Fifty-five years ago, as a white working-class veteran, I was able to graduate from the University of California without debt. I was the first in my family to do so. Entrance was easy: there was room and I was in the top 10 percent of my high school class. I paid a small service fee, but no tuition, since my education was free. My living expenses were covered by my part-time job, my G.I. benefits and cheap room and board at my parents’ house. After graduation, I had many job prospects. The future looked good.
Over the years, things have changed. I probably couldn’t get in today. The University of California cannot accommodate all of the eligible students. Tuition, installed in 1970, has hugely increased. Wealthier and out-of-state students have nearly replaced the working class of my day. The state has failed to invest the resources necessary to keep pace with demand. And good jobs, after a debt-burdened graduation, are hard to get. Why? The answer lies in the economic shift caused by the business community in its attempt to regain control of the economy from the effects of FDR’s New Deal.
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The Rise of Neoliberalism
The New Deal was President Franklin Delano Roosevelt’s attempt to save capitalism as the Great Depression of the 1930s was destroying the hopes and lives of citizens. He also saw unrest among organized labor, socialist and communist parties, and reasoned that this could lead to a revolution. This prospect scared him, as well as a portion of the wealthy who supported most of the changes FDR proposed: higher taxes for the wealthy and social programs by the government to give hope and jobs to the unemployed. As humane as these programs were, none of them were concerned with ending exploitation or supporting worker control in decision-making. They were focused on minimizing the anger of the working class and saving capitalism.
FDR’s Keynesian approach of government intervention and regulation was a reaction to the previous “hands-off” policy of our government toward the capitalist market system, which brought on the Depression. It seemed to work, eventually making the US the dominant and most successful economic power in the world. The World War that followed destroyed the United States’ industrial and trade rivals for years, giving the US a competitive edge. The war also reduced US unemployment by sending off millions to the military, while putting millions more to work in factories supporting the war effort.
The reaction by the other portion of the wealthy — the “economic royalists,” FDR’s name for those rich who didn’t go along with his program — was to systematically tear down the programs of the New Deal. Some even promoted a military coup as early as 1934. The royalists were not effective until the 1970s and ’80s. The Keynesian approach began to lose its effect due to the successful competition and growing economic might of Japan and Western Europe, and the Organization of the Petroleum Exporting Countries (OPEC) oil shock that created a panic at the gas pumps and raised the cost of energy. In order to be more competitive, US companies began to outsource industry and find cheaper labor across the world. This led to a loss of manufacturing, an increase in unemployment, the growth of the Rust Belt in the 1980s and an increase in prisons.
This economic crisis opened the door to the return of the “economic royalists,” represented by the growing power of the conservative movement and the presidency of Ronald Reagan in the ’80s. The Reagan administration mobilized and promoted a heartless formulation of capitalism: neoliberalism. This was a model based on replacing the state with the market as a way to coordinate the economy. It stood for a world in which human relationships are forced to conform to an ideal of economic competition. The individual is transformed from a citizen into an independent economic actor. Under the regimes of President Reagan in the US and Prime Minister Margaret Thatcher in the UK, neoliberalism led to massive tax cuts for the rich, the destruction of trade unions, a growing inequality of wealth, deregulation, privatization, unemployment and the decline of public services — with the exception of prisons and the military-industrial complex.
The main principles of neoliberalism are:
- The rule of the free market around the world from restrictions imposed by government (also known as globalization).
- The cutback of money spent for social services (also known as austerity).
- The reduction of government regulations for everything that could hamper profits.
- The privatization of government ventures leaving wealth in a few private hands.
- The focus on individual responsibility over that of the public good.
- Tax reductions for corporations and the wealthy.
The Neoliberal Assault on the Universities
One aspect of the project of neoliberalism was to reshape the population’s understanding of the purpose of public institutions, such as schools and universities, to fit the corporate model. This transformation was part of a larger cultural shift that began in the ’70s and ’80s, when policy-makers started to see higher education more as a private (rather than public) good.
The plan to transform the higher education system to meet the needs of neoliberalism can be most clearly seen in a memo sent by Lewis Powell, a future member of the Supreme Court, to the US Chamber of Commerce in 1971. The memo was a response to some setbacks that befell the business community, ranging from government regulations on the environment to occupational safety and consumer protection laws. The memo presented a framework for the conservative reaction.
One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.
The campuses from which much of the criticism emanates are supported by (i) tax funds generated largely from American business, and (ii) contributions from capital funds controlled or generated by American business. The boards of trustees of our universities overwhelmingly are composed of men and women who are leaders in the system.
Further, he argued that
… it is essential that spokesmen for the enterprise system — at all levels and at every opportunity — be far more aggressive than in the past … There should be no hesitation to attack the Naders, the Marcuses and others who openly seek destruction of the system. There should not be the slightest hesitation to press vigorously in all political arenas for support of the enterprise system. Nor should there be reluctance to penalize politically those who oppose it.
The Powell memo’s plan was to: a) defund public higher education; b) then “save” the universities with ideologically focused corporate funding friendly to “free enterprise;” c) turn universities into corporations; and d) turn the students into consumers who became educated labor products.
Neoliberal Plan for Defunding Universities
States provide much of the funds for higher education but need to balance their budgets. So when tax revenues fall, higher education suffers, since it is a lower priority than Medicare, prisons and K-12 education. In addition, large corporations often pay little or no state income tax in states where they have large operations. In a 2011 report, the Center on Budget and Policy Priorities concluded that at least 46 states have imposed cuts in the funding of higher education.
The American Legislative Exchange Council (ALEC) — a nationwide association of state legislators and corporations — best expressed the neoliberal perspective. It successfully lobbied both the states and the federal government to reduce corporate taxes and, in effect, deprive public universities of the state and federal funds they needed.
In an Americans for Tax Fairness fact sheet on corporate tax rates, we can see that:
- The corporate share of federal tax revenue has dropped by two-thirds in 60 years.
- General Electric, Boeing, Verizon and 23 other profitable Fortune 500 firms paid no federal income taxes.
- US corporations dodge $90 billion a year in income taxes.
- US corporations officially hold $2.1 trillion in profits offshore.
Tax avoidance, plus lobbying that reduced corporate taxes, diminished the revenue for social programs, especially education. This reduced funding was coordinated with a public relations campaign claiming that public schools were failing, and that they should be privatized and would be improved if they were turned into profit-making ventures. The project is already running for K-12 education with the charter school movement, and now it’s being used in higher education, as federal and state governments have gradually reduced funding.
The least discussed reason for reduced state revenue for social programs is our ever-growing defense budget. The Pentagon spends more on war than all 50 states combined spend on health, education, welfare and safety. Even prior to the arrival of neoliberalism, military adventures drained money from the social budget. In 1935, Gen. Smedley Butler wrote a book titled, War Is a Racket, in which he exposed greedy profit-making corporations as instigators of imperialism and war. In 1961, President Eisenhower warned of the military industrial complex as a hidden force in US politics. But the military budget is higher today than at any point since the Eisenhower administration.
We now have a new neoliberal-inspired military industrial complex consisting of companies, agencies, militarized policing, hidden budgets, a “deep state,” private mercenaries and lobbyists that make Eisenhower’s warning mild by comparison. Our budget priorities keep the country on a war footing, and our economy allows for military and homeland departments to be virtually untouchable. The current excuse for funds is “terrorism,” but under neoliberalism, the actual purpose is to control the world’s resources for American capitalism and to stop other countries from competing with us. As Colonel Wilkerson, echoing general Butler, stated recently: “We’ve privatized the ultimate public function: war … In many respects it is now private interests that benefit most from our use of military force.” A few universities are beneficiaries of war spending through their research for the war machine, but most are losers due to the financial and educational effects of the loss of funding, while the war machine grows.
“Saving” Defunded Universities With Corporate Funding
A partial replacement for the loss of public funds comes from corporate and philanthropic “gifts” and industry contracts for universities. Groups of conservative millionaires like the Koch brothers have created institutions to push the corporate agenda. They have infiltrated universities and introduced the neoliberal worldview through think tanks and programs designed to give “assistance” to those institutions that would accept their money and programs. These groups, with the combined help of the corporate controlled press and a sophisticated public relations campaign, eased the transition to the corporatization of universities.
Turning Universities Into Corporations
A 2014 Institute for Policy Studies report finds that the outcome of treating education as a commodity has led to universities mimicking business models. Presidents, chief executives and a layer of bureaucrats earning excessive salaries were established, while the earnings of the faculty declined, largely because tenured and tenure-track faculty were replaced by adjuncts (part-time faculty) and temporary faculty. Instead of giving primary focus to education, scholarship and research, colleges and universities began marketing themselves as products worth purchasing by the consumer. Science and humanities faculty were encouraged to become entrepreneurs and seek ways to profit directly from their intellectual and technical pursuits.
Mark Yudof, former president of the University of California, conceded that the university needed to stop viewing itself as a public institution and consider itself a “hybrid” university, bridging the divide between private and public institutions. In a time of scarce resources, privatization has emerged as a potential replacement for the historic model of community support of public universities. The danger is that when corporations fund universities, they get influence over studies and analysis produced by universities, as well as influence over the perspectives and career paths of large numbers of students. They also get use of vast resources for private gain and tax breaks associated with making donations.
Students as Consumers and Educated Labor Products
Fifty years ago, students often pursued their favorite high school subjects in college, assuming that the degree itself would guarantee a job. Not so today, as living expenses and tuition have risen. Students and their families paying the bill see themselves more as consumers of a commodity rather than engaging in a learning process. Because there is no guarantee of a good job after graduation, universities increasingly connect learning with the skills needed for the hard-to-enter job force. Education more and more becomes job training, and students become educated labor products.
By ensuring the need for outside sources of funding, neoliberalism set the context that led to the growth of tuition. When the federal government opened its student loan service to profit-making corporations, profit dominated. The privatized loan industry, through predatory lending schemes, offered loans to all students — even to those who sometimes could not afford them. Their profit motive, combined with the laws passed by a highly lobbied Congress, eventually made the $1.3 trillion student debt the worst kind of debt for students, but the best for banks and debt collectors. Currently, all involved in the student loan industry make money from student debt: banks, private investors and even the federal government. This action has led to the rise of for-profit colleges whose goal was often to exploit the poor who couldn’t afford to enter higher education in the first place. And finally, as Kenneth Saltman pointed out, “Shifting the costs of higher education onto students represents a kind of debt spending by youth to fund the military and corporations.”
Even though neoliberalism is in decline due to the 2008 depression and weak recovery, its values and accomplishments have staying power. By using rhetoric like “individual freedom,” “liberty,” “personal responsibility,” “privatization” and the “free market,” it was able to undo much of the New Deal and restore corporate power, and in the case of higher education, be responsible for the rise in tuitions and decline in educational quality.
The neoliberal plan for public universities is to defund, then refund with strings attached, corporatize them into profit-makers, and turn the students into educated labor products that would fit into the economy. Its effects are most clearly expressed by Grover Norquist’s quote about government: “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” Neoliberalism doesn’t want to abolish universities; it simply wants to turn them into profitable corporations that will maintain and promote the neoliberal version of capitalism.