How do monopolies behave? We all know, or think that we do.
They care little for their customers, except as victims. Most of their energy and creativity is devoted to keeping competitors from their markets. They don’t do technology upgrades or customer service. They buy legislators and regulators wholesale. And they’re obscenely profitable.
But sooner or later, according to our cherished models of entrepreneurial capitalism, the monopoly is swept away by market forces. Where are the Xerox machines of yesteryear? Where’s AT&T’s nationwide phone service? Where’s Pan American World Airways?
Gone, driven into bankruptcy or irrelevance by agile competitors, regulatory reform or both.
But, according to our cherished models, public sector monopolies are different. Since governments have no competitors, their natural tendency is toward stagnation and incompetence. Economical service delivery is ignored; instead, bloated, overpaid work forces use the ballot box to preserve their perks. What can we do to prevent this?
It’s simple: limit government spending through measures such as the Taxpayers Bill of Rights and introduce competition into the system wherever possible. Costs will go down — after all, public entities can’t really compete with the private sector, unless they’re heavily subsidized by the taxpayers. Or can they?
Let’s look at one of the most successful, powerful private monopolies — or cartels — in American history.
These folks have ruled their markets for decades — for more than a century, by some accounts. The product they sell is in many ways indistinguishable from similar products marketed by hundreds, even thousands, of competitors. But, by restricting access to their products and by sophisticated pricing strategies, they’ve created an enormous demand reservoir.
Not everyone can buy their services — in fact, less than 10 percent of potential users are allowed to access them. This “velvet rope” strategy, first developed by prohibition-era nightclubs, has long been used to create an illusion of exclusivity, a sense that those who pass the gatekeepers are somehow better than the rest of us.
And for our cartel, it works. Far from being blown out of the water by their competitors, they’ve become ever more powerful, more bloated and less accountable. Potential customers spend years trying to qualify to buy their product — only to be brusquely, even capriciously rejected.
So powerful and ubiquitous is the cartel that all of us, even if rejected by them, would be delighted if our children or grandchildren somehow found favor with the stern eccentrics who control the customer lists.
The product? Higher education at elite colleges and universities — and the cartel members are the institutions which have co-operated more effectively than any group of 19th century monopolists to control their market.
To control a market, you first create an artificial scarcity — by driving out competitors or by deliberately restricting access to your product. And then you price the product at, as a 19th century railroad baron put it, “whatever the market will bear.”
Look at our great private universities: Harvard, Yale, Princeton and their peers.
Despite the demand for their services, they’ve scarcely increased their enrollment since the 1950s. They argue that the educational experience they offer is so rarified, so unique, that it couldn’t be duplicated in a larger setting. They see the increased demand for their product as proof of that fact, rather than proof of their own listless elitism and lack of imagination.
What it proves, of course, is that hundreds of thousand of kids and their parents have swallowed the Kool-Aid and bought in to the unstated premise of such institutions.
Simply stated, here it is: you’re not just getting admitted to a university, but to the ruling class. That’s why we keep the numbers low — just as there are only so many Saudi princes, there can be only so many members of the ruling class. So rejoice! Just work hard, do what we say and you’ll run things.
And just as the Soviet Communist Party ran things in Russia for 70 years by keeping its members in positions of power, so too has the Ivy Cartel had things pretty much its way for generations.
But what of the competition?
There are competitors out there — agile, unafraid and unbound by hoary tradition. And many are in the public sector.
We’ve got one of them right here on Austin Bluffs Parkway — the University of Colorado at Colorado Springs.
Here’s a university that has literally been created from scratch during the last 30 years, where 7,000 students are getting an educational experience that may not be significantly different from that which they’d get at Harvard.
The cost? A fraction of Harvard’s. The prestige? A fraction of Harvard’s. The probability that a student at UCCS will be an educated, thoughtful, contributing member of society? The same as Harvard’s.
That’s because students at UCCS are usually taught not by graduate teacher’s assistants, as are many undergraduate classes at the Ivies, but by grownups — professors who bring far more knowledge of their subject and of the world to their students than could any bright, harried grad student.
My son went to Brown, and got a good education. My daughter went to UCCS — and may have gotten a better education.
Like a car buyer in the early 1980s, comparing Detroit’s tired, underpowered wheezemobiles (remember the Chevy Citation) to their sprightly Japanese competitors, it was an eye-opener.
Why, I wonder, should anyone buy into the siren song of the Ivies when the same, or better, product is available right here for a lot less dough? Do we really think that Ivy League admissions officers can take a bunch of bright kids and, by tattooing “Harvard” or “Yale” on their biceps give them a ticket to power? Yes, we do think so, and our gullibility gives them their power.
That’s why Harvard, an institution supposedly dedicated to education, is sitting on an endowment of close to $30 billion, which might be better described as monopoly profits.
And what kind of endowment does UCCS have? Not much. In fact, virtually nothing. And the university doesn’t get a lot of state support, either. Despite this, UCCS somehow manages to educate almost as many undergraduates as does Harvard.
I wonder, looking at public higher education here and elsewhere, if the Ivies could compete absent the Ivy mystique.
The answer is clearly no. Because, if they could, Harvard would have long since created satellite campuses across the country, extending its brand, competing fiercely with its peers.
But unlike, say, Starbucks, or Wal-Mart or Dillard’s, the Ivies cling to a medieval model of higher education — cloistered and isolated, not quite of this world. Capitalism’s rough-and-tumble is unseemly and mysterious; best leave such vulgarity to DeVry, to the University of Phoenix (whose various branches are presently educating 336,000 students) and to UCCS.
But I guess that, eventually, we’ll all learn something from Harvard. Maybe, one day, there will be a classic business school case, “How the Ivies Lost Control of their Market.”
John Hazlehurst can be reached at John.Hazlehurst@csbj.com or 634-3223, ext. 241.