We applaud Ronald J. Daniels’ Washington Post op-ed (December 31, 2019) on the shortcomings of American tertiary education. As professionals with a deep commitment to educating next-generation citizens and leaders, we concur with his critique of American education and join his call to universities to enable young people to “participate in the daily business of our democracy” and redress our educational system’s longstanding failures.
President Daniel’s op-ed has special meaning in the context of our missions. We work closely with young people to fill in critical gaps between classroom learning and the skills and knowledge they will need to serve as independent agents in the real world, and not pawns of a (broken) business system. For indeed, American tertiary education has become Big Business. American universities were the original source of technology for defense at the outset of the Cold War. Following its end, they morphed into a vital source of capital formation. American tertiary education is the centerpiece of what former President Eisenhower famously called the military industrial complex—as historican Margaret O’Mara painstakingly documented in her 2005 book, Cities of Knowledge: Cold War Science and the Search for the Next Silicon Valley.
Alas, the financial model by and through which higher education functions today contributes directly to the breakdown of democracy. Finance is the elephant in the ivory tower. The search for yield is undermining the process by which education forms good citizens.
Quite literally the search for yield is outstripping social good. Massive defunding of higher education beginning in the early 1980s has pushed universities into raising tuition to levels unaffordable to middle class Americans. Universities have redirected their investment priorities away from educating people towards hard assets (real estate) and facilities development to justify the higher tuition levels.
Civic participation, like the American dream itself, has devolved to a question of finance, and of money. Universities today are unwitting vectors of the problem. With each new graduating class, the democratic freedoms of America are becoming increasely fragilized. Some universities have responded with an overt production line mentality. Those universities of longstanding reputation are able to preserve educational quality and cultivate individual talent in line with the authentic mission of education thanks to large endowments, and the daily efforts of dedicated career educators and administrators.
But a lot of young Americans who must take on the massive investment in education without the means to pay for it are being forced into insurmountable debt that depletes their economic choices. The causal connection to the student loan crisis—over $1.5 Trillion in loans with a runrate default incidence above 10%—is there for all to see.
And tragically, but ironically, finance and money basics are not even part of our educational curriculum. Even in universities where finance is taught to undergraduates or graduates, the theory is so alienated from financial practice that the markets for repackaging consumer loans, lstudent debt and mortgages, are not part of the mainstream finance curriculum.
To address the crisis of American democracy so boldly raised by President Daniels, we propose two modest ways forward.
First, young people need access to universities that offer a genuine alternative: a debt-free operating model without sacrifice to educational quality. The Global Center for Advanced Studies and GCAS College Dublin founded by Creston Davis is such a model. It was specifically designed to build global citizens on the economic, social and pedagogical levels. Its financial model is an embodiment of the idea that the true value of education is what people pay for: knowledge and enablement, not hard assets. In the coming years, GCAS’ business model will add value to university administrators seeking alternative ideas and solutions.
Second, administrators at American universities that offer MBA programs may wish to take a long, hard look at their finance curriculums. Did they guide your university’s investment managers when the ARS (auction rate securities) market froze in 2008? Are they currently responsive to the policy concerns of your candidates who aspire to become model citizens and thought leaders of tomorrow? As the yield curve flattens further and student debt levels rise above 12%, are you attracting and rewarding scholars who want to address 21st Century financial system challenges, who can inspire your students by bringing thought leadership into classroom?
Creston Davis, PhD is the founder and chancellor of The Global Center for Advanced Studies and GCAS College Dublin.
Ann Rutledge is the CEO of CreditSpectrum and Adjunct Associate Professor at SIPA, Columbia University