Home > Economics, Education > The Business of Universities

The Business of Universities

Thomas Frank has an interesting piece in the May issue of Harper’s on soaring college tuition, the concomitant increase in student debt loads, and the money-making financial model of universities. The article is behind a paywall, so I can’t link to it, though a small excerpt from near the end is freely available.

Unfortunately, Frank doesn’t provide evidence to back up his repeated jabs at universities as profit centers. The article is more sketch than in-depth study. Here’s a representative passage, which follows his observation that universities rely on their status as charitable institutions to defend their behavior:

Charitable institutions do not exploit the labor of their charges, nor do they relentlessly bid down their wages, as universities do with grad students and new Ph.D.’s who take on much of the teaching. They don’t run their endowments as you would a hedge fund (or, as is often the case, invest them directly in such concerns). They don’t take kickbacks to steer kids into the toothy mouths of expensive private lenders. They don’t sell their souls for seats on corporate boards or research grants from tobacco companies or a Division I title. They don’t replace scholarly leaders with armies of professional managers who proceed to fiddle with the curriculum, funnel resources to business schools, and strive for supremacy as (in the winning words of one expert on the subject) “one among many industries that pursue intellectual properties.” These are the deeds of profit-maximizing entities. The fact that universities don’t have shareholders and don’t pay exorbitant bonuses to top officers is merely a matter of organizational detail.

Talk about painting with a broad brush! I’d say he overdoes it there. But universities, public as well as private, do need to be out there full time chasing the money, whether from federal agencies, foundations, or individuals. That’s what gets the buildings built, the research equipment bought, the famous faculty hired or retained, the new programs started.

I read somewhere years ago — I wish I remember where, and this was more in the context of the Harvards of the world than universities in general — that if one imagines universities raise money in order to educate students, than one has the model exactly backwards. No, they educate students in order to raise money. Some of those students, some day, will be the source of major gifts. Educate them and the money will come.

Here’s another passage, from the excerpt available on-line:

Massive indebtedness changes a person, maybe even more than a college education does, and it’s reasonable to suspect that the politicos who have allowed the tuition disaster to take its course know this. To saddle young people with enormous, inescapable debt—total student debt is now more than one trillion dollars—is ultimately to transform them into profit­-maximizing machines. I mean, working as a schoolteacher or an editorial assistant at a publishing house isn’t going to help you chip away at that forty grand you owe. You can’t get out of it by bankruptcy, either. And our political leaders, lost in a fantasy of punitive individualism, certainly won’t propose the bailout measures they could take to rescue the young from the crushing burden.

I like that “punitive individualism” phrase as a description of our Republican Party’s attitude toward the unemployed, those with underwater mortgages, the sick. Blame the victims.

The article ends with a remark by Nicholas Merzoeff, a professor at NYU: “I used to say that in academia one at least did very little harm. Now I feel like a pimp for loan sharks.”

I don’t find myself feeling that way about my job, but maybe I’m naive, or perhaps the difference lies in the significantly lower (though sharply rising) tuition we charge at the University of Washington compared to NYU.

Nor do I share Frank’s level of outrage. But higher education is changing, at the least in the expectations set for it by students, parents, and legislators, and not for the better. What stands out is the growing emphasis on universities as job-training institutions. After paying all that tuition, students expect jobs, and we somehow must magically ensure it, a hopeless task in the current economic climate. That’s where the damage is really done — the combination of large debt and job scarcity.

As long as I’m on this theme, I’ve been intending to read Andrew Delbanco’s book, College: What it Was, Is, and Should Be, which was published two months ago. He’s one of the finest writers on higher education that I know (and also a college classmate). I did read Anthony Grafton’s review of it in The New York Review of Books. Early on, Grafton sets out a fundamental paradox, with which I’ll conclude this post:

The belief that college matters deeply is both implicit and ubiquitous. It dominates upper-middle-class and upper-class family strategies, it wins buyers for magazines that offer pointless and inaccurate university ratings, it generates income for college counselors, and it sustains alumni loyalty (genetics is destiny, a fellow professor told me thirty years ago, as we thought about which colleges our children might attend and realized that we might have sealed their possibilities by our own choices). Most important, it impels tens of thousands of students and their families to spend vast amounts of money every year.

The belief that college matters very little is also ubiquitous: it echoes through the dingy mansions of American public discourse. We hear such a belief when Rick Santorum criticizes President Obama for trying to ensure that as many Americans as possible should attend college, and denounces universities as snobbish institutions, divorced from reality and focused on indoctrinating the young with left-wing dogmas; when the billionaire businessman Peter Thiel offers prizes for top-ranked students willing to drop out of college and try to succeed as entrepreneurs; when writers argue that the college premium in wages is overrated and the American concern with selective admissions rests on erroneous beliefs about the practical value of higher education. These people are all, in their various ways, arguing that higher education has become a strange ghost world, whose practices and beliefs are foreign to those of most ordinary Americans, and whose benefits, intellectual or practical, may be few.

Categories: Economics, Education
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