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Bring Down the Ruling Elite

Politics / US Politics Aug 07, 2010 - 05:32 AM GMT

By: Gary_North


Best Financial Markets Analysis ArticleRuling elites as recently as 1600 appealed to God to justify their continuing rule. This was called the divine right of kings: rulership beyond any earthly court of appeal. That began to be undermined in the second half of the seventeenth century. A century later, Enlightenment democratic theory had replaced the divine right of kings. The divine right of Parliament or the divine right of the People replaced it.

This forced a major strategic change on the ruling elite. The ruling elite has to pretend that it does not exist. It formally acknowledged the legitimacy of the People as the final court of appeal. This involved training and screening the judges.

Basic to maintaining this deception has been control over the media. Also vital has been control over the schools – compulsory attendance laws, teacher certification, tax funding, and school accreditation. Above all has been control over textbooks.

This control is ending in the area of printed media, especially newspapers, which are dying. Control over TV news is fading. Digits are killing them. Now control over education is about to be undermined. Same reason: digits.


I have recommended to Ron Paul that he hire a director of curriculum development in one of his educational organizations. The director should then contract with Ph.D.s to create a comprehensive K–12 curriculum. Once it is ready, Paul's organization can post it online for free. I have presented this plan here.

Some parents will want courses taught live. Paul could also put together a faculty of graduate students with M.A. degrees or retired Ph.D.s to provide real-time lectures. The exams can be administered digitally. Record-keeping is digital.

He could charge a minimal $250 per course and split the money 50–50 with the faculty member who teaches it. This should be a profit-seeking venture. It could easily generate $25,000,000 a year. I have explained this here.

Free academic software now allows this. It's called Moodle. Any medium-size organization can now afford to create an online high school or even a university with this open source software. The Mises Institute now has its own online program called Mises Academy. People pay a minimal $250 to take a weekly class. Dr. Tom Woods is teaching a course on Roosevelt's New Deal this fall.

The existing system of government-funded education is facing a technological challenge. The Web can deliver content for free. The model for this is Salman Khan's wonderful Khan Academy. Students from all over the world start with 1 + 1 = 2, and go from there through calculus. It is all done with free 10-minute YouTube videos.

He did this in his spare time just because he wanted to. Now he has funding to create an entire curriculum.

In contrast, this is the model of today's high school.

Right? Right! You know it. I know it. We have known it all our lives. It never improves. It gets more expensive. It gets less efficient. We know it has no hope. Every few years, reformers announce a "new, improved" approach. It is not widely adopted, and wherever it is adopted, scores get worse. They will call for reforms forever. The system will just get worse.

It is paid to get worse. Tax money is automatic. No one stands up locally and runs for the school board on this platform: "Let's cut the budget by 10% next year, and another 10% the year after next." That would be considered the equivalent of blasphemy. Yet we know the tax-funded schools will not improve. Anyone who is so naïve as to believe that the Next Great Reform will be successful throughout the country probably ought to be institutionalized – at a minimum, he should be kept away from sharp objects.


The problem has been that private schools, also burdened with physical classrooms and buildings, are expensive. Not many parents have been willing to pull their children out of the tax-funded schools and enroll them in a private academy. They grin and bear it. "Our schools are not like those other communities' schools. Ours are highly rated." Really? Rated by whom? When? Using what methodology? How long ago?

Who produces the textbooks? New York publishing firms staffed by anti-capitalist Leftists? The same textbooks used in those other communities' schools? You don't say!

With the Web, a PDF file can be downloaded for free. This PDF can be a textbook. If it's in the public domain, it's free. You can print it out. Cost: toner and paper. Maybe you will want to buy a 3-hole punch and a $7 binder. After all, that 3-hole punch is a permanent investment. Amortize it over a 30-year period. You can afford it.

Do you want a video-based course? Salman Khan offers them.

How about MP3 audio files? There are free MP3 hosting sites. Anyone can post lectures.

MIT has put 2,000 mini-courses online for free. Did you know this? It's here.

Local colleges have resisted this. If you were a faculty member of Podunk State University, would you want the whole world to see you and your peers online, 24x7? Would you be confident that parents and students would then be willing to pay $50,000 to get a degree from your backwater institution?

So, university faculties are now in a difficult position. They must justify the absence of online lectures and course plans. Silence is embarrassing. The story of MIT's program is getting out. They will have to argue that MIT's online curriculum is a fluke, that a normal university would not be wise in posting its lectures and course notes for the general public to view free of charge. Yes, MIT can do this, but it's different. It's different because. . . . Well, anyway, it's different. It's not fair to use it as a model. Why not? Because it's the best. The academic world knows it's the best. As an MIT T-shirt says: "Harvard: Because not Everyone Can Get into MIT." The best doesn't count.

By the way, Salman Khan went to MIT and then the Harvard Business School. Now look what he's done. What's Podunk State to do?

Podunk State knows it is delivering a substandard product. It knows that it can keep its doors open only because tax money subsidizes its program. If it is possible to provide digital education, with digital exams, digital grading, and digital record-keeping – and it is – then what does Podunk U bring to the table that (say) the 100 best colleges and universities could not do better? What is the justification for Podunk State?

Accreditation. That's it? That's it.

The collegiate system is a cartel. It is now being threatened by the University of Phoenix, with its 500,000 students at (probably) $10,000 each per semester. The academic community sees the threat of profit-seeking universities. With 15,000,000 students enrolled, it would take only three-dozen University of Phoenixes to teach them all. Let's be generous. Say that 100 schools could do this. What would happen to the other 4,000?

Cartels always collapse. Only the threat of government violence against "cheaters" can sustain cartels. The collegiate cartel in the United States is maintained by a series of Federal government-recognized but privately run accrediting agencies – agencies staffed by members of the cartel. Here is the list.

What breaks cartels? Price competition.


Decades ago, management expert Peter Drucker observed that whenever a new production technique lowers costs by 90%, it comes to dominate. The old producers can fight it, but they cannot prevail.

He said that existing producers can fight by pointing to the prestige of owning an expensive version. This is an appeal to the rich. It is an appeal to status. If you want an example of the status-dominated argument, see the response of the faculty at the University of California, Berekey, to the sensible suggestion that the campus offer distance-learing degree programs.

People who are really self-confident about their status do not play this game. I remember seeing an interview of Denzel Washington. He showed his watch: a Casio. "It cost $35, and it keeps perfect time." That kind of statement sends a chill down the spines of people working for Rolex.

Today, the cost of delivering a good education has fallen by far more than 90%. It has fallen to the cost of bandwidth. Bandwidth keeps getting cheaper.

Back in 1997, Drucker gave an interview to Forbes. In that interview, he offered this assessment and prediction.

Thirty years from now the big university campuses will be relics. Universities won't survive. It's as large a change as when we first got the printed book.

Do you realize that the cost of higher education has risen as fast as the cost of health care? And for the middle-class family, college education for their children is as much of a necessity as is medical care – without it the kids have no future.

Such totally uncontrollable expenditures, without any visible improvement in either the content or the quality of education, means that the system is rapidly becoming untenable. Higher education is in deep crisis.

If he was correct, the large physical universities have only 17 years to go.

Do I think they will disappear this fast? No. Why not? Because control over education is the #1 control device of the ruling class. It is even more important than the control over central banking.

The American educational system absorbs something in the range of 6% of the country's GDP, which means over 10% of the private sector's output. The finished product is a curriculum built on the presuppositions favored by the ruling class. State-funded institutions teach respect for state funding and the bureaucrats who control the flow of funds.

If state-funded education were ever to end, the major means of control by the ruling class would end. The ruling class will not surrender this control without a fight. But it will lose this fight.

The tools of this fight are digital. The basis of this fight is ethical: the right of parents to control the content of their children's education. The state-funded bureaucrats know this. They have fought ever since the foundation of the modern educational system in Prussia after 1810 to insulate their class from political control, while collecting tax money. This is the basis of the doctrine of academic freedom. It means freedom from interference by taxpayers and politicians.

By severing payment from control, the educrats have gotten themselves a sweet deal. Like the Congregational ministers in New England before 1819, they are on the state's payroll, but they insist on autonomy.

The cost of this arrangement is skyrocketing. The educational cartel is facing a revolt. Parents who don't like the content of tax-funded education are breaking ranks. They are teaching their children at home. This was fought by the states in the 1980s, but a series of court cases undermined the laws against home schooling.

Now budget cuts are forcing public school districts to adopt distance-learning programs. This is the death knell for the system. The tax-funded schools are facing budget ceilings. Meanwhile, education is getting steadily cheaper.

Dr. Art Robinson's Robinson Curriculum costs $200 for K–12. It's a one-time payment for the entire family. Yet it could be placed online and given away for free. The curriculum is self-taught. Students who pursue it can quiz out of two years of college, as his children did. They can enter college as juniors at the age of 16.

Of course, a wise parent will not send a child off to college at age 16. So, the child can take the last two years in a program such as Louisiana State University's distance learning program, or at Excelsior College, a private online campus.

Total cost of college? Under $11,000. The student can work part-time and pay his way through college.

Or else he can ask his parents to foot the bill of a conventional on-campus program ($50,000 to $250,000). He can also take on $20,000 in personal debt, which is now the national average.

If he flunks out, all this money is down the drain. Yet about half of students who enroll as freshmen do not graduate.

Which approach makes more economic sense?

What are you buying? An education or a shot at status? Is it a Casio or a Rolex?

There are not many Rolex-type watch firms. There are only about three-dozen Rolex-type universities. They enroll about 2% of the college population.

What is the future for the 4,000 others? Extinction or adjustment to the world of digits.

Digits are cheap.


This is a digital dagger at the heart of the ruling elite. As this spreads, it will be the end of the nearly monolithic educational worldview, a worldview that rests on the assumption that ideas must be controlled, and that this control is best accomplished through screening. Such screening procedures must be in the hands of gatekeepers. These gatekeepers must be certified by other gatekeepers and protected by the state.

The Internet has destroyed most of the walls that give power to control over the gates. The center will not hold. The many competing views of how the world works will act as acid for the worldview of the power elite.

The historical mark of the collapse of the strategy of gatekeeping, after 5,000 years, was Matt Drudge's 1998 story about "Newsweek," which had suppressed the story of the unnamed intern and Bill Clinton. Soon, she was named. Then Clinton was impeached. His Teflon charm let him avoid conviction, but his reputation never recovered. He will always be remembered as the smiling rogue with a roving eye and a cigar. This is not what a member of the ruling elite expects after his successful lifetime effort to shinny up the greased pole of political success. It takes all the fun out of it.

We need an image that represents the digital transformation. I think it ought to be Alex Jones's bullhorn. He posts those video clips of him and some of his supporters standing outside a Bilderberg meeting or some other closed-door conclave of the ruling elite. He has his trusty bullhorn in hand. He shouts at them. He tells them that the People are watching. They don't know what to do about this. The video will be on YouTube within a few days – maybe hours.

Are the People watching? A few may be. Probably not all that many. They are watching funny videos, or pornography, or some other entertainment. But, from the point of view of the ruling elite, nobody is supposed to be watching a Jones video. They hate him and his bullhorn, but they can do nothing about it. Yes, someone hacked Jones's YouTube video of "The Obama Deception" in mid-July, removing it after 6,000,000 hits, but that merely annoyed him. It did not stop him. It is back up.


We are living in the era that will go into the textbooks. If I had the influence to name it, the way that historians designated 1946–1991 as "the Cold War," I would call 1995 "the end of the gatekeepers." It is the Berners-Lee era, but that reference is too obscure.

Every ruling elite rules on behalf of a basic idea, and this idea usually has a slogan. I think the ruling idea today is this: "the mixed economy." Digital technology and state bankruptcies are going to unmix it.

Karl Marx called capitalism's system "the cash nexus." Others summarize it as "money talks." I call it price competition.

The ruling elite has justified its claim to sovereignty and therefore legitimacy in terms of superior technological wisdom – the unique possession of an elite. One institution stands as a testimony against such a claim: Wikipedia. I think it will still be around in 2100. I don't think today's ruling elite will be.

Gary North [send him mail ] is the author of Mises on Money . Visit . He is also the author of a free 20-volume series, An Economic Commentary on the Bible .

© 2010 Copyright Gary North / - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


07 Aug 10, 15:52
Educational Curriculum

This is more of a critique on the demise of public and private learning institutions succumbing to the digital age rather than what the headliner is actually suggesting. All information in the public and private educational system (of any country) is screened and slanted to a degree; that's a given.

Shelby Moore
07 Aug 10, 19:32
Moodle. Thanks!

Perfect compliment to a more free market social network.

Thanks for the tip Gary!

I had been thinking this myself for several years, now its nice to know there is some existing software and effort.

08 Aug 10, 08:28

Interesting, yes. And of some value.

But let's not forget: Gary North is a hyper-religious

whack-job with a right-wing agenda. Google him if you

doubt. Oh, also, don't forget the Y2K fiasco. Gary


Y2K was THE END of industrial civilization. This

reflects -- to put it very mildly -- a problem with


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