China, like the U.S. and much of the developed world, is facing a glut of unemployed college graduates. In fact, at a remarkably high 30 percent, China’s unemployment rate for college grads is far worse than our own. In response, the Chinese government is implementing some radical changes in the way it funds higher ed:
A little noticed Associated Press news story last week reported that China now plans to phase out college majors that consistently produce unemployable graduates. Any program in which 60% of the graduates failed to find work for two consecutive years would face funding reductions until supply was brought back into balance with demand.
This Chinese hand may not be invisible, but it would be one that Adam Smith would recognize. Isn’t it amazing that even self-identified communists are figuring out that markets only work when adjustment mechanisms act to reduce surpluses and shortages? Destroy those mechanisms and unemployable college graduates pile up as fast as unsold electric cars.
This leaves us with a paradoxical question: Have the Communist Chinese done a better job of facing up to the negative realities of market-distorting educational subsidies than we free-market Americans?
It looks that way.