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The Challenge of Financialization …

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The Challenge of Financialization …

At the Campaign for the Public University, we have argued strongly against the financialization of the public university. We have argued that this is not the same as the commodification of higher education (which we can confront as individuals in our pedagogic practices), but represents a series of measures designed to open universities to for-profit income streams. This includes creating a means by which tuition fees can be raised and the income diverted towards other academic activities.

A recent article by Bob Meister sets out how university leaders sought to replace public funding by leveraging income from students. Their argument was similar to that made by Universities UK, that it would enable public universities to compete with private universities. This strategy was predicated on the view that this could be done alongside teaching efficiencies (increased enrolments, use of casualised staff, etc) and that the additional income could be used to augment falling research budgets.

But why would students accept this model? Once again the arguments are familiar to those made by university leaders in the UK. Students should pay because of the graduate premium in incomes. As Meister says, “The core assumption of privatization-as-financialization is that rising income inequality increases the fear of falling behind and thus the willingness of middleclass students to borrow more. If this reasoning is correct, … students should be indifferent to the choice between paying for the education premium up front (as equity) or taking on debt—higher tuition would simply move some students further up what financial economists call the “efficient frontier” between being an investor and being a borrower. … By following the logic of financialization, [universities] could theoretically raise revenues from enrolment growth for as long as [students] were more willing to incur debt than to pay higher taxes.”

However, as Meister shows for the US, there was a significant premium in the early 1990s for the top 20%, but that has not been the case since the late 1990s when all income growth has been in the top 1% (significantly a group in which university leaders are found). The stagnation of ‘middle class’ incomes calls into question such a model. As Meister argues “a potentially greater income gap has appeared among recent college graduates, whose unemployment rate is now approaching the national average. Of those who are employed, 50 percent have jobs that do not require a college degree and that pay on average 40 percent less than jobs requiring a degree.”

At the same time as the system encourages spiralling tuition costs and reduced quality in teaching, it dramatically increases indebtedness. Fear of debt coupled with a perceived lowering of returns to a degree, encourages prospective students, especially those from lower income backgrounds, to enrol at lower cost for-profit providers. Public universities become squeezed between for-profit providers and elite private colleges. Students from low income backgrounds end of paying more for degrees which will do little to advance their social mobility.

This is the system that our university leaders and politicians seek to emulate. Yet, as Howard Hotson has demonstrated, publicly-funded public universities deliver better quality teaching and more equitable outcomes.

Meister’s article makes for bleak reading. There may be no road back. The consequence of high levels of indebtedness is potentially to make populations resistant to tax-based solutions that would ultimately be more beneficial. History will be severe on our university leaders and politicians, who had the evidence before them, but chose to ignore it for a short-term fix to be paid by future generations. The cost is not just financial, it is the undermining of public higher education.

Meister concludes his article with a challenge that is both urgent and compelling:

“Our challenge in resisting privatization is to articulate a vision for higher education that makes it an answer to the problem of growing inequality and debt-servitude rather than a symptom, and increasingly a driver, of that problem… There is no way forward unless the tax revolt, which is now more than three decades old, can be linked to a debt revolt, which is just beginning — and unless both can lead to a renewal of the role of public universities as forces for equality and democracy.”

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