America's Economic Illiteracy
By: Dr. Paul Kengor
FrontPageMagazine.com | Thursday, December 18, 2008
Dr. Paul Kengor: Lee Wishing, this is your first “V&V Q&A.” Congratulations! Our subject today is something that has troubled you for a long time, and which seems to be more acute than ever: economic illiteracy. Let’s start with some background on the problem. First, tell us how and when you personally began to sense that this was a major problem in America.
Lee Wishing: If I had to pick an exact date, I’d pick May 22, 2006 when I converted my retirement investments to cash. But I was uneasy long before then because I was a student of the great economist Dr. Hans Sennholz at Grove City College. Dr. Sennholz retired in 1992. I read and re-read his book Inflation and its recent companion update. I also read his monthly articles posted at http://www.sennholz.com, in which he frequently warned of the root causes of the economic problems we are experiencing today, mainly the expansion of the money supply by the Federal Reserve.
Imagine this scenario: You’re deep in credit-card debt and you can’t pay your bills, so you make 500 copies of $20 bills at your local Kinko’s to pay off your creditors. Everybody is happy until it becomes apparent that those $20 bills aren’t worth what they appeared to be worth. Today, the United States is trillions of dollars in debt. The Federal Reserve is like the Kinko’s in our example in that it creates money out of thin air to pay our creditors and prime the nation’s economic pump. With each new dollar created, dollars become worth less and less. This is called inflation. Inflation, in addition to increased world demand, caused a huge run-up in the cost of gasoline and other commodities. Oil producers demanded more and more of our cheapened dollars to pay for their oil. We also use our cheapened dollars to pay off holders of U.S. debt. This is a dangerous game our country is playing with foreign debt holders.
Our cheapened dollars also found their way into the stock market, causing the “dot-com” crash in 2000 and the recent mortgage malaise. And today, the various bailouts are being financed by the government’s printing presses. In short, expansion of the money supply leads to booms and busts. We’ve seen this throughout history, and it’s predictable. But this time around it’s more alarming because of the vast amount of money that the Federal Reserve has created and continues to create. Moreover, the whole world is in this hole because the dollar became the world’s reserve currency in the 1980s as a reaction to the disastrous results after President Nixon formally took us off the gold standard in 1971. We’re experiencing a bit of a reprieve now. Seeking safety, the world has rushed back into dollars even while we create more dollars and dig ourselves a deeper hole for the future.
Kengor: Your answer dovetails directly into the economic illiteracy problem: Few people have the economics background to even try to understand what you just explained. As for how economic illiteracy in general is a problem today, nationwide, share with us the results of the latest Intercollegiate Studies Institute (ISI) survey on civics and economics in America, the release of which you attended. Also, please note how this problem extends from the classroom to the halls of our nation’s legislators.
Wishing: On November 20, ISI released its third annual American civic literacy study. In 2006 and 2007, ISI tested college students’ knowledge of America’s heritage. This year they tested American adults. Like their college-age counterparts, American adults failed the test. In fact, 71.4 percent failed with an average score of 49 percent and, not surprisingly, Americans scored most poorly on the economics component. And here’s something alarming: Elected officials scored 44 percent—or five percentage points lower than the average American. Prior to the release of ISI’s test, I found the daily stream of economics news flowing out of Washington to be unbelievable, surreal. How could this be happening in America? I wondered. Now I know. According to ISI’s scientific survey, Americans, regardless of their level of education, don’t understand fundamentals of American government, history, or economics. Neither do our elected officials. It’s no longer a wonder to me why “we the people” can create fiat dollars by the billions, run up gigantic deficits, bail out Wall Street, seriously consider bailing out Detroit, and hear from Washington that we need another $500 billion in stimulus on top of the $7.4 trillion in guarantees our federal government has made since our recent problems began.
Kengor: For the record, tell readers how well Grove City College students have done on this ISI test.
Wishing: ISI’s 2007 report reveals that Grove City College freshmen had the third highest civic literacy in the nation. Our seniors finished second, just behind Harvard.
Kengor: This will sound like a partisan jab at Obama voters, but, truly, I’ve never seen such economic illiteracy in a presidential election as the last one. I’ve never had so many discussions with acquaintances about socialism, redistribution of wealth, and very rudimentary Econ 101 things that the typical American must know to be able to function in a successful free society. I listened to a talk-radio host who, every day, when he got an Obama supporter on the phone, would say, “So, you agree with Obama when he says, ‘From each according to his abilities, to each according to his needs?’” The caller would say, “Yes, I absolutely agree with that statement from Obama.” Then, the host would slyly inform the caller that he had quoted not Obama but Karl Marx. These callers weren’t teenage kids but adults who lived through the Cold War and collapse of communism. They couldn’t even identify Marx’s most famous maxim, nor understand why it might be problematic. So, I believe that in this last election this economic illiteracy was especially salient.
Do you have any thoughts on that going forward? What could this mean policy-wise, in terms of the future role of government in America? Has economic illiteracy now opened the floodgates for economic intervention by redistributionist politicians?
Wishing: Unfortunately, I have a feeling McCain supporters would have answered the same way. ISI’s civic literacy test results show that liberals scored 49 percent while conservatives scored 48 percent. Republicans scored 52 percent and Democrats scored 45 percent. This is a bipartisan problem. The economic intervention floodgates were opened long ago during the Hoover and Roosevelt Administrations and a compliant post-1936 Supreme Court. The floodgates came off the hinges during the current Bush administration. We’ll have to see what happens during an Obama administration, but I don’t like what I see so far.
Kengor: That’s sad. I stand corrected, and even more dispirited. How much of the blame for this economic illiteracy can be laid at the feet of modern higher education?
Wishing: Clearly, according to ISI, colleges are failing miserably. I’ll quote ISI: “Whether the question concerns ‘the Fed,’ fiscal policy, trade, or free enterprise in general, ‘College Joe’ appears to be economically illiterate.” I’m happy to say that there is some good news in the ISI report: Nearly three-quarters of Americans “agree that colleges should prepare citizen leaders by teaching America’s history, key texts, and institutions.” These findings are consistent with remarks we hear at our American Founders Luncheon Series programs in Pittsburgh. Many attendees have told us they weren’t exposed to the principles of economics and America’s founding in college. Clearly, we Americans want a better higher education product, and that’s good news.
Kengor: And a further opportunity for us. At Grove City College, our Economics Department has done its part—for decades—to try to correct this by teaching a decidedly free-market form of economics. At The Center for Vision & Values, we’re trying to help educate people on free markets through our op-eds, white papers, conferences, and other work. That said, under your leadership, we’ve just launched an entirely new program to further address this issue in a more pointed, deliberate way. The program is called “Freedom Readers.” Tell us about this program, and what the Center is hoping to achieve with Freedom Readers.
Wishing: Grove City College has a real gem of an economics department that teaches that economics is the study of human economic action rather than the study and creation of complex mathematical models controlled by government bureaucrats. The Center is partnering with our economics department to spread economics knowledge more broadly on our campus through monthly evening dessert programs called Freedom Readers. We ask only that students read an economics opinion-editorial and join us for dessert. While the students enjoy their confections, the opinion writer explains the editorial’s underlying economics principles and relates them to today’s headlines. Eighty-one students attended the first program featuring Foundation for Economic Education President Larry Reed (Grove City College class of ’75) and another 88 registered for last Tuesday evening’s program featuring our own Dr. Jeffrey Herbener. We’re recording these programs and we’ll make them available for the whole nation to watch at our website. A logical next step would be to take this program on the road like we’re doing with our American Founders Luncheon Series.
Kengor: Importantly, this program is not just for economic majors—quite the contrary. Explain the target audience.
Wishing: We’re trying to reach the whole campus by teaching basic principles in an inviting and intellectually stimulating setting. Students representing 27 majors registered for the first program.
Kengor: If donors would like to help with the Freedom Readers program, who should they contact?
Wishing: They can call the Center at 724.450.1541 or email you at email@example.com.
Kengor: Lee Wishing, thanks for talking to “V&V Q&A.”
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