beyond the space-time of debt and privatisation

In a paper from 2011 entitled Questioning Technology in the Development of a Resilient Higher Education, Joss Winn and I looked at the interrelationships between peak oil, narratives of economic growth, and the idea of the university. We argued the following (NOTE: I’ve stripped the references out, except for Hirsch, both of which you really should read).

The importance of oil to economic growth will become an increasing concern to universities, which are themselves seen as engines of growth. Hirsch (2008) has calculated that a decline in the global production of liquid fuels (i.e. unconventional and conventional oil) would lead to approximately a 1:1 ratio in the decline of global GDP. In the same article, the post-peak decline in oil production is calculated to be between 2% and 5% per year, suggesting a similar decline in GDP. By comparison, the decline in GDP during the global recession from 2008 to 2009 was 5%. In the United Kingdom, the Industry Taskforce on Peak Oil and Energy Security has likened the effect of an imminent ‘oil crunch’, due mid-decade, to the current credit crunch. Their report also shows the ‘highly suggestive’ correlation between oil price spikes and US recessions, stating that every US recession since 1960 has been preceded by rapid oil price rises, and that when the price of oil exceeds 4% of US GNP, a recession occurs shortly afterwards. In March 2011, this equated to an oil price of around US$80 per barrel, and therefore April 2011’s price for dated Brent spot crude oil of US$118 per barrel is a threat to economic growth in oil-importing countries. Moreover, within capitalism, a threat to economic growth is a threat to social stability, as is noted whenever there is a recession or conflict, with clear implications for the role of HE.

These issues were amplified by the US Department of Energy’s ‘Hirsch report’, which stated:

The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. (Hirsch et al., 2005, p. 4)

The difficulty of moving away from the use of oil is highlighted by the Hirsch report, which states that ‘a minimum of a decade of intense, expensive effort’ is required to migrate from our current use (Hirsch et al., 2005, p. 5). Businesses have strategically targeted waste in energy usage of technology, and attempted to profit from its measurement and monitoring as part of a strategy to roll out smart technologies, which themselves are highly contentious. Relatively little has been done to address this anticipated problem within HE due to its focus on business as usual. Within the current model, business as usual extends the global demand for oil by at least 15% over the next 25 years.

If you want to see Hirsch talk about the risks of peak oil and its impact on growth, its relationship to national geopolitics and transnational corporations, and our (in)ability to mitigate the decline in oil supply, in order to maintain growth or in fact manage de-growth, I recommend this talk from 2007. One of the key risks in this scenario is of an energy crunch that suspends capitalism, in that it makes growth impossible or precarious. A US Joint Forces Command report from 2010 warned of a possible shortfall in global oil output by 2015:

A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions.

The interplay of the triple crunch of peak oil (or more specifically a lack of ready access to liquid fuels), climate change and economic crisis are creating an increasingly volatile global context, against which higher education is calibrated. And that’s without talking about the geopolitical threats to a global economy underwritten by petrodollars. Moreover, as Nafeez Ahmed notes in a Guardian report on a lecture by a former BP geologist:

The fundamental dependence of global economic growth on cheap oil supplies suggests that as we continue into the age of expensive oil and gas, without appropriate efforts to mitigate the impacts and transition to a new energy system, the world faces a future of economic and geopolitical turbulence:

“In the US, high oil prices correlate with recessions, although not all recessions correlate with high oil prices. It does not prove causation, but it is highly likely that when the US pays more than 4% of its GDP for oil, or more than 10% of GDP for primary energy, the economy declines as money is sucked into buying fuel instead of other goods and services… A shortage of oil will affect everything in the economy. I expect more famine, more drought, more resource wars and a steady inflation in the energy cost of all commodities.”

According to another study in the Royal Society journal special edition by professor David J. Murphy of Northern Illinois University, an expert in the role of energy in economic growth, the energy return on investment (EROI) for global oil and gas production – the amount of energy produced compared to the amount of energy invested to get, deliver and use that energy – is roughly 15 and declining. For the US, EROI of oil and gas production is 11 and declining; and for unconventional oil and biofuels is largely less than 10. The problem is that as EROI decreases, energy prices increase. Thus, Murphy concludes:

“… the minimum oil price needed to increase the oil supply in the near term is at levels consistent with levels that have induced past economic recessions. From these points, I conclude that, as the EROI of the average barrel of oil declines, long-term economic growth will become harder to achieve and come at an increasingly higher financial, energetic and environmental cost.”

This volatility in geopolitics, access to energy, and global GDP is important for those who work and study in higher education, because we are entering a phase of increasingly complex financial mechanisms for indenturing study, which tie both institutions that are leveraged in the financial markets and students whose futures are sold through loans to the myth of infinite growth (or business-as-usual). This is a risk because as I note elsewhere:

it is private (rather than public) debt, and excessive leveraging of debt that tends to push capital into structural crises. The leveraging of private debt through excessive student loans, whilst giving a short-term financial fix for some leaves a deeper structural legacy related to crises of demand. So we end up with an inflated set of financial assets that bear no resemblance to the value of real assets in the real economy, and in the process of deleveraging the ponzi scheme leaves those individuals with high levels of debt at most risk.

This space of high-levels of individuated risk and of futures defined by individual and institutional debt is the world that defines the work of educators and students. Where bailouts meet austerity, where the realities of a quadrillion dollars of debt underpin politics in the United States, where student debt and therefore student education forms part of a coming sub-prime crisis, and where in spite of the rhetoric about higher education and employability, the realities are youth unemployment and long-term falls in real wages, or precarious employment.

And I haven’t even mentioned a future framed by oil, rising oil prices, or carbon. Yet, these matter because as Roger Pielke Jr argues:

We can simplify these four factors even further. Population and income together are simply GDP, or aggregate economic activity, and the production and consumption of energy reflect the technologies of energy supply and demand. The resulting Kaya Identity — as his equation has come to be called — simply says:

Emissions = GDP x Technology

With this simple equation before us, we can see the fundamental challenge to reducing emissions: A rising GDP, all else equal, leads to more emissions. But if there is one ideological commitment that unites nations and people around the world in the early 21st century, it is that GDP growth is non-negotiable. Right now, leaders on six different continents are focused on efforts to grow GDP, and with it jobs and wealth. They’re not as worried about emissions.

The concern then is that these factors become reinforcing. That the drive for GDP and growth recalibrates the University around the rule of money. That inside this space an agenda of privatisation based on evidential assertion or problem-solving theory is presented as de-politicised and normative, and enables technology firms, working with private equity, transnational finance, think tanks and politicians to lever open public education for profit. That student debt becomes a key power source for this drive to privatise in the name of efficiencies, scale, value-for-money and impact, and in fact generates a pedagogic and structural view of student-as-consumer that further recalibrates higher education and the use of technologies inside that sector.

And things continue to worsen, as Andrew McGettigan writes in his notes to the transcription of the Project Hero report of the Rothschild Investment Bank to the Coalition Government of 2011, designed to facilitate a sale of existing student loan debt starting in 2013. McGettigan states that:

One of the most interesting aspects of the Rothschild review is the detail provided on the rejected models, not least because of the centrality of the suggestion that universities could be encouraged to underwrite the risk of poor graduate repayments through debt issues or equity stakes in special purpose vehicles.

Rothschild conclude their report with a new suggestion in relation to all loans: that the government look further into the possibilities offered by ‘tranching’ the loan book in order to attract a better price. In effect, suggesting that the product to be sold is broken down into smaller sizes than whole cohorts. This has significance for assessing whether the much riskier ‘coalition loans’ can be sold (as David Willetts appears to be suggesting as a future funding solution). As each of these cohorts will enter the repayment system with £12billion of debt in total, any feasible sale requires more sophisticated financial engineering.

There are two approaches to tranching outlined by Rothschild: the first relates to a structuring of repayments and risk according to different ‘seniorities’; the second to structuring the product by the ‘underlying characteristics’ of the individual loans themselves.

In the face of the triple crunch, of the volatility imposed by the interrelationships between peak oil, our climate realities, and economic futures, is business as usual really possible for those who labour and study in higher education? What kinds of conversations are we having with society about our need for “more sophisticated financial engineering” to underpin increasing student debt? What kinds of conversations should we be having with young people and their parents about the volatile relationships between debt, real wages, unemployment and precarity, in the face of the added volatility of access to the resources that keep the economy growing? Volatility heaped upon volatility, so that indentured study itself underpins an increasingly precarious promise of a valuable and value-laden working life.

Precarity and volatility, as Ilargi notes at The Automatic Earth, underpins the transfer of resources to those with power and the accumulation of wealth by an elite, which threatens a clash of social forces. This clash is already happening in student/worker occupations, indignations, demonstrations, strikes, and so on, that are aimed against neoliberalism and austerity across the globe. Ilargi notes:

If we presume that a connection exists between the increase in debt on one side and the increase in “asset value” on the other, then I would say chances are we’re looking at both a gigantic wealth transfer from the poor towards the rich and a huge bubble that allows that to happen, and that will make the poor even poorer when it bursts. Which seems inevitable, because debt by itself cannot create value.

And if I’m right, what we’re seeing is not the incredible resiliency of the markets, and no real increase in asset value, but an increase in the threat to the social cohesion of our communities, cities and nations.

The Automatic Earth has long argued that in the coming revaluation, individuals and communities need: to pay down their debts (unless you wish to lose your lives as indentured student/worker or your homes as mortgagee, which are someone else’s assets); to learn some new, tradable and communal skills; to buy some communal tools; and get to know your neighbours. As we career towards an increasingly volatile energy/economic outlook, with the realities of devaluation and debt looming, and increasingly complex mechanisms being sought for locking down and making precarious the future of both higher education institutions and its students/academics, I wonder whether the only response that academics have is that there is no alternative? Or whether academics can develop alternative methods of liberating knowing and knowledge and organisation, and which are beyond the space-time of debt and privatisation.

Addendum: in a piece on the UK’s jobs crisis, Ha-Joon Chang argues that work insecurity, the collapse in real wages, unemployment, mental health problems and a lack of well-being, are hidden from serious discussion. He states that “this wider crisis – perhaps we can call it the “general living crisis” – is not seriously discussed because over the last few decades we have come to neglect work as a serious issue.” This is certainly true of higher education, which has been re-geared around entrepreneurial education and the Government’s growth agenda. Inside the University there is no alternative to an education for the living death of capitalist work. As Marx notes in volume 1 of Capital:

The capitalistic mode of production (essentially the production of surplus-value, the absorption of surplus-labour), produces thus, with the extension of the working-day, not only the deterioration of human labour-power by robbing it of its normal, moral and physical, conditions of development and function. It produces also the premature exhaustion and death of this labour-power itself. It extends the labourer’s time of production during a given period by shortening his actual life-time.

As Chang notes, we need to talk about the reality of this as we expect our students as scholars to consume and produce more debt.


One Response to beyond the space-time of debt and privatisation

  1. Pingback: On the co-operative university and the general intellect | Richard Hall's Space

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