I am not very happy because I just composed a lengthy reply and then it was erased... I will attempt to resurrect my reply..

I do not think that the principal was trying to harm the children, but trying to do them a service. He probably believes that these kids should not have their hopes revived because they are a mill town. Many people follow his example unfortunately and I think it is due to this:
Lower classes do not have a security blanket. When you encourage a child to reach high and then tell them they should jump, you know you risk that child falling. Upper classes have nets to catch them or pad their fall because of their greater ability to: take out loans, borrow from relatives or friends, network with those with money, cash a stock, etc. When someone from a lower income level comes across financial or other hardships in a business or schooling they many times end up way under the surface because they do not have anything to catch them when they fall.

I believe the principal exposed his own thoughts or upraising by asking Jim's brother to quit. He might have been raised to not reach too high, and therefore is reproducing the same cycle. He may have picked up on the community ideals as well and now reproduces that culture.

Many say that to try is to risk failing. I personally know that it is much better to reach than to stand, but it is a very scary thing to us that have no net.