November 11, 2011

Build, not patch

By Deacon Patrick Moynihan *
Due to the impetuous announcement of a rushed, duct-taped plan to fund education in my country of choice, I have been thinking a lot about how subsidies impact the price of a commodity in a free market, especially one in limited supply. Of course, the most likely outcome is that the price goes up. This is one of those axioms you learn in Econ 101 — that is if you do not walk out on your professor as 70 students at Harvard did last week.  

The reason this economic principle is on my mind is that Haiti’s new president has announced that he will boost school accessibility in part with a subsidy payable to private elementary schools. This is great news in a country where less than three percent of children have the chance to finish high school — except that there are not enough actual schools in Haiti and at least 60% of them are for-profit. Another important fact: the subsidy is not a full cost voucher. It is more like 25 to 30% and will not cover all students.  

The last thing anyone wants in Haiti, except for the greediest for-profit schools, is for the price of education to go up. Average tuition for elementary schools already costs 75% of the annual per capita income. This disproportional price is only possible due to the informal subsidy provided by diaspora families. Of the one to two billion dollars Haiti receives in remittances annually, nearly 45 percent goes to pay for local schooling. With tuition already priced out of reach for most, imagine what a second subsidy will do?  

The only real answer to Haiti’s education problem is to build public schools. This is based on another widely accepted economic principle: increased supply drops prices. Given the simplicity of the economics involved one would think anyone with a head for economics and effective government would strongly promote building public schools over subsidies. Oddly, the plan to use private sector schools has been pushed by former President Clinton, the Intra-American Development Bank and the New York Times.

To be fair, the building of schools is in the plan, but not much will be done up front. The excuse: it takes longer to build schools than to pass out subsidies. This makes sense; however, quick, ephemeral solutions are exactly what keep impoverished countries poor. Notably, the IDB’s plan also includes funding 25 semi-permanent schools — another quick solution. None of this solves the long-term issue that Haiti’s schools are short over 500,000 seats.  

What makes economics get set aside in important decisions? The culprits are likely populism and public relations. Subsidies are just faster and easier. They give a bit of breathing room to a struggling President and make donor companies look good — but they are also dangerous in a limited supply market and worthless in the long run. History will show that it would have been better to avoid the private sector altogether and concentrate on providing free public education through the State. But, the NGOs and International Aid Organizations will be in another country by then.   

Now, how does this relate to my country of birth? On my recent visit home, I noted that a lot of people are upset. Those not working are angry at those who are, especially those making the top salaries. Among the populist vitriol, I have heard one salient point: young people graduate with too much college loan debt — on average $25,000 and as much as $60,000.

I do not support Occupy Wall Street; however, I could not escape the irony of the US and Haiti having the same problem: education is too expensive. In the case of the US, it is university education that is too expensive. How could this happen in the world’s largest economy which rewards education with lower unemployment and higher pay?

Could subsidies, aka college loans, be the cause?

I am not suggesting an end to loans, rather an increase in the cheapest seats. How? Build new state colleges. It is time to expand the Big Ten to the Big Twenty with new greener, leaner, and European-styled [less campus housing] schools focused on graduating people able to develop products and services to market to the developing world — where the growth is.  

In the richest country and in the poorest, the answer is to increase real supply, not to patch with subsidies.
Deacon Patrick Moynihan graduated Culver Military Academy in 1983, from Brown University with BA in Sanskrit and Classics in 1987, and from Providence College with an MA in Religious Studies [Theology] in 1999.

He taught Latin and English in a Catholic High School from 1987 to 1990, traded commodities, futures and options for an international trading company from 1990 to 1995 and directed a free Catholic mission school in Haiti for academically gifted children from the poorest areas around Port au Prince from 1996 to 2006.

Deacon Moynihan was ordained in October of 2001 as a permanent deacon for the Diocese of Rockford [IL] where he was the director of formation and later the Office for the Permanent Diaconate from 2001 to 2006. He has since gone back to Haiti and is currently the president of The Haitian Project.

* Catholic News Agency columns are opinion and do not necessarily express the perspective of the agency.


Follow us:

Check out Catholic News Agency Polls on LockerDome on LockerDome