The economy of the New England states have a lot going against them: High labor costs, high cost of living and high taxes. That’s a deadly combination when it comes to retaining an industrial base, but it hasn’t yet crippled the region’s Knowledge Economy. New England’s secret to survival: World-class universities supported by fat college endowments.
A new study underwritten by the Bank of America sheds light on this little-recognized competitive advantage. Although schools in New England account for 5 percent of the national student body, their endowment assets represent 23 percent of the national endowment total ($62 billion of the total $267 billion in 2004). Endowments in the six New England states generate $3 billion a year for discretionary spending!
It’s not that New Englanders are any more philanthropic than anyone else. I suspect that one could trace the endowments back to the Gilded Era when New England played a leading role in the nation’s economy. Building on the gifts of the era’s super-rich industrialists, universities like Harvard and MIT achieved a preeminence that allowed them to attract the brightest students from across the country. When those students graduated, they dispersed, became successful and donated in turn. As a consequence, New England institutions of higher education have a large and affluent alumni base that continues to donate extraordinary amounts of money — and perpetuates their competitive advantage.
In sum, through the mechanism of fund-raising and endowments, colleges and universities pump human and financial capital into the New England states, shoring up what would otherwise be moribund and uncompetitive economies. No one disputes the importance of building strong universities in the Knowledge Economy, but the critical contribution of endowments and alumni fund-raising is understood only dimly.
In Virginia, the University of Virginia is the only educational institution that comes close to playing in the same league as the New England universities– and even UVa falls short. I would like to know: How well equipped are Virginia’s universities to compete in such an environment? Does state funding and affiliation help or hinder them? Would they be more competitive as private institutions?
