Of Financial Capital and Human Capital: Why We’re Bailing Out Wall Street While Allowing Our Schools to Get Clobbered

Our preoccupation with the immediate crisis of financial capital is causing us to overlook the bigger crisis in America’s human capital. While we commit hundreds of billions of taxpayer dollars to Wall Street, we’re slashing our outlays for public education.

Education is largely funded by state and local governments whose revenues are plummeting. As consumers cut back, state sales and income taxes are shrinking; three quarters of the states are already facing budget crises. On average, state revenues account for half of public school budgets, and most of the funding of public colleges and universities. On top of this, home values are dropping, which means local property taxes are also taking a hit. Local property taxes account for 40 percent of local school budgets.

The result: Schools are being closed, teachers laid off, after-school programs cut, so-called “noncritical” subjects like history eliminated, and tuitions hiked at state colleges.

It’s absurd. We’re bailing out every major bank to get financial capital flowing again. But we’re squeezing the main sources of our nation’s human capital. Yet America’s future competitiveness and the standard of living of our people depend largely our peoples’ skills, and our capacities to communicate and solve problems and innovate – not on our ability to borrow money.

What’s more, our human capital is rooted here, while financial capital moves around the globe at the speed of an electronic blip. Right now global capital markets are frozen, but the big money — mostly in Asia and the Middle East — and will come here, bailout or no bailout. At this point it’s coming back as purchases of dollars or in the form of T-bills that are financing the Wall Street bailout. Eventually American assets will become so cheap that the money will come rushing here to buy up the bargains.

It’s our human capital that’s in short supply. And without adequatepublic funding, the supply will shrink further. Don’t get me wrong: I’m not saying funding is everything when it comes to education. Obviously, accountability is important. But without adequate funding we can’t attract talented people into teaching, or keep class sizes small enough to give kids a real chance to learn, or provide them with a well-rounded curriculum, and ensure that every qualified young person can go to college.

So why are we bailing out Wall Street and not our nation’s public schools and colleges? Partly because the crisis in financial capital is immediate while our human capital crisis is unfolding gradually. But maybe it’s also because we don’t have a central banker for America’s human capital – someone who warns us as loudly as Ben Bernanke did a few months ago when he was talking about Wall Street’s meltdown, of the dire consequences that will follow if we don’t come up with the dough.

Originally published at Robert Reich’s blog and reproduced here with the author’s permission.

5 Responses to "Of Financial Capital and Human Capital: Why We’re Bailing Out Wall Street While Allowing Our Schools to Get Clobbered"

  1. Moita   December 5, 2008 at 6:24 am

    Or maybe it’s is just because Wall Street has enough power to demand its owm rescue, despite its excesses and mistakes, while school teachers obviously don’t.

  2. Anonymous   December 12, 2008 at 6:06 am

    Look at all the money wasted education of black and Hispanic who don’t care and don’t want to learn! We waste billions for classrooms of kids who have a 75%+ dropout rate and if you do want to be educated, you’re “acting white.” You want to cut costs of education, go back to the basics, get rid of the teacher’s union and if they don’t want to learn, kick them out!

    • Anonymous   December 12, 2008 at 8:56 pm

      This is a poor statement and ignorance is bliss in your case. If you would do the numbers you would find out that more inner city schools and rural schools where these dropouts rates are the highest are very underfunded. So to try to label it a Black and Hispanic problem is nonsense. Its kinda like gaining/losing weight. It took a while to gain all of those pound and It will take a while to lose them.Education has been last on the list to get funded for quite a while in the US. So please stop the ignorance and get educated. I know many white people who are just as uneducated or worst yet educated(having a degree) and are still very uncompetitive in the work force. Many of them are there because of there color more than anything else. Remember the Good Ole boy system? Wow. Stop the divide and conquer everyone already knows that game.

  3. Guest   December 12, 2008 at 11:59 pm

    I teach programming to kids in middle school. The school is 45% black, 25% hispanic, 15% asian and 10% white. We use Qbasic, Alice 2.0, and VB.NETAnd yeah…. it’s a public school. The problems you cite from High Schools is real. But it is not simply because of the kid’s skin color or lack of values.