Monday, 10 October 2011

The Market

He is writing about universities in America.  But what he is actually describing is how markets really work.

The US university system, by contrast, appears to concentrate a hugely disproportionate share of resources in a small group of very wealthy and exclusive private institutions.  (Howard Hotson, Don’t Look to the Ivy League)

This is one effect, amongst many.  The heavy concentration at the top raises the price of admission, as demand is high but supply is limited; for there are few places in the most prestigious universities.  It is only towards the bottom, at the Primark end of the spectrum, that prices will reduce to a level the majority can afford.  Higher education for everyone!  Although the good stuff is only available for those with the biggest wallets; the small print to which our politicians never refer.  The newer universities cannot compete with Oxford and Cambridge, and the select Redbricks: you cannot manufacture an elite university over a couple of years; and it is not a product that can be made cheaply and sold to everyone at a low price.  These institutions have a history and a culture that cannot be easily reproduced; a culture that is attractive both to the faculty and its wealthy patrons; although each for their own reasons – the one academic, the other social and instrumental.

Because the Ivy League colleges only compete amongst themselves, and their reputations are far above the rest of the higher education system, they can rise their prices almost with impunity. Something very attractive to the rich and powerful: it secures places for their (possibly not so clever) children against the bright young things of the poorer classes.  For the wealthy hate competition, with its constant threat of egalitarianism; that risk to their offspring’s privileges.  And so they have to find inventive ways to circumvent it; although always in the name of market principles; it goes without saying, of course, of course.

Notice my language.  Most commentators use the term market as if it is a living being; some independent organism, making its own decisions and deciding all our fates, and all without conscious thought.  Such a language is used reflexively today; by just about everyone[i], and yet it is only a synecdoche for the robber barons of the global economy: for BP and General Electric, Soros and Warren Buffet, Apple and Microsoft…  All these have both agency and a conscious mind; and their senior managers use them to secure their dominance.

There are other effects too.  The richest institutions are flooded with money; much of which is not reinvested either in the firm or the country.  Instead it is spent on luxuries: huge bonuses, exorbitant real estate and fancy sponsorship.  In the US the elite universities spend it on improved facilities, to enhance the ‘student experience’.  Rich kids expect the best, and of course they must receive it.  Hotson quotes Jonathan Cole on the:

Perverse assumption that students are ‘customers’, that the customer is always right, and what he or she demands must be purchased. Money is well-spent on psychological counselling, but the number of offices that focus on student activities, athletics and athletic facilities, summer job placement and outsourced dining services, to say nothing of the dormitory rooms and suites that only the Four Seasons can match, leads to an expansion of administrators and increased cost of administration.

The market not only leads to rising costs for the most exclusive objects and services, and thus makes them more attractive for the few that can afford them, it also leads to an increase in bureaucracy (the rise of administrators with the introduction of the internal market into the NHS is a British example).  Decades of talk about enterprise and capitalist adventurers, and we end up with a world dominated by bureaucrats.[ii]  It is such an obvious consequence of the corporate takeover of our society that it is easily overlooked.  And it is not some accident or paradox (the latter, the intellectual’s favourite), for by its very nature the market requires order and regularity, it demands efficiency and planning, it needs managers; survives only through the work of its bureaucrats.  For “free markets” are never free or really a market, as commonly understood.  They are highly organised systems of distribution and control, and the businesses that run them have increasingly come to look like the modern state; and for the same reasons – the large multi-nationals are enormous bureaucracies; which in large part are designed to reduce competition and insure against risk; those great enemies of the capitalist classes.

Hotson notes that the ‘student experience’ reduces standards as money is wasted on luxuries (necessities for the rich, who expect nothing less).  This replicates the trend in the wider society, where public facilities are impoverished by the transfer of money from the wider nation into a few private hands; though the PR industry hides this sleight of hand from the rest of us:

Way back when, the average mark in the US was supposed to be a C.  Nowadays, the more expensive the university, the higher the average mark, with the average in private universities now an A-minus.  Why is grade inflation so closely correlated with fee inflation?  The reason can easily be guessed.  If you’ve attended one of America’s hundred costliest colleges or universities and paid upwards of $200,000 for a four year degree, then it had better be a good one.  Ignore this demand and an institution’s levels of ‘student satisfaction’ will plummet, as well as the number of wealthy people willing to invest in its degrees.

But the market is our new god, so even the critics are reserved in their criticism.  So although Hotson recognises the self-interest of this process; as here with the exam marks, and earlier with his comments about the cost of admission; the high prices insulating these institutions from the poor; he doesn’t push his criticism to its logical conclusion; for he accepts (by implication) the unconscious working of the market economy, and the bumbling efforts of its administrators, who do not understand it, merely servants of its machinations: thus the British government is only making a mistake, misled by the expensive facilities in Ivy League campuses, into following the American model. 

Is it simply a policy error, based on superficial reasoning?  This is one of the bad habits of treating the market as an entity in itself.  Government officers and CEOs may not read Serenity Science but instinctively they know how they benefit from a system in which they prosper.  For sure, they do not have complete control, and many of their actions are determined by the institutional roles they play – senior managers have to make the company work, or they are out -; or they are limited by the actions of competitors or by their relationships with the state.  Nevertheless, they know if they follow (or judiciously break) the rules they will retain their power and wealth.  They also know that if they extend these same practices to other forms of life they will also benefit, enormously.  So is the British government blindly following the American model, misled by expensive gyms and fashionable architecture, or does its members perceive their own self-interest, the anticipated rewards to their own class?[iii]

The question of ideological blindness is important, and is a difficult subject to investigate: ideas are not so easily separated from self-interest and situational behaviour.  Moreover, self-interested actions may reduce not enhance one’s prospects – people, usually of the poorer sort, often fail because they are too selfish; and thus cause a general dislike and suspicion; losing the necessary trust of their colleagues and competitors.   Success requires a certain generosity; for the dull and ordinary it is their substitute for charisma.  For contrary to the belief of ideologues like Margaret Thatcher entrepreneurs and bureaucrats need society in order to succeed.  It is rare for a person to make it alone; they are dependent on others for their rise (and fall).  And thus the need for compromise and cooperation; and the ability to both bow down to the rulers and manipulate the ruled; whose consent they need.  Power and wealth, or a comfortable career, depends upon one’s ability to understand the codes and customs of both the society and the class that runs it.  Being educated from an early age as part of a ruling elite is an obvious advantage; and one for which parents will pay a lot of money.  Although it doesn’t guarantee prosperity.  A potentially large failure; and thus the calls over the recent decades for the system to be fixed.  One reason perhaps for the decline of the public education system over the last 40 years – it had become too competitive for the middle classes.[iv]

Although even when adhering their own narrow purposes institutions can be inhibited from acting in their best interests by conventional opinion and intellectual habit.  So Britain in the early 20th century had to relearn the “new imperialism” which incorporated political and economic mechanisms that its free trade ethos of the 19th century had long rejected, and which put it at a disadvantage to the rising powers of Germany and America.[v]  This is still self-interest, but one based on wrong principles and a lack of understanding; a recurrent problem in social action: we only ever partially understand our contemporary world.

It is certainly true that the British industrial, financial and political classes are consumed by a market liberation theology, which not coincidently serves their own interests.  In the same way that free trade in the 19th century was in the best interests of Great Britain – it effectively had a monopoly in manufactured goods.  But is also true that many people are quite conscious of what is going on.  Historically the middle classes have preferred “public” schools because of the better results (mostly at the top end) and because it separates their children from the hoi polloi.  The latter probably the most important reason: success, outside a few occupations, depends more on one’s social standing than examination results; and this has been recognised for a long time (it is the principle assumption of John Locke in his classic treatise on education).[v]  That is, historically education has been used very consciously as a class marker.  There is no reason to doubt that the same thinking pervades the government today; one that seeks very clear-sightedly to secure the interests of the City of London and our biggest corporations; insuring their children are guaranteed educational success; and an easy road into positions of prestige and power.  An open market, or free competition, capitalism as we commonly understand it, would be too great a risk for them to take.  And thus the rich, and their servants in parliament, successfully suppress it.  Keen to replace an egalitarian public system, where the kids would compete most intensely, with a private one; placing tariffs and protective barriers around the highest institutions, those gateways to the good life, which only their children can afford; producing easy exam papers and bloated results; a crisis in the nation’s schools.




[i] By the early 1990s the Italian Communist Party, after the Austro-Marxists of the interwar years the most innovative of all the radical left parties, had caught the disease:
            “[I]n the present historical circumstances there are no alternatives to the market economy…  [privatization] can provide the opportunity to restructure the national economy on a more modern foundation…” 
Although even before the fall of the Berlin Wall the party leaders were infected by the conventional wisdom:
“[T]he market is the irreplaceable motor of the entire economic system and provides a way for measuring its efficiency.” (Achille Ochetto of the PCI.  The first quote is from the reformed PCI: Partito Democratito della Sinistra or PDS.  Both are from Donald Sassoon’s One Hundred Years of Socialism).
A curious irony here is that the PCI should include in its name change the word democracy.  This at the same time it embraced the market; those two great enemies.  For capitalism undermines democratic institutions, through concentrated wealth and its inevitable consequence: unequal access to political power.  Today, and for decades before it, this has been obscured by the narrow concentration on party politics; with representative democracy contrasted against authoritarian regimes.  It is real contest, but a limited one, and which is often used to attack foreign opponents, but misses the most important aspects of our political life; which is very sharp inequalities in freedom and representation.  My Palimpsest has more comment.
Modernisation was a big word in the 1990s, just as in the 1960s, and for the same reason: it was a rhetorical substitute for progressive politics.  Its most impressive success is Britain; with Blair helping to restructure the society so it could be more efficiently exploited by international corporations. 
What Sassoon’s book shows is a century of decline for the mainstream left; as it became absorbed into the political establishment, its great successes in the early years of the 20th century; providing the foundations for the social democracy of the post-war period; which may yet turn out to be the height of western civilisation.
[ii] Notice how Jonathan Cole doesn’t understand this elementary fact about markets, thus he calls it perverse that American elite universities should be centres of consumption; with its inevitable increase in administrators.  If you accept market assumptions you have to accept that both are quite ordinary market mechanisms.
[iii] After just over a century of struggle and social expansion the political class is once again homogenous; and is now merely an extension of corporate business.
[iv] And predicted by Michael Young in his classic satire: The Rise of the Meritocracy.  For once in power the meritocrats will look for ways to secure their children’s future; which their own ability may not be able to provide.
[vi] And it is clearly recognised today, although the language sometimes camouflages it.  Thus we have the rise of social networking.  But who networks?  Isn’t it just members of the same social background – the same class?

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