It Is Time To Tax College Endowments

Goldie Blumenstyck reports in the Chronicle of Higher Education (paid access) that several economists have proposed requiring higher education institutions to use five percent of their endowment each year for educational purposes. Arguably, the requirement might be extended over a longer period. For instance, there could be a requirement that colleges use 5% of their endowment over a twenty year moving average. However, colleges should be required to use their endowments for educational purposes.

In reply, higher ed associations argue that they should not have to use their endowments and that the endowments are not like bank accounts. The Chronicle notes:

"Lynne Munson, an adjunct fellow at the Center for College Affordability and Productivity, and Jane G. Gravelle, an economist at the Congressional Research Service—each recommended at the hearing that Congress enact legislation to require colleges with endowments worth $1-billion or more to spend at least 5 percent of that money each year, as private foundations are required to do, or be subject to federal taxes (The Chronicle, September 27)."

I would cut the minimum to ten million dollars. Colleges are not investment funds. The money should be used for educational purposes, not to protect institutional privileges.

Yet, the Chronicle reports that "the American Council on Education, the Association of American Universities, and the National Association of Independent Colleges and Universities, said that the proposal does not take "complexities into account", such as legal restrictions on the use of endowments.

I would argue that Congressional oversight of the use of endowments is a good idea. Part of section 501(c)(3), the federal law that regulates the tax exemption of universities, requires that assets be used for tax exempt purposes, not for the benefit of the administrators and faculty of institutions. As well, this might be a first step toward increased congressional scrutiny of the politicization of universities, which is not permitted under section 501(c)(3). That is, violations of the tax exemption requirements for university trust funds are an open secret about which universities are inclined to lie. Increased congressional scrutiny might include beginning to require that universities divulge actual student outcomes; improvements in knowledge based on objective knowledge and general skills tests; job placement; graduate school admission; faculty research output; and student engagement on campus.

Academic Freedom or Anti-Semitism?

Daniel Klimek and Victor Lang of the left-wing DePaul Academic Freedom Committee have forwarded a press release concerning their academic freedom conference to be held on October 12 at the University of Chicago. The conference will be open to the public. Apparently, it is not enough that the academic left has squelched conservatives' speech; banned conservatives from the academy; and thrown conservative students out of college. In addition, Klimek and Lang demand that any and every failed left wing anti-Semite deserves tenure.

Klimek and Lang are leading the charge to insist that Norman Finkelstein be given tenure. Competent conservatives are routinely ejected from the academy but Klimek, Lang and their fellow neo-German romantics take no notice and do not see any "academic freedom" issue. But when Finkelstein, who is worse than incompetent as a scholar, is deservedly denied tenure Klimek, Lang and the usual list of neo-German romantics complain that there has been a grievous violation of academic freedom.

Previously, Brooklyn College alum and eminent legal scholar Alan Dershowitz has written about Norman Finkelstein in Frontpagemag. Dershowitz's article begins:

"The level of “academic” discourse on the Middle-East reached a new low—quite a feat considering some of the old lows—when the notorious Jewish anti-Semite and Holocaust-justice denier Norman Finkelstein wrote a screed suggesting that I be targeted “for assassination” because of my views on Israel. The obscene article was accompanied by an obscene cartoon drawn by “Latuff”, a frequent accomplice of Finkelstein. The cartoon portrayed me as masturbating in rapturous joy while viewing images of dead Lebanese civilians on a TV set labeled “Israel peep show,” with a Jewish Star of David prominently featured."

The DePaul Academic Freedom Committee's press release follows:

IN DEFENSE OF ACADEMIC FREEDOM”
PROMINENT SCHOLARS TO SPEAK OUT AT THE UNIVERSITY OF CHICAGO
12 October 2007 - 2:00pm - 7:00 pm
Rockefeller Chapel, University of Chicago

October 12 2007 lecture featuring: Tariq Ali, Akeel Bilgrami, Noam Chomsky, Neve Gordon, Tony Judt and John Mearsheimer

CHICAGO, IL – In light of the controversial tenure denials of eminent Middle East scholar Dr. Norman G. Finkelstein and Dr. Mehrene Larudee earlier this year at DePaul University, the most prominent scholars from across the world will come together this Friday, October 12, 2007, at a conference at the University of Chicago to speak lecturing about the threats to academic freedom at universities.

Professors Finkelstein and Larudee were both denied tenure at DePaul last June for political purposes. After not being allowed to teach his terminal year at DePaul, Finkelstein and the university settled on an agreement in September, when Finkelstein resigned and DePaul acknowledged him to be “a prolific scholar and an outstanding teacher.” Professor Larudee, who was a strong supporter of both Finkelstein and Palestinian rights, is currently appealing her case at DePaul. Both scholars will also appear as panelists at the October 12 conference.

The event is to be held at the Rockefeller Chapel, 5850 S. Woodlawn Ave. Chicago, IL 60637. Scheduled speakers include:

- Dr. Akeel Bilgrami, Johnsonian Professor of Philosophy and Director of The Heyman Center, Columbia University
- Dr. Noam Chomsky, Institute Professor & Professor of Linguistics (Emeritus), Massachusetts Institute of Technology
- Dr. Norman Finkelstein, (formerly) Department of Political Science, DePaul University
- Dr. John Mearsheimer, R. Wendell Harrison Distinguished Service Professor of Political Science, University of Chicago
- Dr. Neve Gordon, Professor, Department of Politics and Government, Ben-Gurion University
- Dr. Tony Judt, University Professor and Director of the Remarque Institute, New York University
- Dr. Mehrene Larudee, International Studies Program, DePaul University
• Hosted by Tariq Ali, Editor of the New Left Review and Verso Books

The Event is Sponsored By:

Primary Sponsors

Diskord Magazine (University of Chicago, RSO), Verso Books (London), and Academic Freedom Committee (DePaul)

Co-Sponsors
University of Chicago: Center for Middle Eastern Studies, Center for International Studies, and International House Global Voices Program*
DePaul University: International Studies Program, Islamic World Studies Program, and Department of Philosophy*
Community Sponsors
Jewish Voice for Peace - Chicago, American Friends Service Committee – Chicago, and Committee for a Just Peace in Israel and Palestine (CJPIP)
*The University of Chicago and DePaul University are not sponsoring the event, only the listed departments and centers at these Universities.

Regulated Versus Free Labor Markets

I teach a web-based class in human resource management. The class covers most of the traditional personnel material such as job analysis, compensation and employment discrimination. In the section on employment discrimination, I asked the students to participate in several discussion boards about (1) "employment at will, pro or con?"; (2) "affirmative action, pro or con?" and (3) "the regulated workplace versus free labor markets". The last question was taken from the course text by Randall Schuler and Sue Jackson and read:

"Some people feel there are simply too many laws and regulations governing how companies may manage their employees. These people believe that everyone would be better off if we let the free market system work without so much government interference. Other people believe that employees are not sufficiently protected against unfair treatment. They believe that employers would treat employees unfairly if our laws didn't forbid it. Which position do you most agree with? Why?"

The majority of students supported affirmative action; a larger majority opposed employment at will and 100% favored regulated as opposed to free labor markets. To quote three students' comments (they were almost all along these lines):

>"I wholeheartedly do not believe employers would treat employees fairly if our laws did not forbid it. Industry in our country is a business. The bottom line is the more profit you make the more successful the business."

>"I think government intervention, as far as the employee-employer relationship is concerned, is a positive thing. I wouldn’t go so far as to say that, 'employees are not sufficiently protected against unfair treatment', but I would say that if laws didn’t forbid it employers would treat employees unfairly. Government intervention, I believe has proven to be most helpful to employees, in form of regulations/laws/policies."

>"I am glad there is government intervention, if the government rules and regulations did not exist it would be a catastrophe. The EEOC, OSHA and ADEA were created to protect our employees because of unfair treatment to employees. I do believe without the governments laws that employers would treat employees unfairly. We have come a long way but there is still room for improvement because there are still a lot of employers that still break the rules and get way with unfair treatment towards their employees. I do not believe Free Labor Market would help improve the work environment it would just do the opposite. Government intervention is a positive thing definitely not a negative thing."

My response to the class was as follows. Note that unlike the majority of left wing professors, I do not try to suppress the students or give them low grades because I disagree with their views. Rather, I engage in civil debate.

"I enjoyed reading the class's comments and I urge you all to look at what your classmates had to say in the three excellent discussions on affirmative action, employment at will and workplace regulation. However, I must say that I disagree with the majority of students on all three topics, particularly with respect to the regulated workplace. Thus, I do not agree with affirmative action; I do agree with employment at will; and I do not think that employment regulations are helpful to workers. Instead I would argue that workplace regulation is harmful to workers and does not make workplaces more ethical.

While I agree with the argument that affirmative action need not involve quotas and is primarily a means to encourage consideration of previously excluded groups through non-intrusive methods such as advertising in newspapers in neighborhoods where "under-utilized" groups are predominant (this is the traditional description of it), I do not believe that it works that way in reality or that its proponents really believe that it works that way. As Thomas Sowell has ably pointed out in a long list of books, such as his recent "Affirmative Action Around the World", affirmative action, defined as hiring preferences based on race, have repeatedly led to anger, conflict and violence.

In "Affirmative Action Around the World" Sowell traces the implications of affirmative action in five countries, to include India, Malaysia, Nigeria, Sri Lanka and the United States. He notes that affirmative action has often led to extreme resentment and even violence. In Nigeria, the genocide of the Ibo people in the 1960s was largely the result of resentment of affirmative action policies. Likewise, affirmative action policies favoring "Untouchables" in India has done nothing to improve their economic position but instead has tended to help a small, privileged segment within the Untouchable group who would have had access to the best schools and jobs anyway. In turn, resentment against the privileged group has lead to violence against the bitterly impoverished Untouchables not in the privileged category who cannot benefit from the affirmative action laws in part because they live in rural areas where there are no schools or transportation to schools.

Sowell argues that this is characteristic of affirmative action: that it leads to increased resentment and discrimination against the least privileged members of the group that affirmative action claims to help, while it is the most favored members who benefit. But the most favored members of the group whom affirmative action claims to help often have greater advantages in the first place than the majority in society, including the less privileged members of the dominant group (e.g, the white working class in the U.S.) as well as the less privileged members of the group whom affirmative action claims to help. For instance, there are probably no groups in America more downtrodden than the WASPs who live in Appalachia. Yet, they are not helped by affirmative action and in fact are potentially excluded from jobs because of it.

Similarly, in Malaysia laws favoring the "sons of the soil" that amount to apartheid-like discrimination against the ethnic Chinese minority have resulted in the impoverishment of Malaysia. In other words, by excluding highly productive Chinese entrepreneurs, who are a self-made minority in Malaysia, the Malaysian economy has suffered. The Malaysians, who live as a minority in Signapore but a majority in Malaysia, have a higher per capita income in Singapore than in Malaysia. (Malaysia cut off Singapore from the rest of Malaysia because it was primarily Chinese and Singapore is now much more successful than Malaysia.) In other words, the affirmative action policies in Malaysia against the Chinese (in favor of the so-called "sons of the soil", i.e., the native Malaysians) have made the average Malaysian poorer, not richer.

The pattern of unforeseen effects stymies all regulatory systems. Employment at will is another example. In Europe, employees are protected by extensive legal requirements, the so-called social contract. The effect of the "social contract" is to reduce employment and increase unemployment. Britain, which has the weakest "social contract" among the major European nations (excluding the newly free nations of eastern Europe) has seen a massive influx of young French men and women, who cannot find jobs because of the "humane" regulation of the workplace in France. Likewise, the Muslims who dominate the low-income suburbs or banlieue have been excluded from jobs precisely because there are so few jobs. They lead lives of desperation, excluded from the workplace, because of the benign "social contract". The French majority feels very good about how generous it is, but France is a society rife with ethnic hatred and anti-Semitism. The "social contract" is anything but benign.

There are so few jobs in Europe (unemployment is much higher than here) because there is so much beneficent regulation. The riots in the banlieue have gone on for several years, and recently have broken out again. There is so much "ethical" and "humane" regulation in France that it is not unusual for French college grads to fail to find jobs for ten or even twenty years after graduation. Not very humane in my book.

The tradeoff between Europe and America is clear. Where there is heavier workplace regulation, as in Europe, unemployment and the exclusion of unfavored and unlucky workers goes up. In America, where there is employment at will, unemployment goes down and employment goes up. The jobs may not be as good, and perhaps the employees aren't as treated well, but you don't have the social exclusion of large segments of the population in America that you have in "ethical" Europe, a continent whose history is blighted with mass murder as well as the "benign" social legislation of Bismarck.

I wold argue that if most regulation were repealed in the US, then demand for employees would skyrocket. Contrary to what several student claimed, regulation hugely reduces wages. It doesn't increase them.

Wages are determined by the interaction of supply and demand. Wages are an economic phenomenon that are enhanced by a more competitive economy. Deregulation means more demand, which means higher wages.

The best security for all is a competitive economy that is generating considerable innovation and lots of jobs. That can be done in a deregulated, laissez faire economy. The more regulation in America, the more Brooklyn will look like the French banlieue, economically depressed and full of people who cannot find jobs.

Nor do I believe for a second that government is more ethical than business. I do not believe that at all. In fact, the worst crimes against humanity have been perpetrated by government, not by business. The Nazis, the communists, the fascists, the Castros, the Hugo Chavezes have all advocated workplace regulation in the name of beneficence.

If you look, for instance at Hitler's 25 point program in the 1920s, the Nazi Party advocated workplace regulation similar to what American liberals advocate:

"14. We demand profit-sharing in large industries.

"15. We demand a generous increase in old-age pensions.

"16. We demand the creation and maintenance of a sound middle-class, the immediate communalization of large stores which will be rented cheaply to small tradespeople, and the strongest consideration must be given to ensure that small traders shall deliver the supplies needed by the State, the provinces and municipalities.

"21. The State has the duty to help raise the standard of national health by providing maternity welfare centers, by prohibiting juvenile labor, by increasing physical fitness through the introduction of compulsory games and gymnastics, and by the greatest possible encouragement of associations concerned with the physical education of the young."

Thus spake Hitler.

Rather than relying on government, the approach that made America successful was allowing individual initiative as much free rein as possible. No system is perfect. But in the 19th century, the average worker improved their standard of living tremendously even as 100s of thousands of Europeans, Italians, Irish, Jews, Poles, etc. flocked here. No other nation in history has seen such a large influx of immigration, yet the economy was able to create better jobs for these people BECAUSE OF FREE ENTERPRISE. The economy didn't start slowing down until government intervention began in the 1900s.

In Praise of NOTA (None of the Above)

I have a project in which I believe: None of the Above. I had a long conversation with Bill White on Tuesday. Bill founded Voters for NOTA in Massachusetts and introduced bills in both legislative houses to permit voters to register a vote for "none of the above". The bill isn't going anywhere in Massachusetts, but it's worth a college professor's try in New York as well. Back in the 1960s, Howard Jarvis, a 1962 California primary Senate candidate didn't see Proposition 13 pass until 1978, eight years before his death in 1986. I envision a similar bill being proposed in NY, and I think I will be the one to propose a bill to my legislators. Bill White has done all the heavy lifting, and NOTA is an idea whose time has come in New York State.

This is a good year for NOTA. There's very slim pickings among the presidential candidates in both parties. Newsmax reports that James Carville believes that the Democrats are stronger than the Republicans only because of the "complete implosion" of the Republican Party, not because of enthusiasm for the Democrats. Even so, reports Newsmax, Carville still believes that the Democrats "could still lose focus". One reason might be the way the candidates look. I still believe that, ugly as Carville is, he is still better looking than Hillary, although both are better looking than Rosie O'Donnell.

On October 3, the Sun reported that growing evidence that conservatives are concerned about the choices shaping up in the Republican primary race, and Mike Huckabee's increasing popularity among voters in caucus states, offers the former Arkansas governor a rare opportunity to become a serious contender. Instead, social conservatives are thinking of running a third party candidate.

Speaking as an advocate of hard money, limited government and the common man, I feel the same way. Candidates just aren't interested in the erosion of the dollar, presumably because they assume that since voters have been educated in American public schools, the subject is difficult for them.

Last week in Kingston, NY, a shopper on line behind me in Hannaford's Supermarket claimed that grocery prices have gone up six percent since July. At dinner on Monday night, my aunt, Norma of Manhattan, a retired bookkeeper, mentioned that she believed that the Department of Labor's Bureau of Labor Statistics has been misleading the public by publishing inflation statistics that do not include food prices.

The only candidate who grasps the inflation issue is Ron Paul, but his views on Iraq are silly and his use of the phrase "Israel lobby" concerns me. Ryan Sager covers this matter here.