The Chronicle Review

The Making of Corporate U.

How we got here

Illustration by Dave Plunkert for The Chronicle

October 17, 2010

In the half-century after World War II, Americans built their dream on three pillars: a new house, new car, and higher education. Over time, higher education came to dominate the dream, for it was a statement about the future, opportunities, and one's children. As it became the only route to an increasing number of professions and the primary path to economic success, it generated greater and greater expectations, enrollments, and money. It became one of America's most successful industries. And it became the target of discontent and anger.

Few industries grew as fast, gained such prestige, or affected the lives of so many people. Higher education received remarkable sums of money from federal, state, and local governments. Alumni and foundations gave generously. Families reached into their savings and went into debt so that their children could go to college. Like the automobile industry, the education industry showed itself remarkably deft at marketing and at adding new institutions, programs, and facilities. Like the housing industry, it became sophisticated at showing individuals how to obtain financing, and it created financial-aid packages with generous dosages of public funds.

By the last decades of the 20th century, colleges had achieved a monopoly as the licensing agencies for Americans who wanted to improve their employment prospects. Every occupation sought to raise its prestige and income by making a college degree (and beyond) the requirement for entry. As the job market for those without college deteriorated into dead-end work at fast-food franchises, continuing one's education became a necessity.

The seemingly insatiable demand to attend college, the availability of government and private money with which to do so, and the desire of every state and local community to have its own college or university made it easy for higher education to charge what the traffic would bear. In the 1980s, tuition so substantially outpaced inflation and the growth rate of median family income that higher education looked like yet another greedy industry.

The 1990s brought renewed inflows of money and a market-oriented ideology, making colleges and universities even more parallel to other industries. Institutions with endowments and large sums of money could invest in the financial markets and receive double-digit returns; institutions with little in the way of surplus engaged in fund-raising campaigns and hired financial advisers to help themselves become richer. The dot-com bubble burst around 2000, but memories of the bust dimmed quickly, until 2008 and 2009 arrived, with devastating financial consequences. It turned out that the higher-education industry, and the ethos that fueled it, was in fact little different than the housing and automobile industries.

As higher education emerged as a giant industry, faculty members also gained enormous public stature. The stereotype of the absent-minded, befuddled professor disappeared, replaced by a growing number of government advisers, policy analysts, corporation consultants, and media commentators. The most prestigious faculty members—in all areas, but especially in the sciences, where the ability to attract outside grants became so important—professors became free agents, selling themselves in the highly mobile job market. The professoriate became the primary campus decision maker, as administrators routinely articulated the basic principle of academic life: The faculty is the heart of the institution.

That is, until the 1980s. By then a new ethos had established itself, one that grew evermore exaggerated and powerful—the ethos of the market. Although a market orientation had always existed in higher education, the market as the compelling force took on a whole new gravitas at the end of the 20th century. With it came an enormous shift in the balance of power in higher education. Institutional managers proliferated. Governing boards took on more power. The most-influential board members came from the world of business because it was assumed they understood economic markets. Students became more important than before because their ever-increasing tuition payments balanced budgets and their brains brought prestige. They expected to be treated well as customers and, more important, they increasingly assumed their degrees would be valuable in the labor market.

Faculty members, once the most important decision makers, lost power. They held onto things like faculty appointments, but the truly big decisions, like where institutional resources would go, whether to biology or history or to a newcomer like public policy or to student services or graduate-student fellowships, were not faculty decisions. As the proportion of part-time instructors grew, so too did divisiveness within faculty ranks, further diluting professors' power.

At the same time, their rights and responsibilities came into question. Could they really never be fired? Did they only teach 12 hours a week? Such questions were the public face of growing discontent. The academic disciplines themselves, which had been the heart of academe, came to look like walls against new approaches to learning; the power of academic departments seemed to serve mainly to undermine decisions taken in the interest of the institution as a whole. The megasize of the higher-education industry, and the high expectations that surrounded it, made it an easy target.

At the end of the first decade of the 21st century, the automobile industry appeared to collapse, along with the housing market—two of the mainstays of success in America. The weight of their failure had simply become too great: greed, callous indifference to the environment, and a failure to take foreign competition seriously, combined with the disappearance of easy credit. The higher-education industry has not collapsed, but it has faced complaints similar to those hurled at the automobile and housing industries: chastised for offering overpriced, poor-quality products and services; as inefficient and bureaucratic, unwilling to adapt to new markets, technologically backward, administratively bloated, uninterested in teaching, and more concerned with frills than the core product. The automobile industry, at least, may remake itself—Americans have a way of doing that. The jury will be out for some time.

And higher education? It is also trying to remake itself. When endowments at the richest universities dropped by 25 percent to 30 percent, gifts declined, and states faced bankruptcies, the costs of business as usual became too great. All the obvious steps have been taking place: cutting staff and programs, canceling capital investments and delaying maintenance projects, renegotiating debt, holding back increases in salaries and financial-aid packages.

Deferred maintenance, however, has crippling consequences because the costs tend to escalate over time. The shift to part-time faculty members, already under way during the last two decades, is accelerating, and almost no one knows the consequences. The use of cost/profit measurements to decide what should be offered as education or what kind of research should be done, already commonplace by the 1990s, is even more intense, just as the goal of greater equity for students seems to be diminishing. The fact that approximately 45 percent of entering college students fail to graduate, with even higher percentages of minority students and students from low-income families, is disheartening. That students are learning much less than they ought to is troubling. Technology has made all forms of education less placebound and more borderless, raising questions about the future for many institutions and opening up entrepreneurial opportunities. Adult students interested in vocational training are essential customers of higher education, perhaps even more so than the once-traditional age group of 17- to 22-year-olds.

The returns of higher education remain high, so the desire to attend will continue. That means the selling and buying of higher education is going to intensify. Corporatization is here to stay. The discontents both within and outside the higher-education industry are not going away.

Marvin Lazerson is a professor of public policy at Central European University in Budapest and an emeritus professor of education at the University of Pennsylvania's Graduate School of Education. His latest book is Higher Education and the American Dream: Success and Its Discontents (Central European University Press, 2010).