Former federal reserve chairman Ben Bernanke once wrote that the “lesson of history is you do not get a sustained economic recovery as long as the financial system is in crisis.”
The lack of a “sustained” recovery since the crash of ’08 — not only in the United States but increasingly in the global arena as well — has been hearty grist for name-callers and blame-gamers of every partisan or ideological shading imaginable for virtually half a decade.
But the underlying structural crisis does not seem to have gone away. Indeed, in the last year and, more perspicuously in the past two weeks, it has found a more demanding as well as disquieting focus — student debt as well as the economic albatross of the maturing millennial generation itself.
Last week during testimony before the Senate Budget Committee in Washington it became apparent that the general economic threat was looming larger with a rise in student loan defaults as well as pressure on the housing industry because young people, historically prime new home buyers, are unable, or unwilling, to take out mortgages.
The signs are eerily reminiscent of the subprime lending crisis of 2007, which triggered the broader financial collapse the following year.
President Obama has responded to the growing political outcry from overleveraged students and parents by issuing an executive order – his governance instrument of choice these days – reducing monthly payment plans for certain qualified borrowers.
Yet critics, which ironically can be found as much on the left as on the right, note correctly that easier repayment plans do just about nothing to address the causes of the crisis itself – runaway college costs.
As crusading Rolling Stone investigative reporter Matt Taibbi pointed out in a scathing article a year ago, the real scandal is the monstrous moral hazard that the student loan lending system has spawned. It amounts, according to Taibbi, “a shameful and oppressive outrage that for years now has been systematically perpetrated against a generation of young adults.”
College officials would tell you differently, of course. They would cite such factors as the skyrocketing demand since the early 1990s from “helicopter parents”, who as a condition of paying the freight for their offspring have demanded everything from luxurious athletic facilities to spanking new buildings to overly indulgent counseling services and professional networking opportunities.
You might also add the ongoing threat of litigation on the basis of forever multiplying grievances by students, their parents, staff, or sundry constituencies which requires larding up the bureaucracy both to forestall and contend with everything from sexual harassment complaints to assaults on students in the immediate neighborhood or while studying abroad.
Risk management departments are probably the fastest growing segments of academia these days.
There is a significant element of truth in these sorts of explanations. As a top university administrator at a prestigious national university in Austria told me last year, the main reasons for the low cost of post-secondary education in the European Union is not state subsidies, as many Americans believe, but that college students there pay only the cost of what is for the most part straightforward and unadorned classroom instruction.
The infrastructure for Austrian universities is utterly bare-bones. The universities only provide dorms for foreign students, and there are of course no special offices for “faculty development” and pedagogical enhancements, all of which (while laudable) do in fact cost money.
Professors, who are generally well-paid, tend just to read their lectures, as they have done for centuries, and students are left to learn on their own. Nor are there fraternities and sororities, or burgeoning numbers of student organizations.
Ironically, for all this Spartan minimalism, when students graduate they tend to be better prepared as both citizens and professionals. Could it be that the generations-old American expectation that higher education should serve to provide an infinite variety of “social goods”—other than learning itself—be a significant part of the problem?
Ironically, the Obama Administration, while routinely decrying out-of-control costs for higher education, has probably imposed more expensive mandates on colleges and universities than its predecessors, though to be fair we must note that the trend began as far back as the Reagan White House and has been for the most part a bi-partisan pastime over the years.
But the problem runs even deeper, constituting perhaps what systems analysts have termed the “revenge effect” in which one strategy of social or economic amelioration spawns outcomes more noxious than the ones they were designed to eliminate. As the old saying runs, “the road to hell is paved with good intentions.”
The crisis is itself amenable to what Marxists used to call a “contradiction between the forces and the relations of production.”
Ever since management guru Peter Drucker proudly announced around the turn of the millennium that we were entering the new “knowledge society” where “knowledge is all”, pundits and policy-makers have been touting the sine qua non for any hypothesized global prosperity the profusion of critical thinking and leadership competencies, communication skills, theoretical sophistication, and the manipulation of abstract symbols in place of conventional labor as the key to the future.
The prevalent fantasy when Drucker wrote was that the global economy would soon sort out into a kind of benign, neo-liberal hierarchy of “comparative advantages”, where highly educated developed nations would churn out the elite knowledge workers of the world, and developing (we now say “emergent”) countries would do the residual dirty work of producing ever less important, but still vital material goods and commodities.
Strangely, or not so strangely, it didn’t work out that way at all. The two major economic debacles of the last fifteen years — the bursting of the so-called “dot-com bubble” about the time Drucker’s last major book came out and the worldwide financial meltdown seven years later — have been distinctly different from Marxism’s fabled “periodic crises of capitalism”, inasmuch as they have been due not to overcapacity in manufacturing, but almost exclusively to bubbles of speculative valuation driven by a certain fetishism for these idealized new “knowledge” products.
“Irrational exuberance,” as Alan Greenspan famously termed the speculation in tech stocks in the late 1990s, has been a regular feature of overheated markets and money chasing dreams of riches since the Tulip Bulb Mania in the Dutch Republic during the 17th century.
However, these sorts of bubbles, even the overinvestment in worthless land deals during the Savings and Loan scandals of the Eighties, involved the retention of real assets to seduce the speculator’s imagination. In this new century the financially ethereal (i.e., ever more strange, rarefied, and mathematically opaque “investment vehicles”, digitized forms of money, etc.) pursues ad infinitum what remains substanceless, idealized, endlessly divisible, and not easily quantifiable.
Jean Baudrillard’s darker scenarios about a “hyperreal” world where simulations reproduce like promiscuous rodents and mere signifiers completely replace any recognizable object ontology may not have come true in the broader realm of human experience, but it seems increasingly to apply to the brave, new “knowledge society.”
As the classical economists (including Adam Smith) understood, all economic systems of exchange generate their own forms of commodification. And if the knowledge economy does not necessarily excel in yielding more pleasingly scented hair spray or better engineered blow dryers, it fabricates almost flawlessly specialized degrees, certificates, and schemes for “continuing education”, most of which are rarely sought for their intrinsic value, but as tickets to more exclusive box seats in the huge municipal stadium of competitive professional advancement.
It is, therefore, “demand-side” economics, for which guaranteed student loans is an easily understandable mass political response, that keeps the machinery of the education industry well-lubricated and humming away.
This overheated demand for “a degree that will get you a job” in the knowledge society, however, not only makes it easy for colleges and universities to raise tuition regardless of student loans, but also props up a cozy and cronyish system of accreditation in which top educational administrators are intimately bedded with government regulators and constitute a discreditable “good ol’ boy/girl” set of relationships that would be outlawed in the banking and financial industries.
College accreditation bodies, which began years ago as a kind of Better Business Bureau for academics, have morphed into an exacting – and often expensive – taskmaster for institutions, which have to jump at every crack of the whip, or every more subtle prompting, from what is affectionately known among cynics on the inside as the “Dupont Circle Mafia” (Offices on Dupont Circle in Washington D.C. are where most of the higher education establishment and coterie of lobbyists resides).
The taskmaster’s tasks are usually prettied up with such highly moral-sounding terminology as “quality of outcomes”, or “integrity of the curriculum”. But they are designed mainly to make market entry difficult for any kind of start-up educational venture, to guarantee that corporations will not have to take the time or expense to train new workers, and of course to subject most forms of internal innovation to the faux discipline of “learning assessment” and “institutional accountability,” which strangles innovation and benefits only the rising hordes of educational bureaucrats.
The tragedy is that real higher learning, especially as defenders of the liberal arts like myself see it, does not have to be so expensive, or financially out-of-reach, for the legions of young and older immigrants rushing to grubstake in the new knowledge economy.
The entrenched belief that higher education is about nothing more than positioning oneself for social prestige and gainful employment has probably a lot more to do with the student loan crisis than many recognize, or are even willing to consider.
It also has even more to do with the monetization, and overdetermination, of the life world of higher education by means of excessive credentialing, marketization, and politicization.
In one important respect we can see the crisis of higher education as comparable to the rise and fall of “megachurch Christianity” in America from the 1970s to the present.
Playing on a deep sense of social need and anxiety about one’s own personal identity that haunted the Baby Boomers in their late 20s and early 30s in the aftermath of the cultural revolution of the 1960s, evangelical entrepreneurs learned quickly how to instrumentalize and de-personalize the grass-roots spiritual life of its followers through performance technologies and corporate organizational modeling, while exploiting their idealism and household finances along the way.
The same factors that seeded the salvation boom among the Boomers also precipitated its sudden decline among the millennials. Many megachurch ministries were devastated financially by the downturn of the last decade, and they have not recovered.
The only difference is that one can decide to postpone until the end of life whether one needs to prepare for heavenly beatitude.
One cannot defer the necessity, however, of securing a job and making a living.