this week in Denver when big education’s stakeholders — the nation’s two largest teachers unions, a superintendents group, a school boards group and federal education officials — met to discuss labor-management cooperation, one participant said.
When the cost of paying unionized teachers increases from the kindergarten level on up while graduates at the end of the educational conveyor belt find themselves unable to parlay their credentials into jobs, one has the classic symptoms of a bubble that has to burst. Glenn Reynolds noted that the same signs which preceded the end of the real-estate bubble are happening to higher education.
It’s a story of an industry that may sound familiar.
The buyers think what they’re buying will appreciate in value, making them rich in the future. The product grows more and more elaborate, and more and more expensive, but the expense is offset by cheap credit provided by sellers eager to encourage buyers to buy….
A New York Times profile last week described Courtney Munna, a 26-year-old graduate of New York University with nearly $100,000 in student loan debt — debt that her degree in Religious and Women’s Studies did not equip her to repay. Payments on the debt are about $700 per month, equivalent to a respectable house payment, and a major bite on her monthly income of $2,300 as a photographer’s assistant earning an hourly wage.
And, unlike a bad mortgage on an underwater house, Munna can’t simply walk away from her student loans, which cannot be expunged in a bankruptcy. She’s stuck in a financial trap.
Business Insider says, “If you had to sum up the education bubble in one misconception, it might be: ‘The average 22-year-old is a good credit risk for $150,000 in debt, collateralized by something completely intangible.’”
At its most basic nonpolitical level, the showdown in Wisconsin is about the price of teachers; about a bubble. It is about whether Wisconsin can continue to afford a union/monopoly supplied product whatever the disparity with the true market value of their ‘value added’ represents. And in other parts of the world it is about the price of food, energy, or the price of maintaining juntas, politburos, kings, emirs or presidents for life.
Bubbles are at the heart of many of the riots now being reported daily and globally throughout the world. Their frequency and persistence are a sign that they are cascading on to each other, like a collapsing house of cards. The growing crisis over the federal deficit, like unrest over food prices, fuel supplies and job allocations in the Middle East — even the troubles in China — are about prices which have been distorted by government policy and now seek an equilibrium it can’t attain.
Long before all this mess, Peter Turchin noted that uprisings have little chance of success when the governing élites are unified and the state is strong, but governing élites rarely stay unified, because everyone wants in, and eventually there are too many élites.