Here’s The Real Story of What’s Happening in Tunisia: A Higher Education Bubble

It would be easy to make light of the current chaos in Tunisia.

Riots in Tunisia
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Riots in Tunisia

“Carthage Makes Bid For Global Attention After 2000 Years Of Obscurity,” would probably make a great headline in the Onion.

One reason jokes come readily is that not many of us have given much thought to Tunisia. If it is familiar at all, it is probably as the real-life setting of George Lucas’s Tatooine, the home planet of Luke Skywalker. Steven Spielberg filmed parts of Raiders of the Lost Ark there. And students of the classics know that it is where Rome’s arch-nemesis, Carthage, once existed.

But there’s a serious lesson for Americans in Tunisia’s current struggles, although it’s a lesson many Americans may have trouble digesting.

First, let’s deal with what’s not happening in Tunisia. Its people are not rising up because they are brutally poor or crushed under the heel of a brutalizing political system.

Tunisia has been ruled by a dictatorship ever since it won independence from France in 1956. As such things go, the dictatorship of Tunisia has not been all that bad. Political rights have been severely curtailed but the main suppressed political group is a gang of Islamic radicals who aren’t exactly agitating for a more liberal society. There are privately owned media companies—including radio and television stations—but they rarely offer up criticism of the dictatorship. Newspapers that cross the government have had their circulation runs destroyed. Tunisia’s government is famously efficient at blocking access to internet sites it deems unacceptable. You can’t get YouTube in Tunisia.

The Tunisian government, however, doesn’t have a reputation for killing its dissidents. There are no politically motivated “vanishings.” Human Rights groups say that some 2,000 people have been imprisoned on counter-terrorism charges without sufficient evidence. Police interrogation techniques are often brutal. The court system doesn’t reliably provide for fair trials.

The First Family of Tunisia—the relatives of Tunisian dictator Ben Ali—are your basic third-world kleptocrats, filling their offshore bank accounts with the country’s wealth and using government jets to visit European and Persian Gulf capitals for shopping trips and the like. All told, however, Tunisia is not all that corrupt, when judged relative to the rest of the world. It falls just about in the middle of Transparency International’s corruption index, at 61 of 179 countries with a score of 4.2 (with 1 the most corrupt and 10 the least corrupt).

Tunisia’s economy is not all that bad. It had a growth rate of 3.04 percent in 2010, which puts it tied with Israel and just ahead of Germany and Australia. Prior to the global economic recession, Tunisia was regularly growing at a rate of around 5 percent. Per capita GDP is $9,500—slightly less than Colombia but better than Peru, Thailand or Jamaica. A little more than half of the GDP is created by people working in services, while slightly less than half of its people are employed in that area. It exports around $16 billion of goods and services a year, mostly to France and Italy. It imports around $20 billion, mostly from France and Italy. Inflation runs at 4.5 percent.

In sum, if you imagine Tunisia as a slightly better than average post-colonial tin-pot dictatorship, with a government that seems not to be totally economically incompetent, you won’t be far off.

So if it isn’t politics or economics, what is it that lead the people of Tunisia to rise up and overthrow their government?

Tunisia’s big problem is said to be unemployment. But unemployment there is running at somewhere between 13 percent and 14 percent, which isn’t really so bad. The real problem is that Tunisia cannot create suitable employment for the huge numbers of college graduates it creates every year.

That’s right: the education bubble popped in Tunisia.

Tunisia has a gigantic education apparatus that has earned it plaudits for years. Free university education is guaranteed to anyone who passes the government’s exams at the end of high school. As a result, an estimated 30,000 to 40,000 university graduates enter the job market every year. Fifty-seven percent of young Tunisians entering the labor market are college educated.

It turns out that creating a large class of college-educated workers is not necessarily a recipe for prosperity. Tunisia has discovered it can be a recipe for political unrest and mass unemployment. For Tunisia’s recent college graduates, the unemployment level reaches to at least 30 percent. If you count in various forms of under-employment, it’s safe to say that as many as half of Tunisia’s recent college graduates are losing out in the jobs market.

Tunisia has clearly over-invested in higher education. It is spending 7.2 percent of its GDP on education, more than any European or North American country that isn’t Denmark (which manages to spend 7.9 percent of GDP on education) or Iceland (7.5 percent). It’s a very typical malinvestment bubble: keep spending based on expected returns that don’t materialize, and suddenly find yourself with a worthless asset. Whether it’s dot com sites selling pet food, homes near Las Vegas, or really well-educated Tunisians the results are the same.

The notion that the laws of supply and demand apply to education has not been well-understood in much of the world, including the United States. Very often, politicians and educational experts act as if the solution to problems of unemployment or income inequality is more education. Recently, Barack Obama announced a new policy aimed at producing an additional 8 million college graduates by the year 2020.

But the United States already produces too many college graduates. As we pointed out in October, over 317,000 waiters and waitresses have college degrees. Over 8,000 of them have doctoral or professional degrees.

“All told, some 17,000,000 Americans with college degrees are doing jobs that the BLS says require less than the skill levels associated with a bachelor’s degree” Richard Vedder has written.

The United States might not be Tunisia. But we need to start wondering whether all of the government programs intended to foster “investment” in education are likely to pay off—or if we’re just blowing another bubble.


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