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Rebuilding America’s Middle Class Prosperity Requires Capitalism in the Classroom Many Americans are finding it tougher to get to the middle class and stay there, and most of us really don’t quite know why or what to do about it. W. Michael Cox, director of SMU Cox’s O’Neil Center for Global Markets and Freedom, and Richard Alm, the center’s writer-inresidence, provide some answers in the O’Neil Center’s annual report essay. Start with the first issue: why it’s getting tougher to get to the middle class and stay there. According to Cox and Alm, America’s first middle class grew out of the Industrial Age and its reliance on physical capital — the machinery and equipment that made workers more productive and raised wages. Industrialists supplied the physical capital; the jobs that went with it typically required physical strength and manual dexterity. Workers learned most of what they needed on the job, not in the classroom. That world doesn’t exist anymore, say Cox and Alm. Over the past four or five decades, expanding trade, advancing technology and shifting consumer preferences have transformed the economy and the nature of work. Today, physical capital doesn’t support nearly as many well-paying jobs producing goods. Americans sought a new path to the middle class — and many have found it in knowledge-related occupations. Earning a middle class income now depends on intellectual capital, a short-hand term for what workers know that makes them more productive. Industrialists don’t provide intellectual capital. Workers build it themselves by investing time and effort in learning, usually by going to school. Earning a middle-class income has become more a matter of brains than brawn. However, U.S. public schools are failing to prepare many workers for today’s knowledgebased jobs. Among 15-year-old students in 34 Organization for Economic Cooperation and Development countries, tests measuring 2009 student performance rank Americans 25th in reading, 17th in math and 14th in science. Cox and Alm turn next to the second question of
middle-class malaise: what to do about it. Their focus on the economy’s transformation suggests that rebuilding America’s middle class will require better schools — from kindergarten through high school. Cox and Alm contend it’s not a matter of money. They prove it by looking at state-by-state spending per student, adjusted for differences in cost of living and demographic composition. With these data, the often-touted link between higher school spending and higher student achievement disappears — spending is no longer statistically significant. The analysis finds a solid link between demographically corrected test scores and higher incomes and better educated parents. The middle class will struggle until America fixes its schools, Cox and Alm contend, but nothing will happen as long as bureaucrats decide how America educates its students. Government institutions typically reduce choice, wallow in red tape, resist change and protect entrenched interests. Cox and Alm offer an alternative: an educational system built on choice and competition, two key principles of free enterprise. Privatize education and run schools as businesses. Give parents and students choice in education, and make schools compete for students. “It’s time to harness the tried and true forces of capitalism — most important, choice and competition. Capitalism in the classroom will create proper incentives, spur innovation and drive entrepreneurial activity,” Cox and Alm write. “The same system that forged the physical capital to build America’s first middle class can mold the intellectual capital to construct a middle class for the knowledge-intensive economy.” Editor’s note: In September, the O’Neil Center explored the essay’s themes further at its fifth annual conference, Entrepreneurship in Education: The Key to Rebuilding America’s Middle Class. Both the full report and conference videos are available at oneilcenter.org. n
go to cox.smu.edu 21