America is going through the bursting of the Housing Bubble. The scale of the damage done to the economy is visible to us all. The reality that values of their homes may not recover for a long time is now talking a toll on American confidence.
Just as we are beginning to understand the societal impact of the housing bubble, a new bubble is bursting before our eyes. In a way, this is a more insidious bubble than housing. The Housing bubble was about a material dream, about consumption and to some extent about greed. Many Americans used their homes as ATMs by taking cash out with frequent refinancings. So at least there is a sense of repentance or moral justice to go with the pain.
But the bubble that is bursting now was never about consumption or a material dream. It was about hope, it was about investment in a better future. It was about a moral endeavor. That is why the bust of this bubble may be more damaging.
The bubble we speak of is the Education Bubble. It is the pursuit of a College degree. It is now a fully accredited American dream, the dream of higher income for the rest of the student’s life, the dream of a better job, a stable, white collar job, the dream of social advancement. The College degree is something you can hold on to for the rest of your life.
This bubble is now bursting before our eyes. We see that in the Occupy Wall Street protest in New York and in such protests across America. Rose Swidden, a student of agriculture in SUNY Cobleskill, expects to graduate in May with $35,000 in debt. She doesn’t know how she will pay it back. Hear the pain in her words to CNBC’s Scott Cohn:
- “We did what we were told to do: go to college, get an education, you’ll get a job, you’ll get a house, you’ll be cool,” she said. “And that’s
what we did. And now here we are done with it—and now what?”
Her pain, her sense of betrayal, her fear of the future is shared by thousands and thousands of young people across America.
The Housing Bubble might be easier to deal with than the Education bubble. A homeowner in trouble can get out from under mortgage debt by giving up the house to the Bank, by the Bank foreclosing on the house or by declaring personal bankruptcy. Oversupply of houses can be theoretically cleared by tearing down unsold houses and building green parks.
But you cannot send a degree back to the College, the College cannot foreclose on the degree and a personal bankruptcy CANNOT wipe out the student loan. The student loan stays with the student forever. Future wages can be garnished forever to pay off the student loan. If this is not wage slavery, it is close enough.
And you cannot cure the oversupply of educated unemployed by getting rid of them. At least not in today’s world. Centuries ago, even one century ago, societies did so by drafting young men into armies and sending them to war against neighbors or far away regions.
A College Education changes a person, a house does not. Foreclosed homeowners can rent for the rest of their lives. A College graduate with a degree finds it emotionally devastating to resort to a “lower” or manual job. Not using your education in a job makes the education worthless in the eyes of a future employer. So when the economy improves, you can find yourself unqualified for a job in the field of your education.
This is why, unlike the housing bubble, the Education bubble is still growing. The new message is that if you cannot find a job, you need to be retrained. So more loans are being taken for this additional education or retraining. The USA Today points out that $100 billion of these retraining loans were issued last year. And student loans are now exceed $1 trillion in America. This not a dream, it is an addiction.
The addiction is what makes College Education a bigger bubble than Housing. The Housing bubble was in in the pricing of houses. Homeowners are in trouble because their houses are worth far less than their mortgage debt. Education, on the other hand, can be a bubble even when it is free.
Look at Europe. Developed European societies are creating legions of educated unemployed via inexpensive or virtually free college education. The Middle Eastern regimes, especially the progressive ones, have poured massive amounts of money to build Universities to “educate” their youth. The education is free in most cases.
What did the Middle Eastern regimes get for their investment? The emotional scream of a man in Cairo’s Tahrir Square who said “I have a law degree but I can’t find a job. So I am reduced to selling food on the streets.” This is an echo of the fury of a man in Zuccotti Park in New York who shouted “I have two degrees but I can’t find a job“.
The education bubble is more dangerous because of what education does to young minds. Education gets into your psyche. It makes you feel important and a better person. An educated unemployed
person still feels superior to a truck driver, to a mine worker even
though the truck driver, the mine worker might make far more money. Giving up this higher status is destructive to the soul. This is why the educated unemployed do not blame Universities or Colleges for giving them defective education. They blame society.
is what makes the educated unemployed dangerous to society. Just think
back to the French Revolution, the Iranian Revolution. They were led by
the educated unemployed. This year’s Arab spring was also led by the
educated unemployed. Homeowners with a family, with kids do not create social chaos, they do not riot and burn. The educated unemployed youth do.
We all hear their primal scream from all corners of the world. Yet, we pay no attention.
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