Higher Education, crisis and volatility

ONE. The marketisation of higher education is turning University life into a series of tactical engagements designed to extract value from public goods, rather than a set of spaces in which we might be able to confront the crisis. This crisis is enabling capitalism to overcome barriers to value production and extraction, and underpins an inevitable revolutionising of HE. This recalibration of HE is focused on the rate of profit, and a purported need to balance the sector’s contribution to the economy.

However, the extraction of value, or the focus on the rate of profit, is high-risk and catalyses volatility and it neglects the wider, systemic, socio-environmental issues that provide the context in which education-for-growth exists.

TWO. In his work on False Accounting: Why Higher education Reforms Don’t Add Up, Andrew McGettigan analyses volatility, instability and indenture in HE.

The income–contingent repayment loans offered to students are also future–policy–contingent, potentially creating an indentured class of graduates from whom higher repayments can be extracted. In sum, the Coalition has concocted a higher education funding regime which fails on its own criteria. It introduces fiscal instability into the sector and offers the nation minimal savings in return. While the deficit may be slightly reduced, large borrowings are required over the next two decades before the scheme is expected to pay for itself. These expectations may be pricked if adequate graduate repayments fail to materialise – leaving future governments to rectify the situation.

He goes on to state that the debate about HE reform is obscured by economic illiteracy.

the government’s deficit reduction strategy is aimed at slowing the growth of the debt. Reducing expenditure reduces the need for additional borrowing to meet any shortfall between annual income and expenditure. Loans have a lower impact on the deficit than grants – but they affect the debt separately to their contribution to the deficit. This is a very important matter and one that has been systematically obscured from the debate around higher education reform.

He then states that the overall effect is high-risk and based on modelling that makes serious assumptions about growth.

The large–scale move from grants to higher loans brings uncertainty into the heart of higher education as the viability of the loan scheme depends on making predictions about the general shape of the economy and graduates within it for the next three to four decades. Current indications about the graduate premium suggest it will be eroded further except in a small group of professions.

TWO. This connects to Christopher Newfield’s argument about the new proletarianisation. He argues that it is difficult to sustain a positivist argument for economic growth, especially where it is tied to the generalised, emancipatory potential of technological skills in a new economy. In part, this is because under neoliberal capitalism, technologies are used to promote consumption, production gains or to increase the rate of profit. The logic of their use and deployment is for productivity gains, or for workplace monitoring and surveillance and management and stratification, or to catalyse the creation of value by opening up/harnessing new markets, or by stimulating innovations that further valorise capital. Thus, Newfield highlights three different types of knowledge or skill:

  1. Type C is ‘commodity skills’, which are ‘readily obtained’ and whose possessors are interchangeable. This category includes most ‘pink collar’ work that involves skills like ‘typing and a cheerful phone manner’.
  2. Type B is ‘leveraged skills’, which require advanced education and which offer clear added value to the firm that hires such skill, and yet which are possessed by many firms. Computer programmers or network administrators are examples of essential employees who worked long and hard to acquire their knowledge, and yet who are relatively numerous. Ironically, they may have entered the field because it was large: its size may have signalled to them when they were picked a major in college–and to their stability-minded parents–something like ‘the high-tech economy will always need computer support specialists’. Yes, but not any particular computer support specialist, and not at a very high wage.
  3. Type A consists of ‘proprietary skills’, defined as ‘the company-specific talents around which an organization builds a business’. The knowledge manager must nurture and cultivate only the skills that directly contribute to the firm’s propriety knowledge, and stamp out (or radically cheapen) the first kind of knowledge worker, whose skills are interchangeable commodities. Only the star producers–those who create proprietary knowledge–enable the firm to seek rents, and only they are to be retained, supported, cultivated, and lavishly paid.

In an indentured world focused on economic growth above all else, not everyone will enjoy the life-styles of those who produce proprietary knowledge.

THREE. Yet, economic growth is coupled to energy use. The Royal Society Science Policy Centre report People and the Planet argues that growth based on extant socio-economic models is extremely problematic.

in the most developed and the emerging economies unsustainable consumption must be urgently reduced. This will entail scaling back or radical transformation of damaging material consumption and emissions and the adoption of sustainable technologies, and is critical to ensuring a sustainable future for all. At present, consumption is closely linked to economic models based on growth. Improving the wellbeing of individuals so that humanity flourishes rather than survives requires moving from current economic measures to fully valuing natural capital. Decoupling economic activity from material and environmental throughputs is needed urgently for example by reusing equipment and recycling materials, reducing waste, obtaining energy from renewable sources, and by consumers paying for the wider costs of their consumption. Changes to the current socio- economic model and institutions are needed to allow both people and the planet to flourish by collaboration as well as competition during this and subsequent centuries. This requires farsighted political leadership concentrating on long term goals.

Furthermore, in their IMF working paper on The Future of Oil: Geology versus Technology, Benes et. al. note that:

the problem of oil becoming harder and harder to produce in sufficient quantities was an important factor that would have significantly increased oil prices regardless of shocks.

it requires a large increase in the real price of oil, which would have to nearly double over the coming decade to maintain an output expansion that is modest in historical terms. Such prices would far exceed even the highest prices seen in 2008, which according to Hamilton (2009) may have played an important role in driving the world economy into a deep recession.

There is likely to be a critical range of oil prices where the GDP effects of any further increases become much larger than at lower levels, if only because they start to threaten the viability of entire industries such as airlines and long-distance tourism.

a point forecast that implies a near doubling of real oil prices over the coming decade, and an increase in prices over and above the very high recent levels even under a very optimistic scenario, at the lower 90 percent confidence interval. The world economy has never experienced oil prices this high for anything but short transitory periods, and we reiterate our previous statement that this might take us into uncharted territory, where a nonlinear, convex effect of oil prices on output might be a more prudent assumption.

And to add to the volatility Hamilton, in hi Oil Prices, Exhaustible Resources, and Economic Growth,  notes:

Coping with a final peak in world oil production could look pretty similar to what we observed as the economy adapted to the production plateau encountered over 2005-2009. That experience appeared to have much in common with previous historical episodes that resulted from temporary geopolitical conflict, being associated with significant declines in employment and output. If the future decades look like the last 5 years, we are in for a rough time. Most economists view the economic growth of the last century and a half as being fuelled by ongoing technological progress. Without question, that progress has been most impressive. But there may also have been an important component of luck in terms of finding and exploiting a resource that was extremely valuable and useful but ultimately finite and exhaustible. It is not clear how easy it will be to adapt to the end of that era of good fortune.

FOUR. Tom Murphy writes eloquently about energy, and how a growth-fuelled politics traps us.

Many of us have great hopes for our energy future that involve a transition to a gleaming renewable energy infrastructure, but we need to realize that we face a serious bottleneck in its implementation. The up-front energy investment in renewable energy infrastructures has not been visible as a hurdle thus far, as we have had surplus energy to invest (and smartly, at that; if only we had started in earnest earlier!). Against a backdrop of energy decline—which I feel will be the only motivator strong enough to make us serious about a replacement path—we may find ourselves paralyzed by the [energy] Trap.

In the parallel world of economics, an energy decline likely spells deep recession. The substantial financial investment needed to carry out an energy replacement crash program will be hard to scrape together in tough times, especially given that we are unlikely to converge on the “right” solution into which we sink our bucks.

Politically, the Energy Trap is a killer. In my lifetime, I have not witnessed in our political system the adult behavior that would be needed to buckle down for a long-term goal involving short-term sacrifice. Or at least any brief bouts of such maturity have not been politically rewarded.

FIVE. Higher Education is focused on a series of tactical manoeuvres: employability; internationalisation; public-private partnerships; value-added; outsourcing; the REF; student number controls; cash-flow and staffing costs; retention and progression; learning analytics; mobile learning; work-based learning; value-for-money; efficiency; economic growth.

Yet higher education does not exist in a vacuum.

What is to be done?

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