David Schultz: The Corporate University Bubble Has Burst

September 3rd, 2012
in econ_news, syndication

Econintersect:  David Schultz, an attorney and professor, has a strident indictment bennett-college-millbrook-nySMALLof the American University system.  He says that the corporate model for university operation in vogue over the past 35 years has removed academic influence from governance and replaced it with a corporate executive structure operating with a business plan.  The result has been an expensive executive bureaucracy that makes the curriculum and administrative decisions for the university based on instructional program selection to maximize tuition revenues and faculty staffing to minimize expenses.  (Econintersect note: All expenses, it seems, except for executive pay and support for expensive public relations efforts such as NCAA Division I athletic programs.)

Click on picture for what's larger view if what's left of Bennett College, Millbrook , NY. According to Wikipedia , the campus is owned by the FDIC and the building pictured, Halcyon Hall, has been scheduled for demolition this year.

Follow up:

Schultz says the corporate university organization was successful until the financial problems of the 21st century set in and the demand for education declined.  The end of the Baby Boomlet and the evaporation of available jobs has reduced both the population growth of college age potential students and the chances that those graduating can find employment.

Schultz summarizes the situation:

The corporate business model worked-until 2008-when it died along with the Neo-Liberal economic policies that had nourished it since the late 1970s. The global economic collapse produced even more pressures on the government to shrink educational expenditures. But the high and persistent unemployment also yielded something not previously seen-the decline of students seeking more education. The decline came for two major reasons. First, Baby Boomer were aging out into retirement, no longer needing educational training. With that, the Baby Boomlet had run its peak, with the American pool of potential students rapidly decreasingly. In effect, the demand for education had dropped.

Schultz says that the corporate business model has crashed; a bubble has burst as surely as the dot.com and housing bubbles before it.  He says that the American college and university system is entering an era which will see:

  • Collapse and merger for many weaker institutions
  • A few surviving elite universities
  • A system more like the higher education system that existed before World War II
  • Only the wealthy gaining a college education
  • The end of many for-profit organizations as non-profits emulate the same offerings

In the two sources at the end of this article the details of Schiltz's analysis and views are presented in greta detail.  Particluarly interesting to Econintersect was the in depth examination of the cultural and philosophical history of higher education from the precepts of Horace Mann, to the philosophy of John Dewey to the free market determination approach of the past three and a half decades.  This is all covered in the 2005 article.

A related item was noted at Monetary Sovereignty today (Rodger Malcolm Mitchell's site).  In that discussion it was noted that 67% of the faculty at American universities are part-time, short-term contract personnel known as adjuct faculty.  This is part of the cost reduction effort of the universities -  these people are working at a small fraction of the expense that occurs when full-time salaried faculty teach.

The Monetary Sovereignty article contains an essay by Sarah Kendzior which contains the following:


According to the Adjunct Project [link added by Econintersect], a crowdsourced website revealing adjunct wages - data which universities have long kept under wraps - her salary is about average. If she taught five classes a year, a typical full-time faculty course load, she would make $10,500, well below the poverty line. Some adjuncts make more.

Kendzior specifically mentions a case where $5,000 was offered for teaching a course.

John Lounsbury


Hat tip to Naked Capitalism.

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1 comment

  1. stan says :

    Academic pursuits like analysing the poetry of obscure 16th century poets are a luxury. That luxury was supported by cheap energy, a situation that no longer exists. However, the ability to extract greater, and novel, productivity from reality is the source of our wealth. If sustaining and enhancing that ability disappears from higher education, we are throwing the baby out with the bathwater, and will surely notice in our quality of life.

    On another note, I recently saw a research paper arguing that NCAA football tailgate parties are in fact tribal rituals that contribute, and even create, the value of higher educational institutions, or at least the perception of such. Marketing indeed.

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