Capitalism’s two centuries have proved competition is its essential element. No place in America’s 21st century demonstrates this like its educational system. On the positive side stands America’s world-leading college system; on the other stands America’s world-lagging public school system. The big difference between them is competition.
Capitalism requires several things to operate well. Private property is one. The rule of law, for enforceable contracts, is another. Stable money is also important.
However, for each of these there are replicas with which capitalism, at least in a primitive form, can exist. If there are societal limits on private property ownership, capitalism will take hold surreptitiously in sub-sectors where it does. Communism’s thriving black markets have continually proved this.
The same applies to the rule of law. If a society formally lacks it, then in sub-sectors where it exists — by force or informal agreement — rudimentary accumulation of capital likely follows. And where formal money is lacking, informal substitutes — from barter to specific commodities — act in formal money’s place.
However, there is no replacement for competition in capitalism. Without it, capitalism’s other elements are negated.
Barred from competing by a monopoly, private property essentially fails to exist in that sphere. Barring competition by a monopoly, there is effectively no rule of law, because law simply exists to enforce the prohibition. And prohibited entry by a monopoly law, money — regardless how stable — has no effect.
Where competition exists, capitalism can sprout in sub-sectors of non-capitalist societies. In sub-sectors where competition does not exist, capitalism ceases to exist there, even in a broader capitalist society.
There is no better proof of competition’s importance than a comparison of America’s college and public school systems.
The two share some important similarities. Government — federal, state, and local — is heavily involved and puts substantial money into both systems.
What the two do not share is competition. Compared to the private sector, America’s college system is hardly a citadel of competition, but it is in comparison to America’s public school system. The college system faces competition in many aspects; the public school system seeks shelter from it in virtually all.
In America’s college system, students attend where they please — across town or cross-country are equally possible. Colleges must therefore compete to get and keep them. Students transfer regularly. Many migrate through the college system’s layers — from junior colleges to community colleges to larger regional colleges and later, graduate schools. Mobility is endemic to America’s college system.
The contrast could not be more complete in America’s public school system. School choice, second-nature in colleges, is virtually unheard of in the public school system. Nothing is opposed more by the teacher unions. School choice, vouchers, home schooling, and charter schools — any means by which a student can freely move is anathema to them. The only guaranteed way for students to change schools, is for their parents to change addresses.
The difference in student mobility highlights another, where competition differentiates the two: funding. America’s colleges compete for it in all forms. Students and their tuition dollars are the clearest example. Because students have full mobility, so does their money.
While a seemingly obvious cause, it is also an effect — and a fundamental difference. Governments’ tuition support is not tied to a particular institution. Federal support can be used anywhere. Funding mobility has promoted student mobility too.
Again, this is strenuously opposed by the public school unions. The lesson that student mobility is both a cause and an effect of governments’ mobile tuition assistance is not lost on the unions.
Colleges also compete for direct government grants. Public school teacher unions oppose this too. Every school and school district — regardless of performance, or lack thereof — should receive the same amount. Here failure — always excused as a failure of “inadequate funding” — is the key to money, not performance.
Finally, the college system also competes for personnel. Faculty helps colleges attract students and government money, so colleges compete for faculty. Once again, public school teacher unions vehemently oppose this in their own ranks. Virtually any evaluating of teachers, other than seniority, is opposed.
The difference between America’s college system and its public school system is stark. Yet so inured to it, we regularly overlook it. More importantly, we overlook why the difference exists. Lost in the individual elements contributing to it, we miss the overriding reason: Competition — America’s college system stands on it; our public school system is built to withstand it.
Competition’s impact on capitalism is clear. There is no more eloquent testimony to its power than its absence. In capitalism, only by force of law can monopoly expunge it.
This is the reason the public school system so fiercely resists competition: They understand its power. It can enforce capitalism even on the unwilling — leaving them no choice but meet its exacting standards. And on the willing, it forces ever increasing efficiency on them.
Capitalism has many enablers, but just one driver. America’s divide between its college and public school system are a lesson in its efficacy, and a condemnation of its absence.