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Universities, Democracy and Bankers

Someone posted to a Facebook friend a lament on the decline of Universities in the US. To which I responded. I edit the response here.

Actually you have to look through your simple conception of the University, it’s place in education, and the needs of the elites as they have grown to power in the US. Universities were once part and parcel of the elite power structure, in some countries that is still the case. Entrance to the lower classes was restricted. By contrast, Universities in the USA, especially PUBLIC universities were part of the American democratic experiment. They were intended to raise CITIZENS up to a level of the elites in older, more class rigid systems.

In the US in the last 40 years Universities have become For-Profit businesses. This was part of the beginning of the neo-liberal conception that profit and business were proper frameworks for judgements for every quarter of life, even education.

Sometime in the 70’s a “financial innovation” happened: someone realized that the financial returns on a large number of students’ loans could be monetized. Then the LOANS became important and the students’ education less so. Nowadays it is not uncommon to find University entrance people engaged in selling the loan, as much as the university, which is packaged into an Structured Investment Vehicles (SIV) much as mortgages were. Mortgages and Student Loans are part of the same banker led financial debacle we are currently experiencing.  In 1978 a law was passed that was very favorable to the banking interests: student loans were no longer dischargeable in bankruptcy (except under extreme conditions). All of a sudden Student loans could be (and were) packaged into  SIVs and sold as securities since they were backed by Federal Student Loan Administration and law which held that they could not be discharged in bankruptcy.

The bankers made this into a Ponzi-Casino as well. The people who needed the loans are on the hook for life. And in the current banker caused downturn cannot pay their debt, nor expunge it in bankruptcy.

The elites are now chasing rents in this country as they did in 18th century Europe. Structured student loans with a non-default provision guaranteed by law are a good way to extract rent out of  students.

The democratic experiment is perilously close to failure in the USA. Which leads to the provocative question: Is democracy possible without the USA?

cross posted

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