The Real Economic Challenge of the 21st Century

David Strom
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Posted: Oct 26, 2006 5:22 PM

There’s a lot of concern these days about American competitiveness in the world economy these days, much of which is simply nonsense.

All the worry about China’s explosive growth threatening American economic might is based on a misconception; as China’s economy becomes more modern and wealthier, Americans are bound to benefit from cheaper goods and a huge new market for our own products.

In fact, much of the worry you hear today about our economic future is nothing more than a recycling of the doom and gloom predictions you heard in the 80’s about how Japan was going to clean our clocks economically.

Of course, not every worry can be dismissed so easily. In fact, America’s economy is in danger, and the source is not external so much as internal.

The biggest threat to the future growth of the American economy is our failing K-12 educational system. And if we don’t shape up fast, Americans will begin losing out in the world job market to countries that are properly preparing their next generation for the fierce competition in the world economy.

According to a recent study by the National Center for Public Policy and Higher Education, the next generation of Americans could be facing a future of declining real incomes unless we begin preparing them with a better education. This is because the proportion of the population with a high school diploma or college degree is set to decline over the next 20 years—and nothing is a greater predictor of income than educational achievement.

What’s driving this decline? Obviously not a lack of investment in K-12 education. Despite all the moaning about tight budgets in our public schools, the evidence shows an enormous increase in real spending on public education over the past 30 years (about a doubling in real dollars)—with no corresponding increase in student performance.

In fact, in many of the ways that count, we have gone backwards in educational achievement. As the proportion of students who are middle and upper class has declined, a terrifying achievement gap between white and minority students looms as a larger and larger economic problem for the United States. Only about half of all minority students graduate from High School, and correspondingly fewer ever get a college education.

What should worry everyone about this is not only the issue of equity and social mobility, but also the glaringly obvious fact that economic success for a country invariably depends upon having a well educated and highly competitive workforce. Affirmative action, social promotion, and all the liberal solutions to the education achievement gap entirely miss the real point: not only will minority students be better off economically, but the future of the U.S. economy depends upon preparing all students for college and giving the best education possible to all students, regardless of race, sex, color or creed. We simply can’t afford to pretend to give all kids a decent education; we have to actually do it.

The inescapable conclusion from the evidence is that the public K-12 school system is failing its customers—the students who need a great education to succeed—and the country as a whole, which will need to have the best educated workforce in the world to succeed in the coming years.

Some would argue that there are no easy solutions to our education woes. High immigration rates, changing demographics, cultural barriers to success, and broken families are creating a generation of uneducable kids. The best we can do is continue to pour money into the current system and pray for the same or better results.

In my view, that’s ridiculous. Immigrants come to the United States to improve their economic fortunes, and want their kids to succeed. When given the opportunity, minority parents send their kids to better schools, proving the skeptics wrong. Broken families clearly are a problem, but not a reason to give up on educating kids.

All we have done up to now by pouring more resources into a failing system is to reward that failure. The education crisis has been a boon to the public school system, as taxpayers have showered it with resources in a vain attempt to improve results. As long as we continue to reward failure with more money, you can expect to get more failure.

The only sure path to reforming our public education system is to subject it to real competition for students and resources. In Minnesota, where there is public school choice (you can choose to a limited extent what public school system you send your child to) over 30% of Minneapolis’ students have fled to better suburban schools. Imagine what could happen if you opened up competition between the public and private schools, and gave low income students the same school choice opportunities that upper-income students have always had.

Injecting competition into our K-12 education system is not some conservative scheme to undermine the public schools. School choice is no longer even just about helping out poor kids to start climbing the economic ladder, however important that may be morally.

Given how the world economy is shaping up, it may be the only way to keep the United States’ economy competitive in the years to come. Simply put, we can’t afford not to educate half of our future workforce.