Income Inequality and Education

K. Sokoloff and S. Engerman argue that in the 17th century, the overwhelming economic success of the U.S. was due originally to income inequality in nations that competed with the U.S. The income inequality led to reduced education opportunities for much of the poulation, and consequently much of the productive potential of these populations was wasted. In the U.S. today, income inequality is in the spotlight. But how does the U.S. rank in education? A Financial Times article quotes President Obama as saying "Our country used to have the world’s highest proportion of young people with a college degree. Now we’re 16th." The same article claims that U.S. Spending on education was 5.5 percent of GDP in 2008 with a downward trend, while countries like China and India are investing more and more in education, with China increasing spending on education from 2 to 4 percent of GDP.

Sources:
History Lessons: Institutions, Factors Endowments, and Paths of Development in the New World
Kenneth L. Sokoloff and Stanley L. Engerman
The Journal of Economic Perspectives
Vol. 14, No. 3 (Summer, 2000), pp. 217-232

http://www.ft.com/cms/s/0/334071d8-e9e9-11e0-a149-00144feab49a.html