Student loans, privatised higher education and the “sub-prime” model.

In Uncategorized on November 8, 2010 by chr1sr0berts

Browne in his more 'natural' environment

In a previous post I sought to outline some of the ways in which the Browne Report and the CSR changed the face and the very ideas and values of university education. The focus was on neo-liberalism, university function (and form) What follows here are some more thoughts about this, but all filtered through the lens of an analysis of capital. Based in part, on David Harvey’s Enigma of Capital and an attempt to locate these changes in the neo-liberal model, and more acutely to deliberate on how we arrived at this point. Any critical analysis of such enormous social, cultural (and of course, educational shift: Browne Review) must consider the wider context, ideas and powers driving it. For me, it seems obvious that asking students to pay up to £9,000 per year in tuition – and cutting funds for university teaching in Arts, Humanities and Social sciences – can be firmly located within a crude brutally iniquitous system that socialises losses and privatises profits.

Firstly, for context: It is fairly well established and accepted that capital seeks to grow by a compound 3% per annum. In order to do so it tries to “secure new outlets for revalorisation” (Harvey). The 2007/8 crisis (& previous crises) stem, at least in part, from its periodic inability to achieve said growth. Capital always seeks new markets in order to ensure this compound 3% growth. Now, in developed countries such as UK and US, new markets are in some ways harder to come by, hence the raft of public utility privatisations over the last 30 years; and the emergence of the PFI where private capital enters previously public environments such as hospitals. However, recession notwithstanding, there exists still a market based economy. A fairly recent phenomenon is that private corporation(s) cut costs by outsourcing ‘production’ overseas, thus restoring some profits to capital. However, this outsourcing can, if pushed so far create a crisis in ‘effective demand’. Put simply: when jobs in local economy disappear overseas and profits ‘offshore’, there is less money to spend in said local economy (demand). Over the last 30 years or so wider availability of private ‘credit’ was the attempt to overcome capitalism’s effective demand problem. “Don’t worry about falling wages…spend on credit, and base this spending and credit availability on ever increasing house prices” This effectively created an unsustainable “property bubble”. People were borrowing more and more in order to “get a foot on the property ladder”. Upshot = many of us are now ‘financialised’.

“Capitalism survives by purging itself of debt and loading the costs of adjustment on the weak and the poor.”

It is in this environment that the Browne report into Higher Education funding was crafted. In the Tory ‘Big Society’ the private finance capital system of provision is the means through which university education is to be funded (sic). It’s a model of socialised risk and privatised profit. Effectively a new ‘market’ in higher education emerges, based on privatising – or outsourcing – most costs onto individual students via loans. The compound 3% growth ‘problem’ is partly solved by the creation of a new ‘market’ (in Harvey’s term: “new outlets for revalorisation”) to exploit. My understanding of it is that government will underwrite the loans (socialise the risk) but they will be administered by private corporations; repayments will be payable at commercial interest rates – with “excess” profits going to private finance providers. Am I the only one that sees this as remarkably similar, at least in some respects, to the fashion for providing sub-prime mortgages to impoverished home-buyers: “Even though you’re not in a position to afford to do so, borrow large sums based on future earnings/price rises”; Further entrenching the power of finance capital who reap the rewards in repayments…and if payments are deferred/defaulted, then the govt will socialise the loss. So the loans have multiple effects.1) They ensure that students are fully enmeshed in and beholden to the financialised system; 2) Upon graduation students will then pay up to 9% of their annual salary back in loan repayments; 3) At the ‘supply side’ universities, in a desperate bid to maintain market/consumer based “legitimacy”, instead of providing spaces in which alternative and creative ideas are debated, themselves become marketeers and mere ‘service providers’ – a very different model and idea of what university education is, and is for. This is a consumption based model that has no place in public service and education of our citizens. The neo-liberal ‘financialised’ model is an attempt to effectively ‘colonise’ a publicly funded, vibrant area of activity that, in some cases is precisely that which critically interrogates the “market is best” *logic*.

The problem is, I do not know what can be done about it other than attend: #demo2010Who’s with me?


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