Economic Update
Economic Update- Financializing Public Universities for Wall Street's Benefit
On this week’s episode of Economic Update, Professor Richard Wolff addresses the numerous requests for financial planning or investment advice that he receives from many of you. We touch on the truth about investing in the stock and/or bond markets. In addition, Professor Wolff offers a basic understanding of the economics of US capitalism's century-long, profit-driven failure to adequately provide housing to its people. Finally, an interview with Professors Eleni Schirmer and Sofya Aptekar about their new book "Lend and Rule" and their fight against the financialization of US public universities, and why it is so necessary.
Support from the production of Economic Update comes in part from Democracy at Work. A non-profit 501(c)(3) organization and publisher of books by Richard Wolff, who is a professor of economics emeritus at UMass Amherst and a visiting professor at the New School University, has authored numerous books on the subject of social economics, including Greek thinking Marxism, Understanding Capitalism, and Democracy at Work, a cure for capitalism. Further information is available at democracy@work.info and rdwolf.com. Welcome friends to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives and those of our children. I'm your host Richard Wolff. I want to begin again by reminding you that Charlie, our faithful volunteer, is ready and willing to take your suggestions and comments for making this program better. You can reach him at charlie.info438@gmail.com. In today's program, I'm going to be talking to you about the stock market. I'm going to be talking about the housing crisis in the United States and about the recent decision of the Federal Reserve to lower interest rates. And then in the second half of the program, I'll be joined by two young women, Elany Elany Schirmer and Sofia Aktakar, who are fighting a battle surrounding the financialization of universities. The way Wall Street has forced public universities to become more and more dependent on debts owned and controlled by Wall Street. I think you'll find the discussion fascinating. Here we go. Many of you get in touch with me one way or another and ask me to provide financial advice about the stock market, the bond market, and so on. And so rather than continue to answer individually, I thought I'd take a few minutes at the beginning of this program and say a few words to you about it. First of all, no one should ever give you advice, or to put it differently, you should never take any advice from anyone who is not first acquainted with your particular situation. There is no one size fits all in the stock market. There never was. It depends on you, your family situation, your job situation, your age, your projects, what you hope to do and accomplish. If I don't know that, I cannot give you good advice. Anyone who doesn't know it cannot give you good advice. Then there are laws that are applicable. You have to be trained, you have to be in a position to do this. I'm not trained to do that kind of work. I do it as a side part of my interest in economics, but not as my professional commitment. And yet I do, of course, understand that all of us are concerned about, worried about, fascinated by the stock market and all that it represents. So I'm going to give you the best advice I know for people who are, for whatever reason, invested in stocks or bonds or thinking about doing so. Here's the best advice based on a lifetime of doing this. And you may not be happy to hear it, but that's not my job. My job is to do a truthful presentation. You cannot know what's going on in the world of business without yourself being in charge of a business. And then it's only that business that you know really much about. What do I mean? Employers have enormous interests in keeping things from you. For example, and these are just examples, they don't want their workers to know that they might be shutting down the plant over the next six months. Why not? Because then the workers would look for other jobs. They don't want to get stuck being told one day, don't come back on Monday morning because we're not going to be here. Their plans are not going to be made clear to you as a worker. Likewise, they don't want the local community to know that they might be leaving and therefore not paying their taxes. And then when would the community be in terms of funding its schools or its parks or they clean air and water its people need? They don't even want their shareholders to know all that much because if the shareholders get a whiff that there are problems, they might sell the shares who would go then go down and everybody would think the company was in trouble. And you know what that might mean? The companies that your company buys from are not going to give you 60 days credit to pay your bills. They're not sure you'll be here in 60 days. So you want to keep anything that might make them think of you as risky from being no long story short. Employers have a vested interest in keeping things secret. The free enterprise system ought to have a more honest name. The secret enterprise system. It's a system in which for many, many reasons corporations try to keep as much of what they do secret from the government, from the workers, from the shareholders, from everybody as they can. Now, they won't talk to you about that for obvious reasons, but you need to understand it. Therefore, the information you can get from the research you do is limited by the fact that the sources of information have as much interest in fooling, misleading or denying you information as they ever have in providing you or the Wall Street Journal or anybody else with accurate information. Yes, reporters work around it and to some degree they can get it, but be careful. When you play the stock market, if you have that feeling you're gambling, you're smart. You are, and you ought to be very careful about how you do that. Housing. Look, housing has been in a crisis in this country for a long time. Good century now. What do I mean? Well, housing is one of the three basics, food clothing shelter, right? You need food to live, you need clothing to survive, and you need shelter, housing, shelter. And it's a simple proposition, if you think about it. Either you have to earn enough money to afford a home or the prices of homes have to come down to whatever it is you're earning, so you can afford them. This is not rocket science. You want to provide shelter for your people, either give them enough to pay the price or bring the price down to make it affordable. Those are the issues anybody can understand it. There are many parts of the world, many countries in which that's what they do. They work out their economic system so that the wages and salaries are enough to pay for the housing. And those countries don't have homeless people, and those countries don't have too many people switched into too few square feet. We could do that. We're rich enough. We always could. But we don't do it that way. We allow housing to be a private, profit-making business on the part of those who build the houses and those landlords who own them, who may or may not be the same people. Now, the people who own the house have the interest of making it as expensive as possible so they can have a profitable income. Whereas the people who rent or buy want the price to be as low as possible so they can afford it. Everybody's struggling. Nobody is making sure it happens. This has made housing a problem in the American economy from the beginning. We should be ashamed of that. We're not. The biggest change happened in the depths of the depression of the 1930s when millions of people who had been inadequately lost all housing and became homeless. The greatest novel written, The Grapes of Wrath by John Steinbeck in the 1930s is about a family that abandons its inadequate house and travels in a dilapidated truck across the United States from the dust bowl to California. So it's a story of homeless people. So bad did it get that finally, and this often happens, the government was brought in to do something. And here's what the government did because we're a profit-driven capitalist system. Did it take charge of wages and bring them down? In a few places it did. You know what that's called fighting for a minimum wage, which we got in the 30s. Did they do something about bringing down the price of homes? Yes, in a number of places in this country, such as New York City, they had rent control, a law that prevented landlords from jacking up the prices far as they would have liked. That lost them on the books in New York City and other places. But they didn't limit it because the power of the landlords was too big. The power of the capitalists was too big. So here's what they did. They found a capitalist solution, debt. You would get your house, if you have one, by borrowing. The bank would come in, lend you the money because your wages could never afford a house, and the people who made houses wouldn't bring the price down. So the bankers stepped in. They'll give you a loan, and then you can buy the house. Terrible. So now you have a house, but you have a debt that can worry you sick while you're in the house. Strange way of solving the problem, and we still allow the price to be too high, and the wages too low. Housing is a problem that capitalism cannot solve, or at least has not been able to, throughout the history of US capitalism. It's an amazing story of failure. And to understand capitalism, that's a part of it that has to be in the explanation. We've come to the end of the first half of today's show. The discussion of the Federal Reserve's interest rate reduction will wait until next week. Stay with us. We'll be right back with a fascinating interview about the financialization of American public universities. Stay with us. We'll be right back. Welcome back, friends, to the second half of today's Economic Update. I am very pleased to bring to our cameras and our microphones to women who have been working on a project I find extremely interesting and important. One is Eleni Sherman. She's a writer living in Montreal. She currently holds a postdoc at Concordia University's Social Justice Center and organizes with the debt collective, the nation's first union of debtors. She is among nine co-authors with the second person on my list today. We have two folks we're talking with, and they're both co-authors in a project, which has, I believe, nine authors altogether. It's called the Coalition Against Campus Debt, and they've just produced a book called Land and Rule, Fighting the Financialization of Public Universities. It was released by Common notions, publication debt, September 2024. And the second co-author with us today is Sophia Uptikar. She is an associate professor of urban studies at the City University of New York, their School of Labor and Urban Studies. She is the author of Green Card Soldier published by MIT last year, 2023, and she's a delegate of the Professional Staff Congress, which I remember is the union of academics at the City University of New York, where I once taught as well. So first of all to Eleni and Sophia, thank you very much for your time and joining us today. Great to be here, thanks for having us. Let me start with you. You're working on financialization of universities. Tell us what's going on there that makes you fight. In other words, what is it that brings you to this fight that might interest all the folks in this country who have something to do with colleges and universities, which is nearly everybody. It's a great question. I got started in this work because I was finishing PhD at University of Wisconsin in the post 2011. It was around 2013, 2014. After the notorious governor of the state had just broken the public sector unions, massively defunded higher education and K-12 education, and we were really the union's public sector workers, higher education advocates were really scrambling to understand how we could possibly come to grips with this governor and his regime and his assault on higher education. One of the things that I began to realize was that it was as much as Governor Scott Walker was a loathsome character and a really, you know, a villain on many accounts, once I began to understand the actual financialization of the university, I could no longer confidently say that Scott Walker and Scott Walker alone was the problem, that he was the cause of what was breaking our unions and weakening public higher education, that I began to understand that he was merely in some ways incentivized by the rules of the game and he willingly, you know, he was eager to play this game and knew all the moves, but he did not invent the game and the game didn't stop once he left office and that is this game of the financialization of higher education, of financing public education through Wall Street and what that means for people that work on campuses, for communities that sustain themselves from campus activity and most of all for students. So that was my entry point. Could you expand perhaps, Sophia, could you expand? What exactly does it mean? That point just made about Wall Street being what's behind the financialization of the university. What exactly do you mean? Absolutely. So we have a situation where public universities and colleges become sites of extraction of profit for, you know, banks, commercial institutions through the mechanism of debt. So as our public universities, like Lenny's example of the University of Wisconsin, experience, you know, just drastic cuts in the last couple of decades in public funding, they make up for that shortfall by borrowing money from Wall Street and through this process, they become beholden to a shadow system of governance by these financial institutions rather than, you know, any semblance of faculty governance and frankly even governance by the administration and Board of Trustees of these universities. So it is through the mechanism of debt and particularly in our book, we discuss the role of credit rating agencies. So just like us as individuals, we have our credit scores that will try to maintain to survive under capitalism, our public universities and colleges also have credit ratings. In order to maintain them, they have to conform to a range of conditions that undermine, you know, worker working conditions for the workers at university undermines student, students' ability to just like survive college financially and they promise in these debt covenants to channel all revenue into the repayment of the debt, getting stuck in decades long cycles of debt repayment, where they're basically our universities are promising future tuition and fees of students who are not yet born. You know, I sit here as a professor of economics, just imagining the gleeful planning of the bankers, get the state governments to cut the university, then immediately show up coincidentally two days later with a package of loans to give to the university officials so they don't have to end the football season or fire the sociology department or whatever other crazy notions they get. Now they can be rescued by the banks and then the story that you tell. Can you give us some sense of the damage that you feel, and this goes to either of you, but the damage you feel is being done to the quality of the education our young people aspire to by this reality. In other words, how is it hurting the education we want for our people that the institution is being financialized in this way? I'll start by saying that, you know, big picture, it severely limits our imagination of what public higher education is even for. It becomes so narrowly returned on investment and so we have because it's on the back of students that this debt is repaid. We have in, you know, some public university systems as much as a third of student tuition and fees are going to repay the debt so students are settled by debt and the universities assume and then, you know, that means they can, they're disinclined, understandably, to be taken risks in terms of what programs and classes they get to experience at the same time as programs and departments that could not demonstrate sufficient return of investment gets lost, right? And these are ethnic studies, humanities, all the things that, you know, help us imagine another world and a world beyond capitalism since we're on this show. And our working conditions are students learning conditions. So when you cut programs, when you saddle staff with doing the work of four or five people because of endless layoffs, the students suffer, right? They have untenable advisor to student ratios. They never get to see their mental health counselor. All of that makes for, you know, a really poor experience for our college students. Yeah, everything that Sophia said, you know, and the consequences are quite grave, you know, from the institutional level where we see an increasing rate that universities, especially small regional universities, are straight up shutting down. Students are left mid-degree with, you know, tens of thousands of debt to repay on a degree. They haven't even finished earning and a transcript that will be meaningless. Staff and faculty are without jobs. The guy selling the coffee to the students has suddenly just lost half his clients. I mean, there's a real sort of fallout that happens with the consequences of this, this return on investment mentality from the material very clearly and also to the spiritual or the ideological about what the point of education is and what happens when university gets reduced to a pedagogy of debt. You know, again, it is fascinating to me, you know, old empires collapsed when everybody was in debt. It's the oldest story in the human race. When everybody becomes indebted to a handful of people, your system can't function. And what you're telling us is an area that we thought somehow might be exempt, education, schools are being caught up in this network of debt. We saw it already with the students who have to take on crazy amounts of debt. Now it's the institution where the students are studying, they're lost in debt. Everybody, the bankers are collecting from all of us and diminishing the experience that we have. And let me add a moment to mention one more. In China, they're increasing universities. They're building universities left and right. That ought to be a hint to somebody. They understand that's their future. We're shutting down. What does that suggest? Or how in the time that we have, which is never enough. Tell me about the fight against it. What are you doing? Where is it going? Who is getting mobilized? What do you think are the prospects of the fight against all of this? Well, you know, I think fundamentally the long-term project is for free, democratic, reparative public higher education. Education that is not financed through Wall Street, that is financed through public sources, through federal government and taxpayer dollars that's democratically governed and has an eye towards a reparative future that imagines the future beyond the harms of capitalism. I think that's the long-term vision that we're going to. In the short term, I think there's a lot of short-term experiments to be done that, frankly, I think we need to see unions taking seriously. You can have a union win an incredibly strong contract and you can have a union protect its benefits. As long as that university is still reliant on creditors for its funding, the strongest union, as long as it's not focusing on where and how the money is coming from, that union will constantly be playing on a defensive ground. And I think this is something that's really important for public sector workers in higher education and everywhere to grapple with. We talk in our work a lot that it can be very easy, especially among academics, no shade on the academics to want to become sort of obsessed with the analysis behind this, to really understand the funding. And that's important. It's very important. We've written a whole book to that effect. But it's not sufficient. We talk about how we need to know enough to be dangerous, no more and no less. That really, what matters in this work is how we are using these ideas to continue to push demands and build power. And I think that's sort of the program that begins with, especially with unions. I think a lot of this rests on unions' shoulders, but also just in general conversation for people that have an awareness about why their kids, why the price tag of their kids' college is going up and how that's related to this bigger picture of financialization of higher ed. Well, I wish we had more time. We don't. And that's a testimony to how quickly this 15 minutes just zipped by. The topic you're dealing with is very, very important. It touches, I know, a large part of my audience. So how about we make an agreement that in a few months, after you've struggled some more, and this fight has developed, you come back and give us a report on how it's going. Fair enough. Sounds great. Thank you so much. Thank you very much for your time and for all that you have taught us. And to my audience, I say, as I always do, I look forward to speaking with you again next week. Support from the production of Economic Update comes in part from Democracy at Work, a nonprofit 501(c)(3) organization and publisher of books by Richard Wolff, who is a professor of economics emeritus at UMass Amherst and a visiting professor at the New School University, has authored numerous books on the subject of social economics, including rethinking Marxism, understanding capitalism, and democracy at work, a cure for capitalism. Further information is available at democracy@work.info and rdwoof.com. [Music]