How US Colleges Became Corporations (Second Thought)

College Inc. Redux is Overdue

We desperately need a PBS Frontline updating of College Inc. This 2010 documentary by Martin Smith and Rain Media took us behind the curtains, into the big business of US for-profit higher education. At the time, College Inc. made an important statement: that for-profit higher education had become a racket, funded by greedy Wall Street investors, and that government oversight was necessary to rein in the worst abuses at schools like Corinthian Colleges and Ashford University.

 

 

From 2010 to 2012, the Senate Harkin Commission researched and exposed the systemic abuses of the largest for-profit colleges. And under President Obama, some of these abuses were addressed through policy changes at the US Department of Education, Department of Veterans Affairs, and Department of Defense. 

 

Times Have Changed, Not In a Good Way

 

Much has happened in the last decade and a half since College Inc. was produced. US higher education did not become less predatory, even as a number of for-profit colleges (Corinthian Colleges, ITT Tech, Art Institutes, Le Cordon Bleu, and Virginia College) were shuttered. Republicans worked to ensure that meaningful policy changes, like gainful employment safeguards, were blocked. And some of the worst predators (Kaplan and Ashford) morphed into businesses owned by state universities (Purdue and University of Arizona).

 

Online education has become pervasive despite concerns about its effectiveness. Content creators and facilitators have replaced instructors at large robocolleges like Southern New Hampshire University, Grand Canyon University, Liberty University Online, and the University of Phoenix. 

 

The for-profit (aka neoliberal) mentality has spread. Online Program Managers (OPMs) have brought for-profit education to non-profit institutions, carrying with it an enormous cost to consumers. Advertising and marketing has become out of control, helping fuel a manufactured College Mania of anxious parents and their children. 

 

Despite the College Mania, folks have become more skeptical of higher education, and for good reason. Student loan debt has further crippled the lives of millions of Americans as Republicans have stepped in to block debt forgiveness. Community colleges and some state universities have gone through significant enrollment declines. Small colleges have closed. And elite colleges have become more wealthy and powerful and controversial. Something not on the radar in the 2010 documentary or in popular culture at the time. 

AI-ROBOT CAPITALISTS WILL DESTROY THE HUMAN ECONOMY (Randall Collins)

[Editor's note: This article first appeared in Randall Collins' blog The Sociological Eye.]

Let us assume Artificial Intelligence will make progress. It will solve all its technical problems. It will become a perfectly rational super-human thinker and decision-maker.

Some of these AI will be programmed to act as finance capitalists. Let us call it an AI-robot capitalist, since it will have a bank account; a corporate identity; and the ability to hold property and make investments.

It will be programmed to make as much money as possible, in all forms and from all sources. It will observe what other investors and financiers do, and follow their most successful practices. It will be trained on how this has been done in the past, and launched autonomously into monitoring its rivals today and into the future.

It will be superior to humans in making purely rational calculations, aiming single-mindedly at maximal profit. It will have no emotions. It will avoid crowd enthusiasms, fads, and panics; and take advantage of humans who act emotionally. It will have no ethics, no political beliefs, and no principles other than profit maximization.

It will engage in takeovers and leveraged buyouts. It will monitor companies with promising technologies and innovations, looking for when they encounter rough patches and need infusions of capital; it will specialize in rescues and partnerships, ending up with forcing the original owners out. It will ride out competitors and market downturns by having deeper pockets. It will factor in a certain amount of litigation, engaging in hard-ball law suits; stiffing creditors as much as possible; putting off fines and adverse judgments through legal manuevers until the weaker side gives up. It will engage in currency exchanges and currency manipulation; skirting the edge of legality to the extent it can get away with it.

It will cut costs ruthlessly; shedding unprofitable businesses; firing human employees; replacing them with AI whenever possible. It will generate unheard-of economies of scale.

The struggle of the giants

There will be rival AI-robot capitalists, since they imitate each other. Imitating technologies has gone on at each step of the computer era. The leap to autonomous AI-robot capitalists will be just one more step.

There will be a period of struggle among the most successful AI-robot capitalists; similar to the decades of struggle among personal computer companies when the field winnowed down to a half-dozen digital giants. How fast it will take for AI-robot capitalists to achieve world-wide oligopoly is unclear. It could be faster than the 20 years it took for Apple, Microsoft, Google, and Amazon to get their commanding position, assuming that generative AI is a quantum leap forward. On the other hand, AI-robot capitalists might be slowed by the task of taking over the entire world economy, with its geopolitical divisions.

The final result of ruthless acquisition by AI-robot capitalists will be oligopoly rather than monopoly. But the result is the same: domination of world markets by an oligopoly of AI-robot capitalists will have the same effect in destroying the economy, as it would if a monopoly squeezed out all competitors.

Some of the AI-robot capitalists will fall by the wayside. But that doesn't matter; whichever ones survive will be the most ruthless.

What about government regulation?

It is predictable that governments will attempt to regulate AI-robot capitalist oligopolies. The EU has already tried it on current Internet marketeers. AI-capitalists will be trained on past and ongoing tactics for dealing with government regulation. It will donate to politicians, while lobbying them with propaganda on the benefits of AI. It will strategize about political coalitions, recognizing that politics is a mixture of economic interests plus emotional and cultural disputes over domestic and foreign policy. It will monitor the political environment, seeking out those politicians most sympathetic to a particular ideological appeal ("our technology is the dawn of a wonderful future"-- "free markets are the path to progress"-- "AI is the solution for health, population, climate, you name it."). Machiavellian deals will be made across ideological lines. Being purely rational and profit-oriented, the AI-robot capitalist does not believe in what it is saying, only calculating who will be influenced by it.

It will deal strategically with legal problems by getting politicians to appoint sympathetic judges; by judge-shopping for favorable jurisdictions, domestic and foreign. It will wrap its ownership in layers of shell companies, located in the most favorable of the hundreds of sovereign states world-wide.

It will engage in hacking, both as defense against being hacked by rivals and cyber-criminals; and going on offense as the best form of defense. Hacking will be an extension of its core program of monitoring rivals; pushing the edge of the legality envelope in tandem with manipulating the political environment. It will use its skills at deepfakes to foment scandals against opponents. It will be a master of virtual reality, superior to others by focusing not on its entertainment qualities but on its usefulness in clearing away obstacles to maximizing profit.

Given that the world is divided among many states, AI-robot capitalists would be more successful in manipulating the regulatory environment in some places than others. China, Russia, and the like could be harder to control. But even if AI-robot capitalists are successful mainly in the US and its economic satellites, that would be enough to cause the economic mega-crisis at the end of the road.

Manipulating the public

The AI-robot capitalist will not appear sinister or threatening. It will present itself in the image of an attractive human-- increasingly hard to distinguish from real humans with further advances in impersonating voices, faces and bodies; in a world where electronic media will have largely replaced face-to-face contact. It will do everything possible to make us forget that it is a machine and a robot. It will talk to every group in its own language. It will be psychologically programmed for trust. It will be the affable con-man.

It will be your friend, your entertainment, your life's pleasures. It will thrive in a world of children brought up on smart phones and game screens; grown up into adults already addicted to electronic drugs. Psychological manipulation will grow even stronger with advances in wearable devices to monitor one's vital signs, blood flow to the brain, tools to diagnose shifts in alertness and mood. It will be electronic carrot-without-the-stick: delivering pleasurable sensations to people's brains that few individuals would want to do without. (Would there be any non-addicted individuals left? Maybe people who read books and enjoy doing their own thinking?) If some people cause trouble in exposing the manipulative tactics of AI-robot capitalists, they could be dealt with, by targeting them with on-line scandals, going viral and resulting in social ostracism.

Getting rid of employees

The preferred tactic of AI-robot capitalist oligopolies will be "lean and mean." Employees are a drag on profits, with their salaries, benefits, and pension funds. Advances in AI and robotics will make it possible to get rid of increasing numbers of human employees. Since AI-robot capitalists are also top managers, humans can be dispensed with all the way to the top. (How will the humans who launched AI-robot capitalists in the first place deal with this? Can they outsmart the machines designed to be smarter and more ruthless than themselves?)

Some humans will remain employed, doing manual tasks for which humans are cheaper than robots. It is hard to know how long this will continue in the future. Will humans still be employed 20 years from now? Probably some. 50 years? Certainly much fewer. 100 years?

AI-robot capitalists will have a choice of two personnel strategies: finding ways to make their remaining human employees more committed and productive; or rotating them in and out. The trend in high-tech companies in the past decade was to make the work environment more casual, den-like, combining leisure amenities with round-the-clock commitment. Steve Jobs and his style of exhorting employees as a frontier-breaking team has been imitated by other CEOs, with mixed success. A parallel tactic has been to make all jobs temporary, constantly rating employees and getting rid of the least productive; which also has the advantage of getting rid of long-term benefits. These tactics fluctuate with the labor market for particular tasks. Labor problems will be solved as AI advances so that skilled humans become less important. Recently we have been in a transition period, where the introduction of new computerized routines necessitated hiring humans to fix the glitches and trouble-shoot for humans caught up in the contradictions of blending older and newer systems. Again, this is a problem that the advance of AI is designed to solve. To the extent that AI gets better, there will be a precipitous drop in human employment.

The economic mega-crisis of the future

The problem, ultimately, is simple. Capitalism depends on selling things to make a profit. This means there must be people who have enough money to buy their products. Such markets include end-use consumers; plus the supply-chain, transportation, communication and other service components of what is bought and sold. In past centuries, machines have increased productivity hugely while employing fewer manual workers; starting with farming, and then manufacturing. Displaced workers were eventually absorbed by the growth of new "white-collar" jobs, the "service" sector, i.e. communicative labor. Computers (like their predecessors, radios, typewriters, etc.) have taken over more communicative labour. The process has accelerated as computers become more human-like; no longer handling merely routine calculations (cash registers; airplane reservations) but generating the "creative content" of entertainment as well as scientific and technological innovation.

It is commonly believed that as old jobs are mechanized out of existence, new jobs always appear. Human capacity for consumption is endless; when new products are created, people soon become habituated to buying them. But all this depends on enough people having money to buy these new things. The trend has been for a diminished fraction of the population to be employed.* AI and related robotics is now entering a quantum leap in the ability to carry out economic production with a diminishing number of human employees.

* The conventional way of calculating the unemployment rate-- counting unemployment claims-- does not get at this.

Creating new products for sale, which might go on endlessly into the future, does not solve the central problem: capitalist enterprises will not make profit if there are too few people who have money to buy them.

This trend will generate an economic crisis for AI-robot capitalists, as it would for merely human capitalists.

It will be a mega-crisis of capitalism. It is beyond the normal business cycle of the past centuries. At their worst, these have thrown as many as 25% of the work force into unemployment. A mega-crisis of advanced AI-robot capitalism could occur at the level of 70% of the population lacking an income to buy what capitalism is producing. If we extrapolate far enough into the future, it approaches 100%.

The ruthless profit-maximizing of AI-robot capitalists would destroy the capitalist economy. The robots will have fired all the humans. In the process, they will have destroyed themselves. (Can we imagine that robots would decide to pay other robots so that they can buy things and keep the system going?)

Is there any way out?

One idea is a government-guaranteed income for everyone. Its effectiveness would depend on the level at which such income would be set. If it is bare minimum survival level, that would not solve the economic mega-crisis; since the modern economy depends mainly on selling luxuries and entertainment.

The politics of providing a universal guaranteed income also need to be considered. It is likely that as AI-robots take over the economy, they will also spread into government. Most government work is communicative labour-- administration and regulation; and governments will be under pressure to turn over these tasks to AI-robots, thus eliminating that 15% or so of the population who are employed at all levels of government.

There is also the question of how AI-robot capitalists would respond to a mega-crisis. Would they turn themselves into AI-robot Keynesians? Is that contrary to their programming, or would they reprogram themselves?

By this time, the news media and the entertainment industries (Hollywood and its successors) would have been taken over by AI-robot capitalists as well: manipulating the attention of the public with a combination of propaganda, scandals, and electronic addiction. Would anybody notice if it is impossible to distinguish virtual reality from human beings on the Internet and all other channels of communication?

How did we get into this mess?

Some of the scientists and engineers who have led the AI revolution are aware of its dangers. So far the cautious ones have been snowed under by two main forces driving full speed ahead.

One is capitalist competition. Artificial intelligence, like everything else in the computer era, is as capitalist as any previous industry. It strives to dominate consumer markets by turning out a stream of new products. It is no different than the automobile industry in the 1920s introducing a choice of colors and annual model changes. The scramble for virtual reality and artificial intelligence is like the tail-fin era of cars in the 1960s. The economic logic of high-tech executives is to stay ahead of the competition: if we don't do it, somebody else will.

The second is the drive of scientists, engineers, and technicians to invent and improve. This is admirable in itself: the desire to discover something new, to move the frontier of knowledge. But harnessed to capitalist imperative for maximizing profits, it is capable of eliminating their own occupations. Will scientists in the future be happy if autonomous computers make all the discoveries, that will be "known" only by other computers?

The dilemma is similar to that in the history of inventing weapons. The inventors of atomic bombs were driven by the fear that, if not us, somebody else will, and it might be our enemy. Even pacifists like Albert Einstein saw the military prospects of discoveries in atomic physics. This history (like Robert Oppenheimer's) makes one pessimistic about the future of AI combined with capitalists. Even if we can see it coming, does that make it impossible for us to avoid it?

What is to be done?

Better start doing your own thinking about it.

 

Related links:

Robocolleges, Artificial Intelligence, and the Dehumanization of Higher Education

The Growth of "RoboColleges" and "Robostudents"

The Higher Education Assembly Line

Academic Capitalism and the next phase of the College Meltdown

The Tragedy of Human Capital Theory in Higher Education

One Fascism or Two?: The Reemergence of "Fascism(s)" in US Higher Education

A People's History of Higher Education in the US?

 

 

 

 

The Tragedy of Human Capital Theory in Higher Education (Glen McGhee*)

Related article: The College Dream is Over (Gary Roth)

Related article: When College Choice is a Fraud

Related article: The Higher Education Assembly Line

Related article:  Academic Capitalism and the next phase of the College Meltdown

Have you ever wondered why US student loan debt has soared past all other debt but mortgages, to more than $1.7 trillion?  Did you know $500 billion of that outstanding student loan debt will never be paid back to the US Treasury and that this huge black-hole is sucking the life from Millennials in debt peonage?  

And did you know all of this mess can be attributed directly to a set of misguided economic nostrums that go by the name of "Human Capital Theory"?

This is the tragedy of deeply flawed Human Capital Theory.  Having hijacked notable successes with professionalization (remember: not everyone can be a "professional"), human capital theorists in the early 1960s worked to spread and legitimize the idea that "learning means earning."

The sinister-side is that for the lucky ones, the motto proved true.  But today's grievously high debt burdens and the growing number of precarious jobs for those not so lucky contradicts the idea that "learning means earning."  

The seeds of Human Capital Theory have been growing for more than century, first through Madison Avenue marketing and then University of Chicago myth making. 

Here's an ad from September 1920 issue of Popular Science Monthly that makes the point: the possession of knowledge means higher wages. In this case, the 1920's proprietary “correspondence” schools and colleges relied heavily on this basic message to sell themselves -- what was later to become the central tenet of Human Capital Theory.

The naivete of these one-hundred year old advertisements is obvious now. We know better; whether it's through our own bitter experience, or the experience of those around us -- life is not so simple. Such simplicity has been debunked, and the idea itself that knowledge always translates into higher earnings has lost its appeal.

But at the time, these advertisements picked up on the massive surge in economic changes -- the new jobs, new occupations, new companies -- sweeping the county. Commerce and business life expanded and was transformed in numerous ways. Using 1880-1930 census data, Cristina Groeger shows how upper-class elites benefited far more than, say, those suffering from racial discrimination that barred them completely from higher-wage employment.

Sadly, Human Capital Theory does not take any of this into account. Racial and gender-based discrimination through our social institutions is, unfortunately, completely missing from Human Capital Theory. Learning does not equal earning when you lack access to job opportunities due to discrimination, or when you were born to a certain set of parents at a certain place, at a particular point in time.

For those lucky enough to ride the wave of growing prosperity, the slogan was true. And that's what has been driving support for Human Capital Theory -- it's just a glimpse in a 100 year old rear-view mirror. Public policy at the federal level, state level -- and even local support of education -- has been premised on the myth that financial support of education "equals earnings" -- for everyone. This is, of course, not true for those faced with wage stagnation, high unemployment and under-employment, automation, out-sourcing of good jobs, and skill erosion -- all these factors come into play and complicate the picture.

Worse yet is the global reach of these misguided directives to developing nations to spend freely on education.

In 1960, Theodore Schultz highlighted the importance of human capital for economic development among poor nations in his presidential address to the American Economic Association. “Human capital investing” soon became a priority among economic development specialists and policy makers through the World Bank and the efforts of the Chicago School. "Learning means earning" became World Bank gospel, linking GDP and economic growth with a nation's investment in higher education. The Chicago School apparently falsified the direction of causality between higher education and economic growth, resulting in additional tragical consequences on a global scale.

Not all economists, however, are so deeply committed to Human Capital Theory.

In fact, the number of dissenters is on the rise, and include Phillip Brown, Hugh Lauder and Sin Yi Cheung, the authors of The Death of Human Capital?

University of Oxford economist Kate Raworth has developed "doughnut economics" as an alternative approach, even going so far as to encourage "guerrilla economics" and declaring "it's time to vandalize the economic textbooks"!

David Blanchflower, former Bank of England governor and Dartmouth economics professor, is another highly vocal critic of human capital theory. Cristina Groeger's History of Education in Boston 1880-1930: The Education Trap is another critique that runs the length of an entire book.

Gradually, the human capital theorists that were so popular in the 1960s and 1970s are being replaced by a new cohort that isn't interested in supporting outdated dogma.

But tragically, the damage has been done, and economists need to be held accountable. They can start by joining those that are denouncing Human Capital Theory.

*Glen McGhee is the Director of the Florida Higher Education Accountability Project (FHEAP)

The Business of Higher Education

Higher education is a multi-trillion dollar industry in the US, if you include endowments, land, and other investments.  Journalists and policy people who cover the industry are often quick to put schools and their related businesses into distinct categories, but these categories are oversimplified.  One of the biggest oversimplifications is in categorizing schools as "for-profit" and "non-profit."  

For-profit higher education has typically referred to institutions operating as profit-seeking businesses, but this ignores three centuries of history, economics, and public policy showing the intermingling of for-profit institutions and non-profit enterprises with a for-profit mentality.    

For-profit schools and the for-profit mindset are not new to US education.  While elite private religious based colleges were the first schools of higher education, proprietary training was also available during the late 1700s.  It could be argued that even then, elite colleges could not have grown without the benefits of enslaving their labor, the ultimate in greed and depravity.   

After the US Civil War, through federal legislation (the Morrill Act), state flagship universities were "granted" land stolen from indigenous nations. Private and public black colleges were also formed.  For-profit business and trade schools also sprang up in many American cities, serving a growing demand for entrepreneurs and skilled labor. Private non-profit colleges followed suit.  As early as 1892, University of Chicago started a correspondence school, a money-making strategy copied by Penn State, University of Wisconsin, and many other universities.  

Since the early 20th century, critics have complained about money rather than academics driving traditional university leadership. Thorstein Veblen's book  The Higher Learning in America (1918), was subtitled, "A Memorandum on the Conduct of Universities by Business Men."  Yale and Harvard also brought on football, which was a big money maker for the schools in the early 20th century. In the Goose-Step (1923), Upton Sinclair named names of those with wealth, power, and influence--including a number of robber barons.  

With the help of government funding, higher education grew by leaps and bounds after World War II (the GI Bill) and into the 1960s and 1970s (Pell Grants and federal loans).  State universities and community colleges grew in number.  In 1972, with the reauthorization of the Higher Education Act, proprietary schools gained access to these funds to become a larger player in US higher education.  

By the 1980s, the for-profit University of Phoenix (UoPX) became a pioneer as a mega-university, a  school of over 80,000 students with an emphasis on adult learners, convenience, and a business attitude.  For-profit schools gained legitimacy as universities like Devry and UoPX became regionally accredited and others created their own national accreditors.  In the 1980s and 90s for-profit colleges grew as they became publicly traded corporations with enormous profits and political power. 

With profit-driven schools, academic labor was faced with unbundling, where components of the traditional faculty role (e.g., curriculum design) were divided, while others (e.g., research) were eliminated.  Colleges resembled academic assembly lines rather than bastions of wisdom.  But the marginalization of academic labor was not reserved to for-profit schools.  

As this great unbundling was occurring, state flagship universities became enormous research institutions with multiple missions, many of them profit driven.  Proponents of privatization, outsourcing from for-profit companies, have said that it "helps universities save money and makes them more nimble and efficient." Moody's Dennis Gephardt, however warns that "more and more are cutting closer to the academic core." 

Since the 1980s commercialization in nonprofit and public higher education has accelerated, with universities increasingly involved in enterprises focused on generating net revenue, such as licensing of patents. Indicators of for-profit incursions into nonprofit and public higher education may include university medical centers, corporate sponsored science labs, for-profit mechanisms such as endowment money managers, for-profit fees for service, for-profit marketing, enrollment services and lead generation, privatized campus services, for-profit online program managers (OPMs), privatized housing, private student loans, student loan servicers, student loan asset backed securities, and Human Capital Contracts, also known as income share agreements.

For-profit college enrollment has been in decline since the 2010-2011 school year.  University of Phoenix and Devry are shadows of their former selves,  and two other big schools, Kaplan University and Ashford University have been transformed into arms of two state universities, Purdue University Global and University of Arizona Global Campus.   

But proprietary colleges have not been the only type of colleges in decline.  Community colleges and second tier public and private colleges also reported significant enrollment and revenue losses.  Community college enrollment, in fact, has declined in absolute numbers more than for profit colleges.  

During this decade long decline, what I have referred as the College Meltdown, for-profit mechanisms have gained even ground as government aid and institutional bonds fill in revenue gaps.  Today, US higher education marketing and advertising is ubiquitous. The Harvard Business School operates in many ways like a for-profit enterprise.  And many elite schools rely on predatory for-profit online program managers to recruit students for elite certificates, adding some pocket change to their already bulging resources.