College Kids Need Capitalism!

 

          BEING young myself and active on the Internet, I am well-aware of the condition and outlook of many adolescents, particularly in America. Their financial literacy skills are below average, and they overeat instant ramen that is an atrocity to physical health. Many of the Internet celebrities I follow, who are in this 20-30 age group, do make reference to their issues, to their lack of finances and their discontent with how society is in general. Life is not looking good for these kids, and we can expect that by the time they are in their 30s they will be tired, overworked, and have making a family as the last thing on their mind.

          How do they cope with this? Most of them find ways to incorporate their levels of anxiety and stress into their lifestyles, remaining apathetic about other concerns. To be explicit, again, they tend to seek out political programs that will help them. While kids of this age may be commonly perceived as being politically apathetic, they are more likely to be politically illiterate, not knowing what exactly is entailed with politics, and hence they vote for people who sound like they’ll do things that benefit them. Namely, they will vote for candidates that promise to pass laws that will “help out with” the sources of their issues, such as skyrocketing tuition fees and prices. Biden took advantage of this political illiteracy during the 2020 election by promising student loan debt forgiveness, which many people in the relevant age group support.

          Many of these young kids turn to socialism and anti-capitalist mentalities as a result, because they have the view that our society is capitalist and so that all the problems with society are capitalism’s liability. They turn to like-minded political policies and politicians, as a result, and stand behind nice-sounding proposals such as “free college”, “Medicare-for-All”, and “student loan debt forgiveness”. They are completely and utterly mistaken, however. One, we do not live under [orthodox, laissez-faire] capitalism in America or Europe (while the commonly toted example of practical socialism, Scandinavia, is more capitalist); two, the better solution to the problems facing college-aged youth would be more capitalism, not less! This is the tragic irony that has befallen the millions that will be taking the reins in a few years’ time.

          In order to prove the second point, that a return to laissez-faire market economics would help improve the livelihood of the youth, I want to focus on three predicaments that commonly face this age group. I will show that, in every case, it is more capitalism - not more government intervention - that will lead to a better outcome. These three are:

1.    Tuition costs.

2.    Housing prices.

3.    Job openings.

          Tuition costs are the most relevant and the best place to begin because, one, students take out loans in the first place to afford tuition, and, two, affording tuition allows the youth to get an education, which sets the foundation for their adult life. No matter how high it is, college kids pay tuition, and this has contributed to the nearly $2 trillion of student loan debt in America. Tuition is, indeed, sky-high, with college costing nearly 500% more, twice the rate of inflation since the 1980s. The questions we must answer now are, “Why is tuition so expensive?” and “Can capitalism fix this?”

          The reason that tuition has increased at such an astronomic rate is not recognized by many mainstream outlets. For example, in the article “Why Is College Tuition in the US So Expensive?” by the website GOBankingRates, causes such as “an increase in demand by students to earn degrees” and “extravagant facilities” are listed. However, the true, root cause is something else. As Jake Tran has explained:

“The minute students could get loans so they didn’t have to pay out of pocket - colleges started jacking up their prices. Prices started going up, and it became a feeding frenzy. Colleges have started competing on who can have the best amenities to get that tuition money. And with more amenities, bigger campuses, bigger staff, our expenses have gone through the roof!”

          Simply, the moment the government got involved in financing education - namely, through the Higher Education Act of 1965 of LBJ’s Great Society - it made kids less financially responsible and gave universities the incentive to keep raising prices, since the federal government would foot the bill. However, of course, as anyone with a slither of political knowledge knows, the government never foots the bill for anything, only the taxpayers. FEE writer Hannah Cox also explains the situation nicely:

“Normally, colleges would see the demand for their product drop if they raised their prices too high—which they have. Very few people could afford $30,000 for one year of school, and private lenders would be unlikely to lend that amount to borrowers for most majors. Therefore, in a free market, schools would have to drop their prices if they wanted to attract more students and stay open.

This isn’t happening because politicians used the federal government to interfere in the market. As is always the case with the government, they break it—you buy it.”

          We find, then, that the root cause of skyrocketing tuition is not capitalism. Rather, it is government intervention in the market. By getting involved in the education industry, the government has produced a massive market distortion. This has led to kids being less able to afford college, more willing to - irresponsibly - take out large loans, and becoming bondservants.

          So, can capitalism reverse this? Very likely. By removing the government from the equation, colleges will need to lower their prices to acquire more demand and students will need to be more financially responsible. Furthermore, free market schemes such as student investment are more valid alternatives to student loans, especially since they make universities put their skin in the game (by directly investing in the academic success of their students). Hillsdale College is an example of a school that practices student investment, and the default rate on its loans is less than a sixth of the default rate on federal loans. Wyoming Catholic is another school that denies federal grants, and - nonetheless - has an above-average graduation rate (compared to the national average) and an above-average retention rate (compared to the national average).

          What about finding a home? We all know very well how life was simpler and cheaper in the 1950s, and part of that cheapness was homes, which tended to be in the five-digit range. However, sometime during the late-60s and early-70s (the time of the Great Society), prices started to take off, and in the decade between 1970 and 1980 house prices had doubled. Now, finding a home is a very ambitious dream, and most college-aged kids live on-campus or with their parents.

          What destroyed the housing market? Who can fix the housing market? These are the relevant questions now, and I will answer both of them. First, whodunit.

          When we look at a timeline of housing prices in America what we see is that prices took off in the late-60s. If the trend prior to this explosion had remained mostly consistent, then median housing prices would have only passed $50,000 in the 2000s, not the early-70s. The origin of this trend in the late-60s is interesting, as this is the time when the failed Great Society began to affect America, a government megaproject of socialist influence. 

          The current housing market was destroyed further by the recession of 2007-2008, which was explicitly caused by the bursting of America’s housing bubble. That recession, furthermore, was caused by interventionist, inflationary, and downright illogical government policies, not an unabated free market. As Robert Stewart explains, “Government-sponsored entities like Fannie Mae and Freddie Mac subsidized mortgages for people who, under more-prudent rules of borrowing, would never have qualified for a loan from a conservative banking institution.” With more financially irresponsible people being given high-risk loans, banks accrued more and more financial risk, and they could not alleviate this because - per the Community Reinvestment Act - they had to lest they be brought before a one-sided government tribunal.

          Local housing markets are also suffering big time, such as San Francisco’s, which inflated 47% in just two years. What is the culprit? More government intervention! In San Francisco and housing markets nationwide, the culprits are invariably rent control and zoning laws. These policies drown the housing industry in red tape, making them expend innumerable man-hours and dollars to be allowed to develop real estate. In order to remain profitable/in the black, housing companies must build less, which means the supply of housing remains artificially constricted. In San Francisco’s case, between 2010 and 2013 its population rose by 32,000, but in the same time period its number of housing units only rose by 4,500.

          What this means is that, per the famous principle of supply and demand, prices will rise as the market does not - or, rather, cannot - supply enough to satisfy demand. The cost of bureaucracy and demand tortuously bind the hands of housing companies, and the consequences of this are passed onto the consumers, who are then told by socialist/progressive politicians that the evil housing bourgeoisie are to blame. The truth is, an unhampered free market - through the innovation of capitalists - will make expensive and non-abundant products cheap and abundant, like with the automobile and television.

          Our final subject of discourse is the job market, or the availability of jobs. Even before the COVID-19 pandemic destroyed jobs, millennials were struggling to find jobs. Why is this? What is making the job market so restrictive to millennials, who are turning in ever greater numbers to alternative/non-traditional, freelance occupations such as YouTube (where they gain a platform to voice the concerns central to this article). The answer is multiplicious, but we will focus on one specific cause and branch out from there. The one cause we will look at is minimum wage laws. 

        When kids come out of high school at age 18 they are likely to have little labor skills, unless they take a vocational training class or go into trade school. Because of this, most young adults are categorized as low-skilled labor, and that labor is not in high demand, except at the most entry-level and menial occupations. Now, before the middle of the 20^th century, youth in America only had an unemployment rate of <10%, and this was the case for White Americans and African Americans. However, this changed when minimum wage laws were first created in the 1930s and expanded in the 1950s, as African American economist Thomas Sowell has explained.

        Minimum wage artificially inflates labor costs above what the market desires. While an 18-year-old fresh out of high school with nothing to put on their resume might be hired for $5 an hour, minimum wage demands prospective employers to pay $15 an hour. Employers, therefore, have two options: don’t hire and overpay unskilled workers, or discriminate against unskilled workers and hire skilled ones (whose rarity has been exacerbated by minimum wage to begin with). This means that young kids cannot get the jobs they want, because they don’t have the skills their employers desire, and they can’t get those skills because no employer can afford their hyperinflated labor costs! 

        At the idea of abolishing minimum wage many anti-capitalists/progressives scoff and begin squawking about stuff like “living wages”, that workers should not be paid less than they can make a living off of. The reason why, however, workers can no longer make a basic living off, say, $5 an hour is because of the interventionist policies that we’ve been critiquing this whole time! $5 an hour cannot afford six-figure apartments, but those apartments used to be worth a fraction of that, and could absolutely be budgeted into an income based on $5 an hour (if we give our hypothetical young worker a typical 8-hour workday then - given the usual 20 workdays in a month - with $5 an hour they will make $800 a month, enough to cover the monthly rent that I linked to above).

        Indeed, it can be argued that a more laissez-faire economy will lead to a more free and productive job market. Free trade, a key element of capitalism, can only logically produce jobs as companies are freer to find and employ individuals across whatever region they operate in. Free trade does not harm the economy, and instead positively impacts it when allowed to operate freely. Interventionist or protectionist policies, on the other hand, do hamper the economy and drain the economy of its life.

        In conclusion, what we see in the realms of college, housing, and jobs is that the strenuous nature of each of these things have been caused by government intervention, not the natural, free operation of the market. When we reintroduce, or when we had, laissez-faire capitalism we see the situation reverse. Applying this to the central issue of this article (the socioeconomic well-being of young adults), when we reintroduce laissez-faire capitalism we will see colleges, houses, and jobs become more available, the three key elements for having a good life. 

        Capitalism is not to blame, and it is instead government intervention - socialism - that ruined things to begin with! It is this same socialism that politicians like Sanders, AOC, Warren, Biden, and others are telling us we need to introduce more to take care of the economic issues that - once more - socialism started! What use are politicians if they are not to be manipulative liars, distorting truths to aggrandize their power?