Building a Better Capitalism through Better Education
Updated: Aug 29
"An investment in knowledge always pays the highest return." - Benjamin Franklin
I come from a family of teachers. My dad taught at both private high schools and small colleges. My mom was a kindergarten teacher, and my brother is a retired music professor. In addition on my mom's side, I have a number of cousins and great aunts and uncles who chose education as their profession, including professors at Biola and Harvard and a dean at Wheaton College.
Education is a subject near and dear to my heart. Nothing else can level the playing field and grant opportunity like it can. On the other hand, the lack of education, whether purposeful or circumstantial, can doom people to a life of substandard employment and living standards. Whether you reside in a rural or urban area, you don't need to look far to see examples of this reality every day.
In the US, we've seen people rise from the humblest backgrounds to become leaders in their fields, heads of companies, and federal lawmakers. One of the greatest things our country offers is the opportunity to achieve through hard work, sacrifice, and yes, education.
It's easy to take universal education for granted and forget how different it was for many people before school became mandatory in the early 20th century. While there will always be unicorns who rise without formal education (Franklin, Lincoln, etc.), the majority of us need it to make our way in the world.
What are some of the economic benefits of an great educational system? We can see the gain in several distinct categories:
Worker Productivity and Human Capital
Higher skills: Training and schooling give workers better tools to perform complex tasks efficiently.
Better wages: Skilled workers earn higher pay, which raises the overall standard of living.
Stronger businesses: Companies grow faster and make more profit when they hire well-educated staff.
Innovation and New Technology
New ideas: Schools and universities produce research that leads to new products and high-tech tools.
Fast adaptation: An educated workforce learns and uses new machinery or computers much faster.
Global competition: Countries with smart, creative workers stay ahead in the global market.
Social Stability and Equality
Less poverty: Good schooling gives poor families a way to earn more money over time.
Fair chances: Equal access to classes helps close the gap between rich and poor groups.
Stronger rules: Learning helps people understand laws and build trust, which can stop corruption.
For anyone who might question the relationship between a person's level of education and economics, the chart below makes it abundantly clear:
This graph is taken from the Brookings Institute article, Twelve Facts about the Economics of Education, which also states the stark corollary between education level and unemployment:
Education plays an instrumental role in succeeding in today’s labor market, as illustrated in figure A. Bachelor’s degree holders face less than half the unemployment rate and earn more than double the income of high school dropouts, on average. Professional degree holders earn 48 percent more ($2,206 vs. $1,493 per week) and face 45 percent lower unemployment (1.2 vs. 2.2 percent) relative to bachelor’s degree holders.
In addition, higher education (both 2- and 4-year degrees) contribute significant economic gains to their communities. The following statistics and graph are taken from an article by the Institute for Higher Education Policy:
Students who attended any college or university generated an estimated total of $73.4 billion in additional annual earnings relative to those of the typical high school graduate, even after accounting for the amount students invested in their education. Students from families with low incomes generated $17.9 billion of this total.
The visual below demonstrates how the total economic contribution from higher education is divided between 4-year universities, 2-year community colleges, HSIs (Hispanic-serving institutions), MSIs (minority-serving institutions ), HBCUs (historically black colleges and universities), and tribal colleges.
Given the evidence, it would seem beyond obvious that financial support for education pays in economic spades; yet federal education spending is currently under both scrutiny and attack.
The second Trump administration has made it a priority to radically reshape the landscape of federal grants by cutting funding to programs perceived to be promoting “gender ideology,” “radical indoctrination,” and “diversity, equity, and inclusion initiatives.” During the first year of the administration, educators across the country faced a wave of federal grant cuts, cancellations, and disruptions that upended budgets and plans for hundreds of in-progress initiatives. Note that many of the economically-contributing schools listed above could be labeled as DEI programs.
Many of the proposals aimed at fulfilling the administration’s reallocation of more than $12 billion have been challenged in court, and some have been deemed illegal by judges and watchdogs. While countering the challenges, this chaotic situation has caused disruption across every type of school and level of education. Considering that students have only a short time in school, the current state of affairs can potentially change the life trajectory for millions of children.
Mill Schools vs. the GI Bill
Let's see what happens when a government either does or does not prioritize education. To demonstrate, let’s look at two scenarios from the past: the mill village schools and the GI bill. Both offered educational opportunities to people that previously had little or no access. Both were implemented as a means of economic development; however, the motives for each were very different.
Mill Village Schools
If you live in the South, you are probably near a place that was once a mill village. The
town I live in had several textile mills dating from the late 1800s through the mid-1900s.
Prior to the 20th century, many children had minimal schooling and no guaranteed access to formal education. In the the late 1800s, many textile companies filled that gap by creating schools for their employees' children as a part of their business model.
Built within a company-planned mill community, these schools offered convenience for workers but also exerted control over their lives. Schools were provided by owners to benefit their business in several ways:
1. They identified better workers. Parents who wanted their children to have an
education were noticeably harder and more reliable workers.
2. They provided needed training: Many of these children came from farms and did
not possess competent reading, writing, and math skills needed for factory work.
Schools ensured that the rising workforce would have these skills.
3. They provided an opportunity for moral education. In addition to academics,
children were taught the virtues of hard work and obedience, making it easier for
managers to control their future employees.
4. They created a temporary worker pool. Mill work could be seasonal. When extra
hands were needed for a short time, school was recessed until the work was
completed.
It’s clear that these schools benefitted the owners, but did they benefit the children as well? While there were advantages, school in a mill village was a definite trade-off:
Pros
1. Schools taught basic reading, writing, and math skills to children who may not
have received them otherwise.
2. Because mill schools had private funding, they were often better staffed and
better equipped than publicly funded rural schools.
3. Mill schools offered education through the 8th grade at no cost to the children’s
parents.
Cons
1. Mill owners did not force parents to send their children to school. Offered as a
choice, many parents opted to put their children to work as early as age 9 to
increase their meager family earnings.
2. Education was engineered to create easily controlled mill workers who would
stay, presumably for life, in the village.
3. The system discouraged further education by making parents pay for upper
grades, which was an option that most people could not afford.
The GI Bill
In contrast to the mill school scenario, The GI Bill (Servicemen’s Readjustment Act of 1944) was probably the most transformative event in American education. It gave World War II veterans the opportunity to improve their economic situation through schooling. With the freedom to choose their institution and course of study, veterans received coverage for higher education tuition, fees, living expenses, books and supplies.
Before the GI Bill, college was too expensive for the majority of working-class people. The bill created a whole new group of students who wanted to learn skills for a changing job market. It was highly beneficial for their families and communities too, since it leveled the playing field for many marginalized groups and raised their overall economic standard.
In the short run, the GI Bill had a big impact on the economy by increasing the number of skilled workers, especially in areas like engineering, healthcare, and tech. This meant people could earn more, get better jobs, and spend more, which helped boost economic growth and expansion after the war.
Over the long run, the bill helped create a more educated workforce, which boosted productivity and innovation. It also led to higher rates of homeownership, better health outcomes, and more civic involvement, all contributing to a stable and thriving society. The educational benefits of the bill opened up new opportunities, driving economic growth and leaving a lasting impact by demonstrating the undeniable importance of educational choice and access.
A Two-Part Solution
Clearly, we must invest in our children and young people's education; but funding schools to produce a more prosperous workforce is just half the picture. Training people for a career without teaching them how to view economics as a symbiotic system can create highly skilled yet selfish individuals. We see ethics classes taught in college business schools; why not teach these principles starting in elementary school? Here are a few ideas for how we can start teaching mutually beneficial economics from day one:
Elementary School
Teaching the golden rule - Consistently instilling “do unto others” in students will help them develop a positive moral compass that guides their interactions with others.
Engaging in a cooperative economic project - Working in a community garden or with a seasonal charity drive can broaden kids' understanding of the needs around them.
Middle School
Basic economics - By exposing students to how money works within communities and the basics of behavioral economics, they can begin to have an understanding of finances.
Basic ethics - Enabling students to see the benefits of ethical behavior for themselves and others promotes a positive attitude for mutuality.
High School
Personal finance - Practicing real-life situations and problem solving, as well as learning how to identify ethical behavior, will give students practical experience with both finances and ethics.
Community College & University
Personal finance and ethics, continued - Teaching a working knowledge of banking, credit, mortgages, stock market, etc. will help students navigate the real world. Equally important, helping them understand the long-term benefits of acting ethically will have a positive effect on their careers and communities.
Education is a long-term investment, and sometimes it's hard to see what the ROI will be. All one has to do, though, is look back at the record. The greatest gains that we've made as a country came when we offered opportunity to and looked out for everyone, and that's a clear path to success.
Join Us
We write about capitalism done well—and how it can be done better—because we collectively have the capitalism we create, and we can collectively create a better capitalism. We’d love for you to join us on this journey of renewing capitalism. You can begin by reading our book, Better Capitalism, and by signing up for our weekly blog post.
Fix Capitalism. Fix the American Dream.
Our vision is to benefit society by transforming capitalism's current core ethic of 'maximize shareholder value' to the better core ethic of 'optimize mutual value.' We achieve our vision by impacting learning, opinion, beliefs, and policy. Institute for Better Capitalism, Inc.
⭐⭐⭐⭐⭐ Our Amazon number 1 new release: Unleash more with Better Capitalism: Jesus, Adam Smith, Ayn Rand, & MLK Jr. on Moving from Plantation to Partnership Economics.
"This book merits close, sustained attention as a compelling move beyond both careless thinking and easy ideology."—Walter Brueggemann, Columbia Theological Seminary
"Better Capitalism is a sincere search for a better world."—Cato Institute
The Institute for Better Capitalism, Inc., is a 501(c)(3). We invite and are grateful for financial partners in this work. We invite you to donate here or contact us for more information. Thanks!
