Schumpeter on How Higher Education Wrecks Freedom

A book that pays high returns for decades with endless insights is Joseph Schumpeter’s Capitalism, Socialism, and Democracy (1943). It is not a systematic treatise. It’s more of a series of observations about huge problems that vexed those times and ours. Many are informed by economics. Some by history. Some by sociology and culture. 

Schumpeter’s outlook is eclectic, to say the least. He is a partisan of the old-school bourgeois order –educated in fin de siecle Vienna – but darkly convinced by mid-century that civilization was doomed to be replaced by some amalgam of socialism/fascism. This was for an interesting reason, not because capitalism itself fails but rather because it breeds the seeds of its own destruction. It makes so much wealth that it is too easy to dispense with the institutional/cultural foundation that makes it all possible.

Here let’s focus on one fascinating insight concerning higher education, just a small piece of the whole. He correctly saw that the West was headed toward bringing ever more people into the academic fold with classes and degrees, away from manual labor and raw skill and toward intellectual pursuits. By that he doesn’t just mean becoming academics but people working from and with an apparatus of ideology and philosophy – a class of information workers – that is ever more distant from actual productivity. 

He is, in other words, speaking of the rise of the credentialed managerial class that would populate every field, among which were journalism and media where workers are detached from the real-world consequences of the ideas they push. They would come to form a class of their own with unique cultural power and a united interest in constructing social and political systems that benefit themselves at others’ expense. 

Let’s see what he has to say. And keep in mind this is 1943. 

One of the most important features of the later stages of capitalist civilization is the vigorous expansion of the educational apparatus and particularly of the facilities for higher education. This development was and is no less inevitable than the development of the largest-scale industrial unit, but, unlike the latter, it has been and is being fostered by public opinion and public authority so as to go much further than it would have done under its own steam. 

Whatever we may think of this from other standpoints and whatever the precise causation, there are several consequences that bear upon the size and attitude of the intellectual group.

First, inasmuch as higher education thus increases the supply of services in professional, quasi-professional and in the end all ‘white collar’ lines beyond the point determined by cost-return considerations, it may create a particularly important case of sectional unemployment.

In other words, he is suggesting that the subsidization of higher education itself would end up creating far more in the way of credentialed intellectuals than society actually needs or the market demands. So these people will always face a kind of job insecurity, or at least believe they do because their abilities have a limited market. 

Second, along with or in place of such unemployment, it creates unsatisfactory conditions of employment—employment in substandard work or at wages below those of the better-paid manual workers.

That’s an interesting observation and it remains true today. A truck driver makes far more than a starting professor and journalist at a newspaper. An electrician or engineer is paid more than any graduate in humanities. Even top writers and media influencers call forth lower salaries than financial analysts and accountants, fields where training and credentialing take place outside of the academy. 

Third, it may create unemployability of a particularly disconcerting type. The man who has gone through a college or university easily becomes psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work. His failure to do so may be due either to lack of natural ability—perfectly compatible with passing academic tests—or to inadequate teaching; and both cases will, absolutely and relatively, occur more frequently as ever larger numbers are drafted into higher education and as the required amount of teaching increases irrespective of how many teachers and scholars nature chooses to turn out. The results of neglecting this and of acting on the theory that schools, colleges and universities are just a matter of money, are too obvious to insist upon. Cases in which among a dozen applicants for a job, all formally qualified, there is not one who can fill it satisfactorily, are known to everyone who has anything to do with appointments—to everyone, that is, who is himself qualified to judge.

All those who are unemployed or unsatisfactorily employed or unemployable drift into the vocations in which standards are least definite or in which aptitudes and acquirements of a different order count. They swell the host of intellectuals in the strict sense of the term whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. 

Discontent breeds resentment. And it often rationalizes itself into that social criticism which as we have seen before is in any case the intellectual spectator’s typical attitude toward men, classes and institutions especially in a rationalist and utilitarian civilization. Well, here we have numbers; a well-defined group situation of proletarian hue; and a group interest shaping a group attitude that will much more realistically account for hostility to the capitalist order than could the theory—itself a rationalization in the psychological sense—according to which the intellectual’s righteous indignation about the wrongs of capitalism simply represents the logical inference from outrageous facts and which is no better than the theory of lovers that their feelings represent nothing but the logical inference from the virtues of the beloved. Moreover our theory also accounts for the fact that this hostility increases, instead of diminishing, with every achievement of capitalist evolution.

Of course, the hostility of the intellectual group—amounting to moral disapproval of the capitalist order—is one thing, and the general hostile atmosphere which surrounds the capitalist engine is another thing. The latter is the really significant phenomenon; and it is not simply the product of the former but flows partly from independent sources, some of which have been mentioned before; so far as it does, it is raw material for the intellectual group to work on.

We have to grant that this is extremely insightful, especially since it was written in 1943. In that year, only about 15% of the population was enrolled in college, a total number of 1.1 million people in the United States Today about 66% of people graduating from high school enroll in college, or 20.4 million in the relevant age cohort. That’s a rather gigantic change from then to now. 

So whatever problems Schumpeter observed about college graduates – the lack of real skills, the job insecurity, the resentment against genuine productivity, the urge to muck around with the public mind without consequence – is vastly worse today. 

The last several years have seen the formation of the absolute hegemony of a ruling class that has zero experience in any real-world commercial activity at all. Waving their diplomas and CVs, they feel themselves entitled to dictate to everyone else and endlessly pound the system of free commercial activity to conform with their own imaginings of social and cultural priorities, regardless of what either people or economic reality demand. 

The move toward every manner of “great reset” priorities is an excellent example. DEI on campus, ESG in the corporate world, HR in all management of everything, EVs in transportation, impossible burgers as meat, wind and solar as energy sources, and you name it: all are products of exactly the forces Schumpeter describes. 

They are by, for, and of the intellectuals born of university environments, implemented and enforced by people with a limited market for their knowledge set and so attempt to rearrange the world to better secure their place within it. This is the expert class that Schumpeter predicted would dismantle freedom as we know it. 

Sure enough, the people who ruled the day during the catastrophic Covid lockdowns were not the practitioners much less the workers who delivered the food or the small business owners or even the hands-on epidemiologists. No, they were the theorists and the bureaucrats who faced zero consequence for being wrong and are still in hiding today or simply blaming someone else in the bureaucracy. Their plans for now are to keep their heads down and hope that everyone forgets until they can reemerge to manage the next crisis. 

In this way, we see that Schumpeter was completely correct. The rise of mass higher education did not breed a sector of society that is wiser and more responsible but just the opposite. He already saw this developing 80 years ago. It took time, but it would be justified to call him a prophet. 

And where are we today? An entire generation is rethinking the model. Is it really advantageous to shell out six figures, forgo four years of real job experience, become saddled with 20-plus years of debt, all to end up in a vast bureaucracy of miserable souls who do nothing but plot the demise of freedom and the good life for everyone else? Maybe there is another way. 

And just what are people really gaining from the choice of college, much less graduate school? Take a look at the credentialing systems of most professions today. They all have their own systems of education, complete with testing. This applies to accounting, tax preparation, every kind of engineering, project management, law and medicine (of course), actuaries, contract preparation, hospitality, genealogy, logistics, information technology and computers, emergency management, geology, and much more besides.

Each field has a professional organization. Each professional organization has a credential. Each credential has an exam. Each exam has a book. And each book has extensive methods of learning the material to enable students to learn and pass. And these systems are not about ideology and socialization. They are about real skills that you need in a genuine marketplace. 

In other words, the market itself is making college obsolete. 

The push to force everyone into higher education has proven to be a massive diversion of financial and human energy, and, just like Schumpeter predicted, it did the cause of freedom no favors. It has only ended up breeding debt, resentment, and an imbalance of human resources such that the people with real power are the same people least likely to possess the necessary skills to make life better. Indeed they are making it worse. 

Schumpeter’s prescient warning was right on target. And that’s a tragedy.