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The Rise and Demise of Neo-Liberal University: The Collapsing Business Plan
of American Higher Education
*by *David Schultz
The dominant business model for American higher education has collapsed,
taking with it the financial integrity, academic quality, access, and
independence that college and universities once enjoyed.
Since the end of World War II two business models have defined the
operations of American higher education. The first was the Dewey model
that lasted until the 1970s. The second, a corporate model, flourished
until the economic crash in 2008. What the new business model for higher
education will be is uncertain, but from the ashes of the status quo we see
emerging one that returns to an era before World War II when only the
affluent could afford college and access was limited to the privileged few.
*Model I: The Dewey University*
The first post-World War II business model began with the return of
military veterans after 1945 and it lasted though the matriculation of the
Baby Boomers from college in the 1970s. This was a model that produced an
ever expanding number of colleges for a growing population seeking to
secure a college degree. It was a model that coincided with the height of
the Cold War where public funding for state schools was regarded as part of
an important effort to achieve technological and political supremacy over
communism. It also represented the expansion of more and more middle and
working class students entering college. This was higher education’s
greatest moment. It was the democraticization of college, made possible by
expansion of inexpensive public universities, generous grants and
scholarships, and low interest loans.
Public institutions were key to this model. They were public in the sense
that they received most if not all of their money either from tax dollars
to subsidize tuition and costs or federal money in terms of research grants
for faculty. The business model then was simply-public tax dollars,
federal aid, and an expanding population of often first generation students
attending public institutions at low tuition in state institutions. Let us
call this the Dewey business model, named after John Dewey, whose theories
on education emphasized the democratic functions of education, seeking to
inculcate citizenship values though schools.
*Model II: The Corporate University*
Yet the Dewey model began to collapse in middle of the 1970s. Perhaps it
was the retrenchment of the SUNY and CUNY systems in New York under
Governor Hugh Carey in 1976 that began the end of the democratic
university. What caused its retrenchment was the fiscal crisis of the
1970s.
The fiscal crisis of the 1970s was born of numerous problems. Inflationary
pressures caused by Vietnam and the energy embargoes of the 1970s, and
recessionary forces from relative declines in American economic
productivity produced significant economic shocks, including to the public
sector where many state and local governments edged toward bankruptcy.
Efforts to relieve declining corporate profits and productivity initiated
efforts to restructure the economy, including cutting back on government
services. The response, first in England under Margaret Thatcher and then
in the United States under Ronald Reagan, was an effort to retrench the
state by a package that included decreases in government expenditures for
social welfare programs, cutbacks on business regulations, resistance to
labor rights, and tax cuts. Collectively these proposals are referred to
as Neo-liberalism and their aim was to restore profitability and autonomy
to free markets with the belief that unfettered by the government that
would restore productivity.
Neo-liberalism had a major impact on higher education. First beginning
under President Carter and then more so under Ronald Reagan, the federal
and state governments cut taxes and public expenditures. The combination
of the two meant a halt to the Dewey business model as support for public
institutions decreased and federal money dried up.
From a high in the 1960s and early 70s when states and the federal
government provided generous funding to expand their public systems to
educate the Baby Boomers, state universities now receive only a small
percentage of their money from the government. As I pointed out in my
2005 Logos “The Corporate University in American Society” article in 1991,
74% of the funding for public universities came from states, in 2004; it
was down to 64%, with state systems in Illinois, Michigan and Virginia down
to 25%, 18%, and 8% respectively. Since then, the percentages have shrunk
even more, rendering state universities public institutions more in name
than in funding.
Higher education under Neo-liberalism needed a new business model and it
found it in the corporate university. The corporate university is one
where colleges increasingly use corporate structures and management styles
to run the university. This includes abandoning the American Association
of University Professors (AAUP) shared governance model where faculty had
an equal voice in the running of the school, including over curriculum,
selection of department chairs, deans, and presidents, and determination of
many of the other policies affecting the academy. The corporate university
replaced the shared governance model with one more typical of a business
corporation.
For the corporate university, many decisions, including increasingly those
affecting curriculum, are determined by a top-down pyramid style of
authority. University administration often composed not of typical
academics but those with business or corporate backgrounds had pre-empted
many of the decisions faculty used to make. Under a corporate model, the
trustees, increasingly composed of more business leaders than before,
select, often with minimal input from the faculty, the president who, in
turn, again with minimal or no faculty voice, select the deans, department
heads, and other administrative personnel.
The corporate university took control of the curriculum in several ways in
order to generate revenue. The new business model found its most powerful
income stream in profession education. Professional education, such as in
public or business administration, or law school, became the cash cow of
colleges and universities. This was especially true with MBA programs.
Universities, including traditional ones that once only offered
undergraduate programs, saw that there was an appetite for MBA programs.
The number of these programs rapidly expanded with high-priced tuition.
They were sold to applicants that the price would more than be made up in
terms of future income earnings by graduates.
This business model thus used tuition from graduate professional programs
to finance the rest of the university. Students either were able to secure
government or market loans or those from their educational institution to
finance their training. Further, the business model relied heavily upon
attracting foreign students, returning older Baby Boom students in need of
additional credentials, and recent graduates part of the Baby Boomlet
seeking professional degrees as a short-circuit to advancement.
This model accelerated with the emergence of the Internet, on-line classes,
and was especially perfected with the propriety for-profit schools. In the
case of the expansion of on-line programs over the Web or internet, a
specialist designs the curriculum for courses, sells it to the school, and
then the university hires adjuncts to deliver the canned class. Here, the
costs of offering a class are reduced, the potential size of the classes
are maximized, and if and when the curriculum needs to be changed to
reflect new market needs or preferences, it is simple to accomplish.
Traditional schools, seeing this model flourish, began emulating it,
expanding on-line programs, often with minimal investments in faculty.
A second way higher education became corporatized was in the increased
funding streams from corporations. These funding streams became necessary
as a result of decreased public support funding for higher education. One
way schools have become more dependent upon private funding is simply by
turning to corporate donors either to contribute directing to them, or by
way of naming, that is, giving private corporations the right to donate in
exchange for naming some part of a school after them. For example, in
recent years many business schools have adopted famous names of companies
in return for donations or sponsorships.
Overall, the new business model relied heavily upon the expansion of pricey
professional programs sold to traditional and non-traditional students who
financed their education with student loans. This model took off with the
Internet, and was facilitated by a management structure and partnering that
drew higher education into closer collaboration and dependence upon
corporate America.
*The Collapse of the Corporate University*
The corporate business model worked-until 2008-when it died along with the
Neo-Liberal economic policies that had nourished it since the late 1970s.
The global economic collapse produced even more pressures on the government
to shrink educational expenditures. But the high and persistent
unemployment also yielded something not previously seen-the decline of
students seeking more education. The decline came for two major reasons.
First, Baby Boomer were aging out into retirement, no longer needing
educational training. With that, the Baby Boomlet had run its peak, with
the American pool of potential students rapidly decreasingly. In effect,
the demand for education had dropped.
Second, traditionally MBA and other professional degrees flourished in
tough economic times as individuals used their unemployment as the
opportunity to get retrained. But since 2008 that has not happened, in
part because of the persistent high unemployment and rise of consumer debt.
Unlike previous post World War II recessions, the most recent one has
dramatically wipe out the wealth of consumers-some $13 trillion in wealth
was lost-and consumer debt has skyrocketed. Student loan debt has also
ballooned and is now greater than personal consumer debt-$829 billion
compared to $826 billion as of early 2012, with estimates that it will soon
top $1 trillion. The average student loan debt for a graduate of the class
of 2010 exceeds $25,000. In effect, potential students are tapped out-they
have no money to finance further education, they see that companies are not
hiring, and overall, find little incentive to debt finance for jobs that
may not exist. The result? A crash in applications to graduate
professional programs including MBA and law schools. From 2009 to 2010,
MBA and law school applications declined by 10% for full time programs.
The corporate business model has crashed. Even such mainstream
publications as the Economist in its August 4, 2012 issue noted the
collapse of this old model. It was a bubble that burst much like the real
estate one that burst in 2008. But in actually, it was a model waiting to
burst. The corporate business model functioned as education Ponzi scheme.
Higher education paid for programs by raked in dollars from rapidly
expanding professional programs and selling degrees on the promise that the
high tuition costs would be worth it to students. But as all Ponzi schemes
go, they soon collapse and that is what higher education is now
experiencing.
*The Next Business Model?*
But what is the next business model? In a foreseeable era of high
unemployment, decreasing public funding for education, and persistent
consumer debt, significant retrenchment will occur along a few models. For
one, a few elite universities will continue to exist, serving elites who
can afford to pay the privilege of attending them. This model negates the
democratic function of higher education that existed since World War II.
Second, expect significant collapse and merger of weaker institutions as
they seek to find ways to complete for a dwindling student population and
resources. This model decreases access to higher education as the range of
college and university choices decrease.
Third, while many for-profit institutions may not be able to withstand
market pressures, look to see many traditional colleges and universities
will have no choice but to emulate that management style. It may not be a
viable business model but given economic pressures for the future, that may
be the only one that exists, rewarding a few schools that are able to
provide a curriculum that is cheap enough that students want to attend. In
effect, the new business model is a hyper-extension of the current model.
This may mean even more alliance with corporate America along with
curriculum pressures that further de-emphasize traditional liberal arts
studies in place of professional education. One sign of that already is
the movement to take professional degrees such as MBAs and now offer BBAs
instead.
Fourth, the education market is ripe for non-traditional suppliers. For
example, media companies such as the Discovery Channel and Disney see
delivering educational materials as an extension of their brand. They are
able to combine the power of the television and media presence with
textbooks and educational materials and deliver a package of services that
few if any traditional let alone for-profit schools can. With an intense
and loyal viewer-consumer, it makes sense of them to now leverage that
relationship into one that taps into the student-education market. This
neo-liberal solution simply opens up education to even more exploitation
and profiteering. Look to see down the line one of the major media
companies purchase a Walden or Capella University.
Likely business models for higher education are not good. They threaten to
erode the strengths that American higher education enjoyed for years, while
at the same time not articulating a plan that is financially sustainable.
On Sun, Sep 2, 2012 at 10:45 PM, Bruce E. Woych <[log in to unmask]> wrote:
> ******************************************************
> * http://www.anthropologymatters.com *
> * A postgraduate project comprising online journal, *
> * online discussions, teaching and research resources *
> * and international contacts directory. *
> ******************************************************
>
> Regards to ALL:
> from Bruce E. Woych
> consider this article (but realize that this has been happening
> progressively since the 1970s):
>
> http://www.aljazeera.com/indepth/opinion/2012/08/2012820102749246453.html#.UDKflxS3DmM.facebook
>
>
>
>
>
>
> Sarah Kendzior
> Sarah Kendzior is an anthropologist who recently received
> her PhD from Washington University in St Louis.
>
>
>
>
>
>
> The closing of American academia
>
>
>
>
>
>
>
>
>
>
>
> The plight of adjunct professors highlights the end
> of higher education as a means to prosperity.
>
>
>
>
>
>
>
>
> The CORRECT question really concerns the "closing" of American
> Anthropology by de-financing processes that have dismantled much of the
> Public Interest Institutions towards a private market agenda. The CRITICAL
> question is really ...
>
> ...has ACADEMIA ABANDONED ANTHROPOLOGY AND DOES THE INTELLECTUAL COMMUNITY
> SEE LIBERAL ARTS ITSELF AS PARALLEL TO THE WWII NOTION OF "USELESS MOUTHS?"
>
> Something to consider while ethics and perspective are weighed against the
> survival necessities of market utility; and the discipline fights for
> rationalized survival.
>
> My best to you all; You ARE the community of last resort! You must decide.
> Bruce
>
>
>
>
>
>
>
> -----Original Message-----
> From: Madhu Narayanan <[log in to unmask]>
> To: ANTHROPOLOGY-MATTERS <[log in to unmask]>
> Sent: Sun, Sep 2, 2012 3:46 am
>
>
> ******************************************************
> * http://www.anthropologymatters.com *
> * A postgraduate project comprising online journal, *
> * online discussions, teaching and research resources *
> * and international contacts directory. *
> ******************************************************
>
> Dear all
> What is livelihood mean,how can it be conceptualized rather than"work",
> "means of living" or "production" at the present socio economic stage?
>
> --
> Madhu Narayanan
>
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