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Speech by Darryl R. Francis, President,
Federal Reserve Bank of St. Louis, at
Dedication of Edwardsville Campus,
Southern Illinois University,
May 21, 1966
It Is a personal delight to have this opportunity to join you
at this dedication of the Edwardsville Campus of Southern Illinois
University. It Is especially good to Welcome another great university
into the St. Louis Metropolitan Area. I am sure that the area will
be grcrtly benefited by the presence of another major institution of
higher education.
This ne,v campus demonstrates the fact tnat we in the United
States believe that all citizens have the right to obtain a general
education. This right, h&vever, was not always the case. A backward ylance indicates the uniqueness with respect to education of
both this nation and this age. Recognition of need for mass education
for sil citizens is a relatively recent thin'j. Until the Nineteenth
Century, education was essentially a privilege of the aristocratic
groups in most nations of the world. Some of our o&n states had
compulsory education systems as far beck as the 1850s, but it was
not until the close of the First World War that all states of the union
had passed compulsory education laws.

- 2We in the United Slatesteygecimuch of Western Europe in
recognizing the need for some education for all citizens. The first
compulsory national education system was instituted in Prussiain the mid-lTOQ's. Most other Western European nations followed
with compulsory school systems about 100 years later. Thus, by
1918, when education finally became compulsory throughout the
United States, most of the great commercial nations of the world had
decided that all citizens should have some schooling.
The educational system In Vao United States, however,
developed differently from systems in Western Europe, in contrast
to those systems where elementary education was designed for the
lower classes and higher education for the upper classes, our system
developed along a ladder-type structure. Beginning with the first
year of schooling, it extended through graduate and the professional
levels. _Eyej-y_child i s f r e e j o ^ j i n L a t the iowesl level andprogress
through the grades and schools as far as his abilities and ambition
will take him.
This idealistic program is indeed a heroic assignment for our
educational system. We have taken into the school system a greater
proportion of our children 3nd kept them there longer than any other

1/ Source: The Encylopedia Americana.

-3nation. While our population has increased 4 times since 1889, our
enrollment in secondary schools and colleges and universities has
increased more than 80 times. Of our population in the 18-to-21
age group, more than 30 per cent were enrolled in institutions for
higher education in late 1965. in comparison, only 10 to 12 per cent
of this age group in other advanced countries enrolled in higher
education in recent years. Our land grant colleges became symbols
of equality and a means of realizing an ideal — so did the hundreds
of other colleges and universities that sprouted and grew all over the
This approach to an education for ail the people has been
criticized by intellectuals Doth at home zm abroad. Many critics
have contended that we have sacrificed quality for quantity. Europeans
are often bewildered by our great multitude of colleges and universities
lacking uniform standards for admission or graduation and varying
in quality from very high to very lo*v. We doubtless have been guilty
of overlooking some quality aspacts of education in \h^ pursuit of our
goals of equal access to educational facilities and a maximum education
possible for all citizens. Nevertheless, we are rapidly approaching our
goal which is that anyone who has the ability and ambition can say
that he or she has received a college degree. According lo the U. S.
Department of Health, Education and Welfare, more than 550 thousand
students in the nation earned degrees in 1953, and this number is

-4expected to double by 1975 when about 1.1 million are expected to
receive degrees either at the first, second, or doctorate level.
We are not embarrased because of our efforts to educate ail
the people. We recognize that wide disparities exist in the quality
of our colleges, universities, and our college graduates. Nevertheless, we have decided that this disparity is not totally incompatible
with \h& achievement of excellence which is said to have been so
devoutly pursued in Western Europe. We have discovered that we
can achieve both high quality and mass education with our diversity
of institutions. Our best collages and universities compete in
quality with \hQ finest that Europa can offer. On the other hand,
the remaining schools carry the rest of our students to the maximum
of their abilities.
We have for many years recognized the close association
between individual training and levels of income and welfare.
Numerous studies have b$en made which indicate the wide difference
in earnings between college and high school graduates. One study
by Morgan and David using 1959 data- indicates that ihQ value of
a college degree is about $1.00 per hour to those in the 35-44 age
bracket and $1.50 per hour to those in the 45-54 age bracRet. Translated into annual wages, this amounts to $2 thousand to $3 thousand

2/ Quarterly Journal of Economics, August 1963.




per year. On the basis of these data, a person during his (her)
40 post-college years of productive work will earn $80 thousand to
$120 thousand more with a college education than would be earned
by entering the labor force with only a high school diploma.
These studies recognize the problems of measuring the
influence of educational Achievement on income. Those entering
college generally have higher intelligence test scores and are perhaps
more ambitious than those who do not. Also, college graduates are
on the average from families having greater wealth than other
families, in such cases parents a n ofcen place their graduate sons
and daughters in higher paying positions than would be possible for
less fortunate individuals. Allowances were made for all such
factors in the study cited.
Although the benefits to che individual alone would appear to
justify all our efforts on behalf of education, more recently another
benefit from education has been recognized which focuses the
world's attention more than ever on America's mass educational
experiment. That benefit is the part which education plays in the
over-alt rate of a nation's economic growth. In studying t he growth
patterns of firms and nations, economists have long recognized the
parts that are played by the basic factors of production; namely,
labor, management, and capital — including land. We have noted

-6that some firms can combine these factors of production in such a
way that they will grow substantially faster than other firms. We
have also observed that some nations, while apparently using the same
factors of production, will grow at a significantly greater rate over a
long period than will other nations.
In the past it was assumed by most scholars that a large part
of the disparity of growth rates among nations could be accounted for
by the diverse rates of capital formation. When one compares growth
patterns of two nations of similar people, the average level of management of all firms combined will apparently be about equal for both
nations. Most such comparisons, however, have left much of the
national growth pattern unexplained. When analytical tools are
applied to growth, using the usual production inputs to make
estimates of growth rates, there remains a substantial unexplained
residual. This leads to ihe question: What is being omitted from the
growth problem that leaves so much usiexplained after all labor and
non-human capital have been accounted for?
This questioning has led to the conclusion ttrat a unit of labor
is not the same from one person to another or from one nation to
another. There is a wide difference in the average productivity of
labor from one nation to another. Such differences in labor
productivity, according to leading analysts, are related to the

-7acquisition of useful skills and knowledge, including formal education,
and not so much to differences in muscular strength and willingness
to work.
Thus, before any over-all measurement of a nation's
productive capacity is possible, we must have measures of the skills
and knowledge of the labor force, including its educational achievements. In this sense, labor has become an important part of a nation's
capital stock. It has acquired skills that have economic value. The
value of these skills is not of a trivial nature. It is sufficient to alter
the patterns and over-ail level of wages and real income of a nation.
Carrying this idea of investment in humans one step further,
schools are a major means by which such investments are made. If
we look upon our schools as a menns of investing capital in humans,
thereby increasing productivity, we can better understand our
attainment of a long uninterrupted period of relatively high growth
and our current high level of income which is the envy of the rest
of XhB world. Also, as education is being more closely tied to economic
growth, our system which provides for educating all citizens to the
maximum of their abilities is receiving more intensive study,
especially from our Western European friends.
This recently-discovered link between education and economic
growth has greatly broadened the base of support for education in
both our own country and the resi of i'm world. Professional

-8educators have always been major supporters for learning, perhaps
primarily because of its cultural, moral, and political values. The
aristocratic groups of Western Europe have supported the higher
education of a limited number as a means of perpetuating class
distinction. In our own zeal for equality we have given support to
higher education for ail people in order to further a truly classless
democracy. At the same time, we have recognized its value to the
earning power of the individual. Mow, however, we have a much
broader objective in supporting maximum schooling. It is a great
social investment of capital m human resources from which the
entire nation reaps the gains through higher output from ihB nation's
factories, mines, farms, and all the supporting marketing and
transportation facilities.
How well does our investment in schooling pay off? Professor
T. W. Schultz, of the University of Chicago, one of this nation's
outstanding economists, reports iM\ education directly accounted
for one-fifth of the nation's growth from 1929 to 1957.- Another onefifth of growth during this period is estimated to be a consequence of
basic research, approximately half of which is carried on within Ihd
educational establishment, in the field of agriculture, with which I
am personally familiar, research has been especially productive.

- 9The Land Grant College Experiment Stations have made many major
contributions toward a rapidly advancing farm technology, indicative
of the speed of agricultural advancement is the rate of decline in the
size of our farm labor force. During World War I, 13.5 miliion
workers were employed on Vm nation's farms. During World War 11,
only 8.9 million farm workers were required, and today the farm work
force totals only 4.6 million. One farm worker produced food and fiber
for 7.7 people during World War I, for 15.5 people during World War 11,
and for 42.4 people in 1965.
Back to the Schultz study, cur growth in real ou\$u\ per capita
attributed to schooling and research during the 1929-57 period was
greater than that attributed to the addition of material capital to the
economy. Furthermore, Dr* Becker, sn outstanding economist at
Columbia University, estimates that the rate of return from our total
investment in schooling at least equals and perhaps exceeds the rate
of return on material capital investments.
The businessman, however, is interested in schooling not
merely from the standpoint of national growth; we have a direct
interest in both the research products and human products of our
higher educational institutions. Within the Federal Reserve System
we are in regular contact with colleges and universities relative to
problems within our limited field of interest; namely, monetary policy
and other problems associated with our bank supervisory functions.

-10I am sure that other firms and government agencies likewise have close
working relationships with university research people relative to their
mutual fields of interest.
It is to your other area of activity, however, the improvement of
young men and women, that I would like to address the remaining portion
of my remarks. Basic to these remarks is ihe fact that administrative
and managerial responsibilities in business are becoming more and more
complicated. Automation has greatly increased the upward pressure on
skills for all levels of our work force. In all firms the level of competence
required is constantly increasing. Only a few years ago it was unusual
for us to hire a college graduate at the Federal Reserve Bank of St. Louis,
in contrast, today a substantial per cent of our new employees are
college graduates. Furthermore, we are vitally interested In the type
of college education that the job applicant has received. That brings me
to the core of this discussion; namely, the type of training that we would
-prefer for those whose energy and abilities are sufficient to take them to
senior positions in business firms.
No longer is excessive specialization desired. In fact, undue
specialization in one or two disciplines may well lead to a dead end rather
than provide an avenue to deeper and broader understanding and greater
responsibilities. I am thinking primarily of the tendency in some
colleges of agriculture, business, and education to load their curricula
with their own special courses. In turn, their students are perhaps
denied the opportunity of obtaining a general education.. A broader
educational background \hm that provided by most of these specialized

-11colleges is urgent.
Many college courses in agriculture are designed to provide
skills needed for functions on the farm. Agriculture, however, Is
becoming less and less a function carried out on the farm.
Most college programs for training school teachers are subject
to similar criticism. A recent special studies report of the Rockefeller
Brothers Fund found that programs for the preparation of teachers are
rigid, formalistic, and shallow. \l also indicated that the requirements
for teacher certificates were so technical and trivial as to make it unlikely
that the better liberal arts students would attempt to enter the teaching
A recent report by the Committee for Economic Development
recommended that business school curricula be pruned to reduce
vocationalisrn and over-specialization. The report further suggested
that courses in typing, shorthand, elementary bookkeeping and other
narrow vocational courses had no legitimate place in a 4-year college program.
I am sure that similar problems exist in other colleges. The
college graduate of the future should be more than a specialist in a
narrow field. In other words, the colleges should move away from the
trade school concept of education. I recognize that deciding what is
important and what is not important in education is a very difficult
problem. Yet, it is an extremely vital one, particularly for the more
able students.

-12I believe that I am in tune with a substantial portion of the
business world in wanting to sea on a college graduate's transcript,
regardless of his or her major field of interest, a sizable number of
courses in the basic sciences, mathematics, statistics, English, and
the social sciences. Such training enables one to interpret what
goes on in the surrounding world. It provides the basis for a wellrounded, imaginative, and intelligent human being. A large portion
of our technology becomes outdated within a decade. It is extremely
wasteful for the better students to spend four years or more learning
current techniques and methodology that are so short lived, when
the opportunity is available to equip them with IhB basic mental tools
for the much greater variety of tasks in modern business management.
To be more specific, for ihB better students, I strongly favor a liberal
arts program of training during the undergraduate years, with
specialization to be "iced on" at the graduate level. On ihe other
hand, the less capable can be sorted out mercifully by encouraging
them to take the more routine type of courses, in closing, I would
like to read to you a paragraph from a booklet published in 1958 by the
Rockefeller Fund entitled l The Pursuit of Excellence."

There is a danger of training scientists so narrowly
in their specialities that they are unprepared to shoulder
the moral and civic responsibilities which the modern

-13world thrusts upon them. But just as we must insist
that every scientist be broadly educated, so we must
see to it that every educated person be literate in science.
In the short run this may contribute to our survival. In
the long run it is essential to our integrity as a society.
We cannot afford to have our most highly educated people
living in intellectual isolation from one another, without
even an elementary understanding of each other's
intellectual concerns. Such fragmentation must lead
to a loss of social purpose.
I heartily concur with these comments. However, in addition to the
moral and civic values of a college education, I would like to emphasize
again that the college or university also has another function. It is
a place where young men and women can add to their capital stock of
skills and knowledge, thereby enhancing their future earnings.
Furthermore, from a social point of view our collages and universities
might well be looked upon as factories which add to the nation's
productive capacity in the form of an enlarged stock of human capacity
to produce. In this context this new SII) campus is the equivalent of
another permanent stream of high earning capital which will produce
a continuing flow of income into \hd area it serves.