[This post is the fifth in a series on American Exceptionalism. I’ve written on this subject elsewhere, so some of you may want to skip this one.]

In my last post I described the remarkable power of private philanthropy, which is, of course, funded solely by private capital. In this post I look at another use of private capital: building the great American universities.

No one needs to be reminded that higher education is crucially important to a nation’s competitiveness. After all, this is where a society builds the intellectual capital that will drive its progress. You might, therefore, expect that great universities would be evenly distributed around the world – but you would be wrong.

By consensus, eight of the top ten universities in the world are in the US – add Oxford and Cambridge and you have rounded out the top ten. But it’s better than that – roughly 80 of the top 100 universities in the world are in the US, a country with less than 5% of the world’s population. How can this dominance in such an important sector possibly exist?

Here’s the explanation. Let’s rank the top 1,000 universities in the world by quality in one column. In the other column, let’s rank the top 1,000 universities by size of endowment. What we’ll find is that the correlation is extremely high.(1) Endowment matters hugely to the quality, independence and stability of a university, and endowment comes from only one source: private capital.

A large endowment allows a university to attract better professors, which in turn attracts better students, who tend to be successful and contribute to making the university’s endowment even larger.

But there is another important function to an endowment: it protects independence of thought. A university, especially a great one, is hounded on all sides by (national, regional and local) governments and by too many constituencies to count: faculty, students, alumni, neighbors, gadflies, etc., etc. A well-endowed university feels all this pressure and bends as necessary, but needn’t break. Elsewhere in the world, institutions of higher education are funded entirely (or almost entirely) by governments, with all the turmoil and lackeyhood that implies.

I’m not, I hope, blind to the challenges American higher education faces, from pandering to students to narrow, clueless faculty to a preposterous rise in tuition that has dramatically undermined the cost-benefit analysis for a college education. Many of these issues are associated with a fundamental change in the nature of “higher” education as we have foolishly insisted that virtually everyone should go to college. But whatever problems American universities face, they have a long, long way (down) to go before they approach the level of most non-US universities.

American universities dominate the world because private capital has allowed them to do so. No private capital, no large endowments; no large endowments, no great universities; no great universities, no future as a society.


(1) Though not, of course, perfect. There are extraordinarily important institutions that have somehow thrived even though they are significantly under-endowed compared with their peer institutions. St. John’s College, the so-called “Great Books” school, is a perfect example. St. John’s carries the (increasingly endangered) torch for true liberal education, asserting itself as a gentle but insistent example of what everyone else should be doing but isn’t. It is, at least since the demise of Plato’s Academy 2,000 years ago, the most intellectual place on the planet.

Next up: American Exceptionalism: Powering the Ideas that Power Civilization

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