The political economy of higher education

The Political Economy of Higher Education

No one in the Treasury, the Industries Commission or anywhere else has produced a body of research showing that market reform has actually improved student satisfaction, or the community relevance of courses, or university efficiency, or the rate and the quality of innovation

(Marginson 2004: 21).

The Neoliberal Turn

The relationship between the liberal state and universities changed dramatically in the West at the end of the twentieth century. Previously, it had been widely accepted that education was a public good for which the state should assume primary responsibility. The public conceptualisation did not negate the private benefit that accrued to individuals as a result of their experience of higher education and the credentialism that emanated from it, nor did it negate the financial contributions made by students, alumni or the occasional philanthropist. However, the public interest in an educated and culturally aware citizenry outweighed the private, individualised benefit and, in recognition of this good, the state could be relied upon to provide recurrent and infrastructural funding to enable universities to conduct their core business of teaching and research.

This is no longer the case. There has been a notable shift away from public to private responsibility. Although the full privatisation of universities may be the ultimate aim, as suggested in the UK following the Browne Report in 2010, what has emerged in education policy to date is a hybrid system. I wish to stress that it is the public sphere qua government that has engineered and supported the privatising imperative; there is no invisible hand at work here. Hybridity is nevertheless an uncertain state – neither one thing nor the other – as this somewhat vexed comment by a New Zealand law dean suggests:

My perception at the moment is the New Zealand Government doesn’t quite know what it’s doing in respect to tertiary education policy because, on the one hand, they have inherited a neoliberal framework of funding which has been market-driven that’s tied to student numbers and, on the other hand, being a Labour government, their natural instinct is to control. So, in a way, you’ve got the worst of both worlds; you’ve got a controlled market system. There are incentives to get more students but not too much money comes with it, as would have happened if you had a completely free market system. On the other hand, the funds directed to individual universities or law schools might be higher if you were in a completely controlled system.

(Dean, male, NZ)

While the idea of the university as a community of scholars engaged in the dispassionate pursuit of truth may never have accorded precisely with the reality, any semblance of the idea now seems to have gone forever as the market assumes centre-stage and governments seek to deploy universities for instrumental ends. Inevitably, the transformation has profound ramifications for the legal academy – what gets taught and how it is taught, and the relationship between the institution, academics and students.

The radical changes in higher education have to be located in their broader political context, most notably a marked shift to the right, which became a global trend in the latter part of the twentieth century. The swing away from a progressive politics is associated most notably with Ronald Reagan in the US and Margaret Thatcher in the UK (e.g., Ashford 1997: 21; Muir 2003: 56). Neoliberals favour reducing the size and ambit of government, and transferring responsibility for the economy to the market (Nozick 1974). Within the market, individuals are expected to take responsibility for the course of their lives. It is believed that the totality of enlightened self-interest contributes to the greater good in a way not possible when initiatives emanate from the state alone. Indeed, the social liberal state is dismissed as the ‘nanny state’ by neoliberals because it induces dependence (Sawer 2003: 93–94). Furthermore, a focus on social justice, perceived to be an illusory ideal, leads to an endless growth of the state and wasteful schemes of redistribution (Self 1993: 72). Neoliberals have little respect for the common good, an idea captured graphically by one of Margaret Thatcher’s most famous aphorisms – there is no such thing as society (Thatcher 1993: 626). Indeed, civil society, which includes education, has largely been absorbed into the market. The ‘death of the social’, Culpitt suggests (1999: 81), is now an established fact, no longer merely a proposition.

Neoliberalism has supplanted social liberalism, or Keynesianism, as the dominant political philosophy of the Western world. The welfare state may be something of an overstatement as a descriptor of the political philosophy of social liberalism, but the rhetoric of the common good predominated in the UK and its former colonies – Australia, Canada and New Zealand – for much of the twentieth century. Under social liberalism, there was general acceptance that it was the responsibility of the state to engage in at least minimal policies of redistributive justice and equal opportunity, as well as the protection of public goods. While social liberalism supported individual success and entrepreneurialism, the potential for excess was tempered by government regulation and progressive taxation, together with a robust civil society. Now, instead of the state assuming responsibility for the allocation of social goods, we have what Peter Self (1993) refers to as government by the market.

Small countries, such as Australia and New Zealand, did not blindly imitate the US and the UK in the swing to the right in the late twentieth century, but the lure of corporate capitalism proved irresistible. In her study of the Australian Liberal Party, Judith Brett (2003) shows how Australia’s declining economic performance on the world stage sparked a resiling from the settled policies of a century. Australia and New Zealand had traditionally focused on primary production – agriculture, forestry, fishing and mining – for their wealth, but had slipped in OECD rankings. The view was that their economies had to be restructured with a focus on flexibility and new knowledge (Casey 2006). The revisioning coincided with the intellectual ascendancy of neoliberalism within the UK and the US (Brett 2003).

The adulation of the market is by no means confined to conservative political parties. In fact, the espousal of neoliberal policies began in earnest in Australia with Labor Prime Minister, Bob Hawke, in the early 1980s, followed by Paul Keating. The influential Hilmer Report (1993), which was commissioned by Keating, advocated restructuring the economy and expanding the ambit of competition policy.1 The strongest incarnation of neoliberalism, however, did not emerge until John Howard assumed the prime ministership in 1996. Within a few years he had resiled altogether from the social liberal legacy of the Whitlam era (1972–75), which had included free higher education as one of its key planks. The swing from social liberalism to neoliberalism highlights the way the two poles of liberalism produce a Nietzschean notion of ressentiment (Nietzsche 1969). When social liberalism is in the ascendancy, the rich and powerful feel that their freedom has been attenuated at the expense of equality (Brown 1995). Their ressentiment gnaws away at the social, which results in the political pendulum swinging to the right.

Under neoliberalism, governments have sloughed off the notion of common good, stifled civil society and effected an intimate relationship with the market. This is in sharp contrast to social liberalism: ‘Whereas once laissez-faire meant keeping the state out of the market, today neoliberalism means bringing the market into the state’ (Sarat and Scheingold 2001: 7). Nevertheless, while formally committed to deregulation and minimal intervention, the neoliberal state is in fact highly regulated. Rather than fostering relationships between citizen and state within civil society, neoliberalism locates its subjects within the market where they are expected to vie with one another for survival and success. The role of neoliberal governments is to ensure that the path for market players is free from obstacles. In a remarkably short time, neoliberalism has succeeded in transforming citizens into entrepreneurs and consumers who are overwhelmingly concerned with the accumulation of wealth and material wellbeing.

The ‘market metanarrative’ (Roberts 1998) has become so pervasive that it has induced governments to abandon, or at least dilute, redistributive and social justice policies in favour of wealth creation. The rhetoric of common good may still be invoked, but sometimes only to support economic rationalist and income generation measures, which may disproportionately impact on individuals, as illustrated by the concept of ‘corporate welfare’ (Nader 2000: 147), in which big business is wooed with financial incentives. Exemplary in the context of higher education is the decision of the South Australian Government to invest AU$20 million in Carnegie Mellon, a wealthy US private university, as an inducement to establish a branch in Adelaide, despite it then being in competition with South Australia’s three struggling state universities.

Public policy has been in turmoil as governments throughout the Western world have moved to corporatise, privatise and commodify heretofore public goods, which are viewed as cumbrous weights on the free market. The idea that social institutions, such as universities and hospitals, are losers rather than generators of money can no longer be tolerated (Said 2000: 2). Universities must be subjected to competition within the market in the belief that this will facilitate ‘genuine diversity’ (McGuiness 2005: 4). If they cannot survive within a social Darwinist environment that is too bad. Indeed, the resulting inequality between winners and losers could be said to be the very raison d’être of neoliberalism.

Universities became imbricated in the denigration of social liberalism as neo-liberals held them responsible for the ‘“new class” of privileged, disaffected parasites’ who had worked to change society (Macintyre and Clark 2003: 108). The genesis of this ideological critique emerged within the US, where a strong offensive was launched by Ronald Reagan against liberal progressivism (Macintyre and Clark 2003: 108; see also Friedman and Friedman 1980). In Australia, attacks on ‘élites’, ‘the chardonnay set’ and ‘café latte drinkers’ were mounted by conservatives to denigrate the beneficiaries of university education, particularly those from the humanities and social sciences, who were most likely to critique the market ethic. Their averred moral superiority on social justice has been consistently attacked in an endeavour to withdraw support from expenditure on equal opportunity, Indigenous issues, multiculturalism and environmentalism (Sawer and Hindess 2004). The teachers, social workers and public interest lawyers, who work in these areas, the ‘new class’, are constructed as self-seeking and indifferent to ordinary people (Sawer 2004). Since this class comprises university-educated professionals, a metonymical slippage holds universities responsible for the extravagant public expenditure. Accordingly, they should be reined in to ensure that they toe the market line and teach ‘useful’ knowledge. Philosophy, sociology, music and languages are among humanities disciplines excised from universities on the ground that they lacked ‘use value’. The construction of the new class of academic élites as one that is engaged in the ‘ideological corruption of society’ (Dymond 2004) signifies the profound anti-intellectualism that underpins the neoliberal assault upon universities.

The New Knowledge Economy

Globalisation compels competition between nation states, as well as between transnational corporations. The fickleness and evanescence of economic globalisation most graphically exemplify how market domination is simultaneously a postmodern and a modernist phenomenon. Practices and money flows emerging from globalisation are no longer contingent on national borders. The market flits between the universal of the global and the specificity of the local, filching whatever takes its fancy and restlessly moving on. Nevertheless, the imperialistic propensity of globalisation is contingent on identification with specific nation states, as can be seen from its ubiquitous Anglocentricity, notably because the preponderance of electronically coded information is in English, which is also the international language of contract. The most familiar corporate symbols scattered throughout the world are associated with the US, to the extent that ‘Americanisation’ may be a synonym for globalisation (Readings 1996: 2 et passim).

Within a postmodern and postcolonial setting, knowledge has become the revolutionary trading commodity. As Lyotard has observed (1984), knowledge has replaced land, raw materials and cheap labour as the new property. Knowledge itself has also been transformed, so that it evinces both modern and postmodern traits. John Henry Newman’s concept of universal knowledge (1976; Ker 1999) – knowledge that is certain and true – has been displaced by the concept of ‘new knowledge’, an unruly and fluid notion that is shaped by informatics, postmodern scepticism and fickle mood swings, according to the dictates of the market.

The contemporary adulation of the market is a world-wide phenomenon, despite the catastrophic effects of the global financial crisis (GFC) in the US and Europe, and it is apparent that neoliberalism and globalisation are closely imbricated with one another. Indeed, Giddens (1998: 14) suggests that neoliberalism is a globalising theory because it involves the application of the same political theory on the world stage that guides local involvement. Although the market is almost as old as civilisation itself, what is different about its postmodern incarnation is its ability to commodify virtually anything and to operate without a fixed place of abode. Transnational corporate players are driven by a voracious need to find new markets for their products and ever-cheaper sources of labour to produce them. Markets are destructive of loyalty and long-term relationships as the desire to maximise profits takes precedence over all else. The market necessarily has a distorting effect when transposed into the academy (Evans 2002), as its presuppositions sit uneasily with what is supposed to be a sphere of freedom.

It is clear that the status of universities as key knowledge producers was bound to change within a marketised environment. The intellectual property associated with scientific knowledge and biotechnology does not recognise national borders and is capable of producing great wealth for nation states. Harnessing and exploiting knowledge production through ‘technology transfer’ for the purposes of commercialisation is therefore a primary goal of nation states. There are also other factors at play. In Australia, the creation of sixteen new universities within four years helped the Labor Government manage a national youth unemployment problem (Marginson and Considine 2000: 29). The complexity, the insidiousness and the seductiveness of the neoliberal rhetoric defies any straightforward theorisation, for it always intersects with the local, the national and the global in multifarious ways (de Sousa Santos 1995).

Within the university context, globalisation possesses several meanings. In one sense, it is only the word that is new, as the idea of academic communities of scholars, scattered throughout the world but connected to each other by intellectual bonds is well established. The Internet and email have strengthened and facilitated global academic communities, which are in immediate and intimate dialogue with one another. However, because globalisation has come to be understood as synonymous with economic activities, it is the commodifying aspect that has become the primary meaning, overshadowing other meanings. In the global context of higher education, this refers to the export of educational services to any country willing to purchase them. This new ‘industry’ in education is now worth billions of dollars per year to the leading nation state players, namely, the UK, the US, France and Australia.2 The amount of money involved, together with the potential for expansion and increased profits, tips the balance in favour of the market over an ethical curriculum, which includes regard for the appropriateness of expensive and culturally questionable courses being exported to the Developing World. Paradoxically, however, the rhetoric with regard to the higher education ‘industry’ has become louder and louder. A further paradox that emerges from the significant revenues generated by the sharp increase in fee-paying international students is that this money is not generally used to support teaching activities, despite the special needs of non-English speaking background (NESB) students, but is channelled into the expansion of marketing and revenue-raising activities:

Most of the new fee income was applied not to the costs of teaching and research (as the old public funding was) but to marketing offshore recruitment, servicing the additional students, alumni fund-raising, financial and asset management, quality assurance audits, new business school buildings, executive salaries and the other trappings of a corporate university struggling to keep ahead of the competition. Most of the new market revenues were ploughed back into the costs of earning those same revenues, and in many universities there was no surplus at all.

(Marginson 2004: 32)

The role of the university at the local level has also been transformed. Rather than one or two universities serving major metropolitan centres, large towns and regional centres must also now have their own university. Serving the community is another way in which universities are expected to demonstrate that they are functional, although local ‘ownership’ of the university is also supposed to generate reciprocal financial benefits. In addition to taking account of local labour markets and business needs, the community focus has prompted regard for the needs of consumers, that is, the students, within those markets. The need to attract new constituencies has prompted the ‘flexible delivery’ of courses, including the offering of part-time and external programmes, as well as non-traditional modes of access for those for whom race, class and/or geography formerly constituted an impediment to higher education. ‘Flexibility, effectiveness and easy access’ are perceived to be the key to securing a ‘competitive edge at the top of the global value-added chain’ (Schleicher 2006).

Universities are also expected to play a key role in the process of transforming society and ensuring acceptance of the market narrative. Generally speaking, they are responding to the challenge with alacrity. Many are certainly compromising, if not overtly forsaking, the traditional academic values associated with the disinterested pursuit of truth and the public good in favour of a constellation of values associated with the market. There is also a sense in which universities have absorbed the anti-intellectualism and conservatism associated with the populist politics of neoliberalism, as they are all too often prepared to accept that critical and humanistic knowledge is dispensable in favour of what is deemed to have greater use value within the market. Generally speaking that means applied or facilitative knowledge. The point is illustrated by the contraction in the teaching of history at Australian universities. Stuart Macintyre points out that the academic history profession numbered approximately 750 in the early 1970s, but by 1995, the figure had dropped to 410 (MacIntyre and Clark 2003: 26). I will suggest that there has also been a comparable resiling from a humanistic approach to the teaching of law.

The functional role of universities in the new economy has been made clear in a raft of government reports, in respect of which New Zealand led the way (NZ Department of Education 1989), followed by the UK (Dearing Report 1997) and then Australia (West Report 1998). The reports all stress the central role of universities in training skilled workers and ensuring that research is relevant to industry and commerce (Peters and Roberts 1999); research excellence alone would no longer suffice (White Paper 1993: Cm 2250, 3.13). To ensure ‘relevance’, research partnerships and linkages with industry and business (on which I elaborate in Chapter 5) are now fostered by state funding bodies. Businesses that avail themselves of new knowledge through selective technology transfer are assured that they will become more efficient and productive, thereby contributing to the wealth of the nation state and enhancing its competitive advantage at the international level (Gray 1999; Bradley Report 2008). On the other hand, businesses that fail to take advantage of new knowledge will wither and die. The future of universities thereby became imbricated with that of business. The trends towards marketisation and commodification are not new, however, as the work of E.P. Thompson and others showed in 1970 in their critique of Warwick University’s embrace of the market (Thompson 1970).3 What is new is the way the market has seeped into every aspect of university life, a phenomenon that is facilitated by the state. Competition policy is the core of market liberalism, which requires universities to behave just like other corporations (McMahon 2001). Thus, a university department is now a cost centre that is expected to sustain itself, or it can expect to be closed down. It must devote all its energies to competing for students, research grants and other sources of revenue.

Academics themselves are knowledge workers within the ‘New Knowledge Economy’. As researchers, they produce knowledge and, as teachers, they train cohorts of future new knowledge workers. The key is what they teach and how they teach must add value in market terms. Adding value emphasises training, rather than education. The significance of this functionality is apparent when we contemplate the dramatic increase in the number of students attending universities. A generation ago, only the élite attended, which amounted to between 5 and 10 per cent of the population. The figure is now around 40 per cent and rising. The end of the binary system, which brought colleges of advanced education and polytechnics into a unitary system in both Australia and the UK, has markedly increased the number of degreeawarding universities to cope with ‘massification’. Higher education has been recognised as a ‘great, largely unknown and certainly underexploited resource contributing to the creation of wealth and economic competitiveness’ (Holland 1999: xi). The full-frontal assault by governments on the university sector to harness this resource has given rise to instability and uncertainty.

The Legacy of Hayek and Friedman

As the market underpins the transformation that has occurred in universities, something should be said briefly about the economic and philosophical imperatives of neoliberalism. Hayek (1976) is the primary architect of the economic philosophy that ranks competition and the pursuit of individual good as central motivating factors guaranteed to achieve the best outcome in all human activity.4 Egalitarianism, the key feature of social liberalism, plays no part.

The conservative philosophy of Hayek was of comparatively little significance when first developed, but it has come into its own with the help of neoliberal think-tanks, replacing that of John Maynard Keynes (1936, 1933), the guru of social liberalism. Even though the market itself is conceptualised by Hayek as an organisational form that is natural and universal, government can do more to stimulate it and ensure individual freedom. Hayek’s position is that while it is in order to use political organisation to make provision for the weak, it is an altogether different thing to suggest that the poor are entitled to a share in the wealth of the rich (Hayek 1960: 101). Any attempt at distributive justice will collide with the rule of law (Hayek 1960: 232), which Hayek interprets in a strictly formalistic sense. Distributive justice will necessitate discriminatory and discretionary action; instead of a free market, a ‘command economy’ will emerge. Distributive justice is therefore a notion that is incompatible with a free market economy (Hayek 1960: 232). The state should play no role in securing equality before the law. The stimulation and support of the free market is the modus operandi of neoliberal governments because it is deemed to be the best way of satisfying human wants and aspirations (Self 1993: ix). Hayek perceives the adaptation of opportunities to individual aims and capacities as the opposite of freedom. In fact, state regulation curtails freedom and leads to totalitarianism. Freedom is the crucial human value that must be protected at all costs; everything else is incidental (Hayek 1960: 92–93). It is this idea of giving free rein to individual actors within the market that is emphasised in relation to higher education rather than a role designed to sustain and maximise a public good for present and future generations.

Hayek himself did not advocate a particular position on education, but his philosophy was picked up and elaborated upon in relation to universities by his colleague, Milton Friedman (1962; elaborated upon in Friedman and Friedman 1980). Friedman was of the view that human resources could be better utilised by strengthening competition and devising effective incentives. He felt that state-funded universities tend to attract a proportion of poorly motivated students who are not serious about their studies. In contrast, at private institutions, students are ‘paying for what they get, and they want to get their money’s worth’ (Friedman and Friedman 1980: 176). ‘Competition’, ‘market’ and ‘choice’ are extolled as the key concepts in a system comprising schools (public and private) and universities. Indeed, the view is that students should be charged the full cost of their education. A voucher would cover the cost of public education, but could be spent at a private institution of choice, in which case the individual would pay the difference.5 Students enrolled in professional university courses, including law, would not be the recipients of any public funding because of the high earnings and benefits that would subsequently accrue to them. Accordingly, they should pay the entire cost of their education themselves. Rather than up-front fees, Friedman advocated a loans system that would be repayable via the taxation system:

The individual in return [for the training received at a recognised institution] would agree to pay to the government in each future year a specified percentage of his earnings in excess of a specified sum for each $1,000 that he received from the government. This payment could easily be combined with payment of income tax and so involve a minimum of additional administrative expense.

(Friedman 1962: 105)