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Imitating the Economy

Is the pandemic higher ed's version of the oil shocks of the 1970s?

July 9, 2020

The higher education “system” in America resembles the American economy of the early 1970s. It features some long-entrenched elites, a relatively broad middle class, some good options on the lower end and some intriguing start-ups in garages (or business incubators) trying to upend everything and make lots of money.

The resemblance makes sense. Although some elites date back to the 1600s and 1700s, the system as we know it now mostly emerged in the 1960s. It was a few decades behind the rise of managerial capitalism as defined by Berle and Means in “The Modern Corporation and Private Property” (1932). Berle and Means noted that the combination of large industrial corporations and relatively dispersed stock ownership had the effect of separating ownership from control. Owners might have been interested entirely in profit, but managers had multiple goals, of which profit was only one. This was the era of “corporate citizenship,” when managers were expected to be “pillars of the community.” Private sector union membership hit levels not seen before or since.

Social critics at the time pointed out the sheer silliness of managerial culture. Because it was both restricted (mostly) to white men, and relatively insulated from the market, it became sort of, well, fratty. Literature of the ’50s and ’60s is rife with concerns about “conformism,” which managed to draw simultaneously on fear of communism, fear of fascism and fear of big business. (The titles tell the story: The Man in the Grey Flannel Suit, How to Succeed in Business Without Really Trying, The Organization Man.) Big companies grew quickly and modeled themselves internally on the military. Moving up was less about creating value -- within a huge organization, who could tell? -- and more about a tricky combination of fitting in and standing out. Even as perceptive a critic as John Kenneth Galbraith could argue, in The Affluent Society, that “bigness” was simply a given, and that “countervailing forces” (by which he meant unions) could be counted on to offset its abuses, more or less forever. He knew better than to call it a dialectic, but the roots of the argument were visible.

In the U.S., managerial capitalism hit its high point in the 1950s and 1960s, which was also the formative era for much of public higher education. In the 1960s, community colleges were established at an average of one per week for the entire decade. In their internal organization, colleges very much resembled General Motors, circa 1965. They had pyramidal hierarchies, in which moving up relied on a tricky combination of fitting in and standing out. They strongly favored white men. They had internal job security, based on relative insulation from the market, but remarkable insecurity about promotion. Unions thrived, at least relatively. They broke education into credit hours that could be assembled and reassembled like so many interchangeable parts. They produced ever-greater numbers and levels of credentials that were built to be legible to HR departments in companies organized the same way.

In the 1970s, managerial capitalism began to fall apart. Some of that was due to external competition, as countries whose productive capacity had been damaged in World War II gained ground and started to offer real competition. Some of it was the bloat of those companies at their peak, when they happily produced substandard products at massive scale, leaving themselves vulnerable to shocks. (Anyone remember the AMC Gremlin? The Pacer? The Ford Pinto?) Some of it was the rise of mutual funds, which reconcentrated ownership in the hands of a much smaller group of fund managers who could suddenly bring recalcitrant or negligent managers to heel. Some of it was a series of tax revolts, often tapping into a not very subtle racist backlash against civil rights gains. (Anyone remember Howard Jarvis and Prop 13?) Those tax revolts tended to elect leaders who changed laws, making union membership harder and privatization of gains much easier. This is when the 401(k) was born. And some of it was the fallout from a pair of oil price shocks in 1973 and 1979. Those back-to-back recessions had devastating effects on some of the titans of the economy.

In the decades since, the direction of income distribution (as measured by the Gini index) reversed. Managerial capitalism brought with it an expanding middle class, and a relatively flatter distribution of wealth. Shareholder capitalism instead exacerbated income inequality, putting an ever-tighter squeeze on the middle class.

Meanwhile, higher ed just kept chugging along, playing by midcentury rules. It became somewhat more open to people who weren’t white men, and it experimented with a few innovations, but the basic structure remained. It just got bigger, until it didn’t.

I’m wondering if the pandemic is higher ed’s version of the ’70s oil shocks.

Bryan Alexander and Kevin Carey have argued this week, in different ways, that the economic effects of the pandemic will be hardest on the middle tier of colleges. Elites, they suggest, will be fine; they have the resources to ride it out, and they trade on exclusivity. Community colleges are about access and affordability; they’re the Honda Civics of higher ed. There’s always a market for that. But middle-tier colleges -- four-year schools in nonmetro locations with local or regional reputations and high tuition -- may face widespread closures. They were fragile before the pandemic, often offering discount rates of 50 percent or more; the pandemic simply removed what little cushion they had left.

If that’s true, and I take the prospect seriously, then it’s more than just a humanitarian catastrophe for the people who worked there. It’s a glimpse into a brutally bifurcated future, in which the middle of the system drops out. A few winners will win even bigger than they already do; everyone else will lose. Greater equity on campuses -- as we rightly pay attention to guided pathways, OER, student basic needs and the rest of what Sara Goldrick-Rab calls #RealCollege -- will coexist with greater inequality among campuses.

In a sense, higher ed is adjusting to fit the economy again. An economy with a big middle produced a higher ed system with a big middle. A barbell-shaped economy is producing an education system in its image. The pandemic, like the oil shocks, is an accelerant, speeding up trends that were already happening.

To the extent that this diagnosis is correct, continuing to talk about higher ed as if it exists outside the economy, or politics, is self-defeating. We academics, whether we think of it this way or not, have been in the business of producing a middle class for a country that no longer wants one. That’s not sustainable.

Where there’s life, there’s hope. The Depression brought, among other things, a new way of looking at economics -- Keynesianism -- that enabled decades of subsequent prosperity. Now we have Stephanie Kelton in the John Maynard Keynes role, making waves with modern monetary theory. MMT builds on Keynesianism to show that the rules of the game aren’t what we thought they were, and that we have options we didn’t know we had. We have new populations of students and professors who aren’t wedded to structures that had to resort to decades of adjunctification to maintain a facade of permanence. As a culture, we’re beginning to have some long-overdue recognition of the folks who never got to worry about “conformism” in the first place. And we have technology that nobody in the ’60s could have imagined, enabling forms of connection nobody anticipated.

As with the economy, we have some level of choice in the matter. We just need to realize it, face it and own it. Middle classes -- whether of people or of institutions -- don’t exist in nature; they have to be created and recreated. It’s time to re-create.


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