Definitions, facts, solutions: A reply to Henry A Giroux: Democracy in Crisis

This is a reply to Henry A Giroux: Democracy in Crisis, the Specter of Authoritarianism, and the Future of Higher Education, an article that attacks “neo-liberalism” as a major threat to universities as a democratic public space, and ultimately as a cornerstone of democracy itself.   (http://ecommons.luc.edu/cgi/viewcontent.cgi?article=1001&context=jcshesa). This is crucial in view of the current debate about the role of universities in South Africa.

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Definitions, facts and practical proposals. Whenever I deal with a piece like this, I feel the need to get three things straight at the outset. What is “neo-liberalism”? What are the facts concerning its application at this stage? And finally, what does the author propose should come in its place?

First then, the definition. Normally what people mean when they talk of “neo-liberalism”, is free-market policy. The author does however qualify this by suggesting it is a more authoritarian, undemocratic version of free markets, driven by selfish values hostile to the weak of society. If the suggestion is that there is an acceptable version of free-market policy that is none of those things, one has to agree.

It is important to understand what a free market is and is not. It is not anarchy.  An absolutely typical exponent of free-market policy is the Fraser Institute’s Economic Freedom of the World Index, which measures freedom of markets across the world. It regards certain institutions, such as courts of law and sound money systems, for example, as essential to a free market.  In other words, even where there is a free market, the framework is based on the principle that certain forms of regulation are essential to ensuring freedom.  Most significantly, the law of contract is central to the system, as is the law of property.  This is because the two principles of freedom of contract and protection of private property are crucial to the free-market system.  It is based on voluntary exchange of goods and services, and unless the legal system is able to enforce contracts voluntarily reached between adults, and the protection of property, such a system would be next to meaningless.  A free-market system also has a sound monetary foundation in that a monetary unit adopted by the system is stable and not inflationary.  That in turn is essential for the other cornerstone of the free-enterprise system, namely accurate price signals.

But most importantly, a free-market system has as an inherent ingredient the rule of law – the idea that people are governed not by the arbitrary whims of people, but by laws. That is a crucial ingredient of the policy,that is equally essential to democracy.

All these instruments are designed to protect the individual, including the poor, against abuse by the state and other people.

The free market does not rest on “an irrational belief in the market to solve all problems and serve as a model for structuring all social relations”. It is based on a rational belief – namely the belief that, as is evidenced by developments, the most effective economic system to improve the life quality of the largest number of people, given the inevitable scarcity of resources, is a free market. Can it solve all problems? Of course not. But on balance, is it better than the alternatives? You bet. The big picture is that

  • The world has globally moved in a free-market direction over the past 35 years, as the Economic Freedom of the World reports[1]:

“There are 109 countries for which the EFW data have been continuously available since 1985. … economic freedom has increased throughout the world during the past three decades. The average EFW rating of the 20 high-income countries was 0.8 units higher in 2014 than 1985 and that of the 89 developing economies, 1.7 units higher.” (Note, this is out of a possible 10, therefore increases were 8% and 17% respectively)

  • In that period billions of people have been lifted out of poverty:

“The extreme poverty rate in the developing world fell from 56.9% in 1980 to 34.5% in 2000, and 15.6% in 2014. Thus, the extreme poverty rate in less-developed countries is now more than 40 percentage points lower than in 1980. In 1980, 73.9% of the population of low-income countries had incomes below the moderate poverty rate threshold in 1980. By 2000, the moderate poverty rate in the developing world had declined to 59.2%, and by 2014 the figure had fallen to 34.3%. Thus, the moderate poverty rate was reduced by more than 50% during the 34-year period.”

This is not an ideology that “considers profit-making the essence of democracy”. The essence of democracy is power given to the people – to have an effective say in decisions affecting them, to be protected against the power of government, to be free to live life with as many choices as possible. These principles are not only compatible with free-market policy, they are essential to it. Most people in a free market never take profit in the normal sense of the word. They are employed through contracts freely concluded. They benefit yes, just as much as employees, as consumers.

For example: Jason Furman, the Chair of the Council of Economic Advisers to President Clinton, explained in 2006:

“There is little dispute that Walmart’s price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Walmart are enormous – a total of $263 billion in 2004, or $2,329 per household.”

Ordinary people enjoy the enormous benefits of profit-driven consumer goods like smartphones and internet access. Life quality has changed for them beyond all comparison. Ask the billion people lifted out of poverty in the last 30 years in South East Asia whether they would rather forego the benefits they enjoy as consumers. We know what they will say.

But no, consuming” is not “the only operable form of citizenship”.  What a gross distortion to say that free-market policy has ever suggested anything of the kind. But consuming matters a great deal. Our ability to consume – food, housing, entertainment, education – co-determines our quality of life. And that makes it an important part of citizenship.

Take that away, and what do you have? Take the example of environmental consciousness – the sort of concern that embodies good citizenship, beyond “mere” consumerism. Here are the ten countries with the best environmental performance in the world: Switzerland, Luxembourg, Australia, Singapore, Czech Republic, Germany, Spain, Austria, Sweden and Norway. They are all relatively free-market capitalist countries, with an average score of 7.728 on the Economic Freedom of the World Index, and an average ranking of 24.1 out of 157. By contrast, the ten countries with the worst environmental records that also appear on the Index – Bangladesh, DRC, Sierra Leone, Togo, Lesotho, Haiti, Burundi, Madagascar, Mauretania and Myanmar – have an average point of 6.154, and an average ranking of 126.1 out of 157. The best environmental records generally are held by the wealthiest countries. The average per capita income of the above ten best environmental performers is $54224, while that of the ten worst performers is $2095. The best cure for most environmental scourges is economic growth. The best way to ensure economic growth, is by maintaining free markets. Environmentalism costs money. The most productive societies (ie those that produce wealth most cost-effectively) are invariably the ones that best address growth of human wealth as a priority, and then as a happy side effect, care for the environment.

We are often guilty of not seeing the wood for the trees.   It is necessary to step back a little and gain some perspective and see where we are.

For example:  A common misconception is that the United States has a free-market economy.  Whereas it is true that for many years – in particular the years 1980 to 2000, the US was amongst the freest economies in the world – that, sadly, is no longer the case.

According to the latest edition of Economic Freedom of the World, the US has declined in economic freedom:

“Americans have long described their country as ‘the land of the free and the home of the brave’, a description immortalised in the American National Anthem, sung before every major sporting competition in the United States.  While that description was apt for much of modern history (at least compared to other major economies), over the last decade and a half that description has begun to ring less and less true.  The United States was ranked first in economic freedom among OECD countries as recently as 2000 – and third overall, typically behind only Hong Kong and Singapore, and some years, only Hong Kong – and had been since 1980.  Unfortunately, it has been declining since then.”

The authors show that the US declined from second or third position in the international rankings to hovering between sixteenth and eighteenth in the world.  Of particular concern is the fact that the components of freedom relating to the rule of law and the size of the government have been deteriorating.

So, the US is no longer a paragon of market freedom, and its performance in respect of income has reflected this.  From 1985 to 2000 its per capita income grew by about 100%.  By contrast, over the next decade and a half its freedom rating declined to 7.75, and per capita income only grew by about 50%.

A particularly disturbing trend is the decline of the rule of law in the rating of the US. This takes the form of, among other things, a surfeit of executive orders to attack foreign countries and implementing regulations by executive fiat, not to mention the arbitrary interference with the due-process rights of prisoners of war and criminal accused. Judicial independence (as measured by the Index) declined between 2000 and 2014 from 8.02 to 6.84, impartial courts from 9.02 to 6.84. Legal enforcement of contracts declined from 7.33 to 5.45.

Individual freedom has therefore suffered severe setbacks.

Also the economic power of the government has grown hand over fist. Government spending at the time of Obama taking over the reins was at a historical high. To the credit of the government under his leadership government spending was brought under control somewhat, but at the same time billions of Dollars’ worth of paper money was pumped into the balance sheet of the Fed, massively inflating the stock market and unjustifiably boosting inequality. In this way an unsavoury alliance has been formed between the corporate rich and the government, to the detriment of the poor. Arbitrary money creation by an agency that is not answerable to Congress, is a serious violation of the rule of law.

Here is a graph showing the decline in the rule of law in the US, compared to its general economic freedom, which is now lower than that of Canada.

rule

According to the Cato Institute: The measured deterioration in the rule of law is consistent with scholarship in that field and, according to the report, is a result of ‘increased use of eminent domain to transfer property to powerful political interests, the ramifications of the wars on terrorism and drugs,’ and other property rights violations.”

As a matter of fact therefore, the US has become a more authoritarian and pro-rich place, which undermines many of the principles of democracy. In many instances government and corporate interests are in bed together. Examples include almost any commercial lobby one can imagine. The increase in the influence of special interests is in its turn the result of a watering-down of democracy by reason of the entrenchment of incumbent congress members due to election rules that undermine the principle of federalism and centralise state power. If all that is what “neo-liberalism” means, then one must agree with the author – the less one has to do with it the better.

The problem is that that shift in policy – away from the rule of law – is seized upon by the left to discredit free-market policy, whilst it demonstrates the opposite. The left now wants to throw out the baby of free markets with the bathwater of abusive state power. That is a serious mistake. In the relatively free-market era (1980-2000), for example, the poor in America in absolute terms advanced in leaps and bounds. During that period, the real income of the bottom 20% grew cumulatively between 20% and 40% per year – faster than that of the second and third quintiles. To the extent that the income of the top 20% still grew faster, that is mainly the result of arbitrary money creation referred to earlier.

As for higher education, it is not clear from where the idea comes of “the increasing exclusion of working-class youth from higher education”. The US, which is presumably the pinnacle of modern-day neo-liberalism, has one of the most accessible higher education systems in the world as measured by enrolment figures (http://data.worldbank.org/indicator/SE.TER.ENRR?locations=ES).  88.8% of school leavers enrol in some form of tertiary education, compared to 78.5% in the Netherlands, 62% in France, 61% in Germany, 76% in Norway and 63% in Sweden. If neo-liberalism is the cause of denying university access to the youth (of any demographic) then it is passing strange that the latter group of social democracies are more guilty on this score than that paragon of neo-liberalism, the US.

As for high tuition fees, the main cause of this is the universal availability of government-subsidised student loan schemes, which increase tuition by 50-70% (https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf). How ironic that the focus of the author’s thesis provides such a good illustration of the unholy alliance between the government and corporate interests! The answer is to get the government out of tuition funding, and make prices more cost-effective, as in the case of Korea or Chile, neither of which has traditionally had such national loan schemes.

Even so, while it is true that tuition fees in the US are the highest in the world, between 1965 and 2014 university enrolment there increased as follows:

1965 2014
Public 3.97m 14.66m
Private 1.95m 5.55m
% private 21.3 27.46

 

The idea, in the light of these figures, that youths are progressively excluded from tertiary education (by anyone) is simply fiction. What is true, is that private interests, as is the case all over the world, bear an increasing load of the funding and management of universities. The one reason for that is that it is very difficult for even the richest countries nowadays to provide free education to all those who demand it. The supply of higher education is in the result increasingly carried by the private sector. Over the last few decades university access has dramatically grown.  Consequently the idea that university education is increasingly an “elite” activity, is simply nonsense. While in the sixties it truly was an activity reserved for the elite, today it is a common commodity. University education has never been as equal as it is now. Like all commodities it has been made more accessible by the market system, not less. The countries that have so-called “free” education (mainly the Nordic societies) suffer significantly by comparison in that they are on the whole worse off in terms of access, quality and cost-effectiveness of education.

Here is a table of developed countries ranked from highest private funding of higher education to the lowest, showing:

  • The quality rating of each country’s higher education system (SR)[2];
  • the enrolment percentage of school-leavers in higher education (E)[3];
  • the combined figure for the two (SR + E);
  • their respective economic freedom ranks;
  • their respective per capita GDPs.
Country Private funding % System rating (SR) Enrolment % (E) SR+E Free

rank

PC GDP
Korea 70.7 80.1 97 177.1 39 34549
Japan 65.7 78.5 62 140.5 26 37322
Chile 65.4 46.7 84 130.7 10 22316
US 62.2 100 88.8 188.8 16 55837
Australia 55.1 92.6 86.6 179.2 12 47514
New Zealand 47.6 70.2 80 150.2 3 36982
Israel 47.6 50.1 66 116.1 39 35431
First quartile average 59.18 74.02 80.62 154.64   38564
Portugal 45.7 40.3 66 106.3 35 29214
Canada 45.1 90.2 88.7 (1996) 178.9 9 44310
UK 43.1 98.5 57 155.5 10 41325
Russia 36.5 59.8 78 137.8 99 24451
Italy 34 73.4 63 136.4 68 35897
Netherlands 29.5 84.8 78.5 163.3 30 48459
Second quartile average 38.98 74.5 71.86 146.36   37276
Spain 26.9 75.3 87 162.3 49 34527
Poland 22.4 20 71 91 47 26135
Estonia 21.8 10.5 73 83.5 22 29095
Czech Rep 20.7 31.8 65 96.8 42 32167
France 20.2 89 62 151 70 39678
Turkey 19.6 26.1 79 105.1 82 19618
Third quartile average 21.93 42.11 72.83 114.94   30203
Ireland 18.2 60.9 73 133.9 8 54654
Germany 14.1 94 61 155 29 47268
Sweden 10.7 73.1 63 136.1 42 46420
Belgium 10.1 71.6 72 143.6 52 43992
Austria 4.7 49.1 80 129.1 31 47824
Norway 3.9 46.6 76 122.6 27 61472
Finland 3.8 66.9 91 157.9 19 41605
Fourth quartile average 9.35 66.02 73.71 139.73   49033

 

As regards the issue whether the university is no longer a public space where freedom of thought, speech and enquiry flourishes, firstly this: There is always a place for the university in the time-honoured tradition as a place of such learning and enquiry. In the sixties this role was fulfilled mainly by public universities.

As to the idea that universities are beholden to private funding to such an extent that funders effectively shut down public discourse and academic freedom, where is the evidence of that? It is true that the market dictates what courses have to be provided, which is a function of training needs of the corporate world.

But the idea that corporate needs include a subservient, indoctrinated student mass in the result, is laughable. As in, it induces laughter due to the conspiratorial nature of the theory. For instance:  “This role of higher education [namely as democratic public sphere]  is perceived by neoliberal acolytes as dangerous because it has the potential to educate young people to think critically and learn how to hold power accountable (Giroux, 2014b).” Can the man be serious? A growing number of CEOs demand a liberal arts degree for a significant percentage of their job candidates, as the complexity and ambiguity of modern commerce, especially hi-tech, requires integrative, creative and critical thinking. (See E Segran: Why Top Tech CEOs Want Employees with Liberal Arts Degrees, fastcompany.com 8/28/14).One only has to read the debates on social media about identity politics for example, or the American mass protests against Trump, to see how false the notion is that corporate culture has killed critical thought among students. Not all of it is of high quality, mind you, or remotely independent. Free-market intellectuals (such as the very Thomas Sowell denigrated by the author) ironically frequently complain about precisely the opposite, namely that the mindless narrative of modern identity politics and political correctness speaks of a lack of independent thinking at our universities.

That university education has “dumbed down”, is possibly true. Inevitably, if it is going to be a mainstream commodity (as it is, like cell phones, the internet, international travel) there is going to be some “dumbing down” in the aggregate. In the US part of this must be laid at the door of American basic education, run by the government on a highly centralised basis and with consequently moderate to poor results by world standards. But part of it is simply a function of demographics. Universities are no longer an elite pastime reserved only for the graduates of elite schools. It is today the expected due of all who pass school.

But the most laughable idea advanced by the author is the notion that universities are now bastions of free-market/neo-liberal thought, in a manner of speaking. Anyone who has tried to advance the ideas underlying a free market, will testify to the fact that academia is the very last place where such an agenda is likely to fly. Academic economists are, almost to a person, terrible free-marketeers. An example is the almost universal support for trade unions in those ranks, notwithstanding ubiquitous evidence that high trade union density slows down job growth.  Academics are the strongest bulwark against the free market, a demographic that supported Bernie Sanders as a solid block (see eg “Leading Academics Launch ‘Higher Ed for Bernie’”, berniesanders.com 27 October 2015). If the author is worried about free-market policy having converted entire faculties, he shouldn’t be.

That brings us to the most important question: so what?  What does the author suggest we do to cure this mass cultural conversion of universities into neo-liberal agencies? Not much on the practical front. This is the type of platitude with which we must content ourselves:

“Those who believe in higher education and democracy have to engage the issues of economic inequality and overcome social fragmentation, develop an international social formation for radical democracy and the defense of the public good, undertake ways to finance oppositional activities and avoid the corrupting influence of corporate power, take seriously the educative nature of politics and the need to change the way people think, and develop a comprehensive notion of politics and a vision to match.”

Really? No wonder the left is so ill-equipped to beat the forces of “neo-liberalism”. What the author doesn’t get, is that calling higher education a democratic public sphere, does not mean it does not have to answer to the laws of economics.

May I venture a proposal: Given the author’s transparent suspicion of the market, one expects he would say that the scourges he identifies should be dealt with by way of public funding. That way, surely, the sacred space of academia will not be beholden to corrupting corporate culture. So, how has that worked out in the world so far?

If you believe that the percentage of a country’s GDP that is expended on tertiary education is important (as undoubtedly it is), then it is significant to know what proportion of that percentage is private expenditure[4]: In other words, which countries (OECD countries in the sample below) tend to spend more on higher education: those where most of the spend is public, or where it is private? In the first column is the percentage of GDP spent by the private sector in each country. In the second column is the percentage that that private spending makes out of all spending on higher education; and finally we see the total percentage spent on higher education, expressed as a percentage.

Country Private spend as % GDP Private spend as % of whole spend Total spend as % GDP
Chile 1.5 60 2.5
Korea 1.5 65 2.3
US 1.4 50 2.8
Canada 1 40 2.5
Japan 1 66 1.5
Australia 0.7 43.7 1.6
Israel 0.7 43.7 1.6
NZ 0.7 36.8 1.9
Ave 1st quartile 1.06 50.65 2.05
UK 0.6 33 1.8
Hungary 0.4 33 1.2
Mexico 0.4 30,7 1.3
Portugal 0.4 30.7 1.3
Netherlands 0.3 17.6 1.7
Czech Rep 0.2 14.28 1.4
Estonia 0.2 12.5 1.6
France 0.2 14.28 1.4
Ireland 0.2 15.38 1.3
Spain 0.2 16.6 1.2
Turkey 0.2 14.28 1.4
Sweden 0.2 11.76 1.7
Ave 2nd quartile 0.29 18.1 1.44
Finland 0.1 5.55 1.8
Iceland 0.1 8.33 1.2
Italy 0.1 11,1 0.9
Poland 0.1 7.69 1.3
Slovak Rep 0.1 10 1.0
Ave 3rd quartile 0.5 8.53 1.24
Austria 0 0 1.7
Norway 0 0 1.6
Belgium 0 0 1.4
Germany 0 0 1.2
Slovenia 0 0 1.2
Luxembourg 0 0 0.4
Switzerland 0 0 1.2
Ave 4th quartile 0 0 1.24

Clearly then, the greater the percentage spent by the private sector, the more a nation spends on higher education – by far. When a country is really intent on increasing spending on tertiary education, the private sector should incur as large a percentage of the total expenditure as possible.

Of course, you may say the amount spent does not matter. Perhaps it is better to have a “democratic public sphere”, even if that means “the increasing exclusion of working-class youth from higher education”.

Education is a resource. It depends on the development of human resources, namely academics, and the provision of facilities in the shape of libraries, classrooms, computers and laboratories. In other words, how is this luxury of a “democratic public sphere” to be funded, while still maintaining high pedagogical and research standards and optimal access for all? Like all such questions, it is a matter of efficiency. Without addressing that, the author’s opponents will not take him seriously. In fact, one wonders how his supporters can.

[1] https://www.fraserinstitute.org/sites/default/files/economic-freedom-of-the-world-2016.pdf

[2] http://www.topuniversities.com/system-strength-rankings/2016#sorting=rank+custom=rank+order=desc+search=rankings/2016#sorting=rank+custom=rank+order=desc+search=

[3] http://data.worldbank.org/indicator/SE.TER.ENRR?locations=ES

[4] http://download.ei-ie.org/Docs/WebDepot/EaG2015_EN.pdf

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