The Graduate
“True terror is to wake up one morning and discover that your high school class is running the country.”
Kurt Vonnegut
Lately, I have been reading about the “Elite Overproduction” hypothesis, put forward by Peter Turchin a few years ago. The idea is relatively straightforward, if a bit difficult to prove empirically; membership in a country’s elite (intellectual, moneyed, political) is the promise of higher education. When enrollment is low, the majority of citizens do not aspire to be members of the elite, however you measure it. As enrollment increases, so does the number of aspirants. Because the number of spots in the elite is limited[1], those who will inevitably fail to be admitted into the elite, will revolt. Since, by definition, the elite is a very small proportion of the population (around 1%), the number of the disaffected will be relatively large. Some intra-elite competition is good, because it selects the best candidates. Fierce intra-elite competition is destructive according to Turchin, since it creates parallel networks and erodes social norms. Why? Because aspirants, given that they are numerous, will break social norms in order to dislodge members of the current elite. The following from Turchin:
I have been thinking that a large part of the “estallido social” may be associated with the unfulfilled promise of higher education in Chile. This comes in two parts; first, university graduates are not earning what they should to join the middle/upper middle class, and second; the movement’s leaders are frustrated elite aspirants. Even though they may be elite adjacent in nominal terms (education, upbringing, social circle), they have not really reaped the rewards of participation. I will spend most of this post on trying to understand the first part, how this critical mass of people came to be disaffected, and why it is so large. The second part is mostly speculation, and is really not the aspect of this that I find the most interesting.
Some background:
You could think of the nineties as an exercise in the expansion of the elite in Chile. Ex-opposition members that had been exiled, both physically and metaphorically from the ranks of the Chilean elite were brought back into the fold. They acquired political as well as economic power. Some of this was viewed as “just deserts”; compensation for their violent removal from elite ranks in the first place. However, a lot of it was just the expansion of rights and economic activity. People who would have never really been elite, either because of class or because of political affiliation, now could. This is not to say that the old elite somehow became more egalitarian or more meritocratic. The Chilean elite is highly inbred and, I would suggest, not very meritocratic. If you look at the list of the top wealthiest people in Chile, about 60% (more if one actually tallies amounts rather than individuals) is mining/forestry inherited wealth (mostly rent-seeking) and the rest is financial services/retail, not exactly the innovative hub that would suggest a lot of value added. Note that during one of the most significant technological revolutions (IT), not ONE tech billionaire has cracked the top ten list in Chile.
This expansion of the elite came with an unprecedented expansion in university enrollment. The figure below, taken from the OECD, quickly paints the picture; the number of students enrolled in tertiary education nearly quadrupled during the democracy period.
(this is an index, with the number in 2010 = 100). I included two small countries for comparison. Graduation rates also remained fairly high for the period in question (percentages, again taken from the OECD site).
The Problem
Most of these students would be middle or upper middle class aspirants in reality. The promise was simple, you study, you get the diploma and enter the labour force. The diploma was the key to entering the middle class. This may have been true for a handful of universities in Chile, but for the large number of diploma mills that mushroomed in the nineties, it was an oversell. It is hard to prove this empirically, but looking at the OECD data, one can clearly discern a pattern. Here is a quick graph showing basic cognitive abilities of Chilean adults and the percentage of people with low education.
(taken from the Future of Work, another OECD project. Paper here, the graph is on pg. 4)
The gap in Chile is larger than in any other OECD country. Nearly 70% of those who are tested seem to have low cognitive skills. When I first saw this graph I discounted it as ridiculous, it could not be that 70% of Chilean adults have low cognitive skills, that’s just impossible. But then I dug deeper into the data from PIAAC and I realized that this is a persistent problem. Average literacy rate in the OECD is around 30% higher than Chile, which does not seem too large. But then if you look into the complete distribution, the picture becomes much more concerning. At the top of the distribution, the percentage of adults scoring high in the literacy/numeracy tests in the OECD (average) is around 6 times higher than that of Chile; that is, 600%! At the bottom of the distribution, the percentage of adults scoring low on the test on both numeracy and literacy is nearly three times higher in Chile. The means might be similar, but the tails are vastly different. There are too many people at the bottom and too few people at the top. Chile produces plenty of top-notch intellectuals, but the next bin of the distribution is almost empty. That is where the middle class is supposed to come from, and it is definitely missing.
(Data from the OECD website, graphs my own, I included Finland and Slovenia as a control)
So what does this mean? Well, that primary and secondary education in Chile is basically a dud. The public education system, which is producing most of these adults is doing a spectacularly bad job of educating the young. Even the private system, which is eye-wateringly expensive, is not doing particularly well in preparing people for adulthood. In one statistic that I found astounding, the top decile in Chile in terms of income performs as well as the bottom fourth decile of Canada’s income distribution. In terms of education, it is better to be poor in Canada than to be rich in Chile. There is a whole lot to unpack there, and that might be the subject of another post. But two things are certain; 1. Paying for private education is a way to avoid the abyss of public schooling (but the investment in itself does not have a good return) and 2. Public school education is failing miserably.
These young adults then go to some university, pay dearly for a diploma expecting to be well on their way to the middle class and find a labour market that is fully aware of their skills. Employers know that the selection process of most universities outside of a select few is pretty bad. So they either don’t hire these recent graduates, or they hire them to do menial jobs. On top of that, they are overburdened with debts incurred to pay for this education that they cannot possibly repay, given that nobody will pay them an adequate wage. More concisely, the Chilean labour market is flooded with low productivity workers that were wrongly promised a middle class life style. They are duly angry, they did the things that they were supposed to do. They went to school, they studied and got a diploma and still can’t make ends meet. The problem is that they were not ready to go to university, and unless they were extremely persistent and went above and beyond, they will not even be middle class let alone elites.
This is not to say that these people are not intelligent, I am sure they are. I am sure they have the capacity to learn and improve. After all, there is no reason to believe that Fins are fundamentally different from Chileans when they are born. However, the system is doing nearly nothing to teach them the skills necessary to enter the middle class. If you are intelligent enough to pass the tests and end up in one of the good universities, you have a better chance. But if you are intelligent enough but did not go to the handful of good schools, you’re pretty much out of luck no matter how hard you work. I have friends that are intelligent and plenty hardworking. They are dismissed offhand in the labour market because they do not have the right university name on their diploma. It is unbelievably frustrating. I have lived this experience with them and it pisses me off just to see them go through the hell of trying to find a job.
The “Solution”
So what was the solution that the Student Movement offered to this problem[2]? – Basically, let’s make university free for everyone. - That was the proposal, in a sentence, that came from the Chilean left. Free university will do nothing to help those struggling. It only takes away debt but it does not address the productivity problem. Even if you PAID these people to go to university, it won’t help. The opportunity cost loss of doing something else for 5-6 years is not worth the nearly zero marginal value added by a university education. Who does gratuidad help? Elite universities. Universities that can afford to be more selective will also attract wealthier students since private schools do a better than dismal job of educating children. Since wealthier students pay full fees, elite universities receive full tuition payments, not the 60% that the state offers for low income students. Furthermore, there are good arguments to be made that this actually might increase inequality by giving more resources to elite schools. Is it a particularly bad thing that elite universities are better off? Maybe, maybe not. But in the end it does nothing to help those who the movement claims to want to help. Free or not, those who could not make it into a good university, still won’t get there. In the meanwhile it also helped the political careers of the movement’s leaders, some of whom are now members of parliament. Good for them, but they did less than 0 to help those who propelled them to power. These same student leaders are now pushing for a slate of new policies for a “new Chile”. I would not put much stock in their ideological drivel.
Let’s wrap this up because it’s getting way too long
So what’s my point? One part of the estallido was fueled by middle class and elite aspirants. The middle class aspirants were led by elite aspirants. The failure of middle class aspirants was due to poor elementary education and university was not going to help. They thought their poor economic outcomes were due to the for-profit model of Chilean universities. They rebelled. Elite aspirants, partly due to their ideological leanings and partly due to their own frustrated elite-joining ambitions, became the faces and the leaders of the new movement. They seized the opportunity to fulfill their ambitions. In a better version of the world, they would have attacked the problem at its root, challenging the fundamental problem of Chilean primary and secondary education. They did not do this, because that would have implied disturbing a large part of their movement’s base, the teacher’s unions. So instead of being intellectually honest, they used ideological pabulum to fuel the justified frustration of the masses as is typical with populists. What could be a proper solution to this? Long term, increase the quality of elementary and secondary education. Short term, increase technical training for technicians and other non-university careers. Better trained teachers who are constantly subject to aptitude tests. There are many paths to joining the middle class. Germany does something similar. What are we most likely to get instead? Probably more populist mumbo jumbo and no real solutions.
There is elite overproduction in Chile only in terms of quantity, not quality. In the end the system that was built under Pinochet was never reformed as thoroughly as it needed to be. The system keeps low income Chileans in a perpetual state of sub-par learning. The left claims not enough money is being paid to teachers, which is not correct. The right is in denial about the dismal state of public schools in Chile because its kids really don’t attend public schools. Now its alumni are coming to bite its architects in the ass. As they say; “you break it, you own it”.
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