Saturday, December 29, 2012

When Education Becomes 
a Business. . .

One of the important side effects of the Occupy Wall Street movement was the extensive publicity given to the large debts our students carry to pay for their education. One of the causes of the steep increase in student debt is the steady rise in college tuition – a faster rise than the rate of inflation. Getting an education has become more expensive every year.
Where does all this money go?
Here are some interesting facts: in the 1970's about 20% of all college teachers were part timers, adjuncts. Adjuncts earn less than full-time professors, they have no job security, no health care or pension benefits. Many of them teach courses at different schools. Many of them are on food stamps.
Today about 50% of all college courses are taught by adjuncts. As is true for many employees, more and more college teachers have precarious, temporary jobs and have a hard time making a decent living.
The rise in the cost of college education does not seem to be due to the cost of actual teaching. The college wage bill has tended to go down because more and more teachers are, frankly, underpaid.
Where then does the money go? "Between 1975 and 2005, decades of rising college enrollments, the number of full-time faculty grew 50% while the percentage of those employed as university administrators swelled by 85% and administrative staffers by 240%" (Thought and Action: the NEA Higher Education Journal volume 25 (2012), 9).
Add to that, that top level administrators' salaries have increased substantially. It is no longer unusual for a college president to make a six-figure—as in $ 600,000.00-- salary.
These changes in higher education reflect a trend of considering colleges and universities as just one more business. Hence the successful effort to shrink the wage bill and increase the number and salaries of top managers. Universities are treated as if their main task was to make a profit. The focus is on the athletic department, on the winning football team where huge sums are invested. What counts is the bottom line. Learning, education, scholarship, scientific research count for little unless they can be commercialized and bring in profits.
Many of the new highly paid administrators are not scholars or even particularly well educated. They are business men; they are pretending to run a business where that is completely inappropriate. Education is about increasing knowledge and skills, expanding personalities, equipping all of us to lead the best lives we can live, making us better and more knowledgeable citizens, and the parents of happy and promising children. These values cannot be measured in dollars and cents. Leading the best lives we can, being good citizens, being excellent parents is different from having or producing a lot of money. You may leave your children a lot of money but be a bad parent; good parenting enriches your children in non-monetary ways. Being a good citizens does not necessarily bring in money. The rich often are very poor citizens. You may be a person with many resources but money is not one of them. You can be rich and be a clown like Donald Trump.
Money and wealth are not the primary goals of education or of educational institutions. The new administrators and presidents of colleges and universities, being mainly into money, enrich themselves while destroying their institutions.
Ever since Calvin Coolidge said that "America is business is business" we have thought that whatever we do in our lives should be thought of as a profit and loss undertaking. Applying that completely inappropriate motto to education leaves us with a faltering education system that costs more and more and is less and less effective.
This is just one instance of the mischief done by considering everything we do as a business. Health care used to be about helping sick people become well and about well people remaining well. Today it is mainly a for-profit undertaking. As a consequence America spends more on health care than any other country in the world but the health care we get is inferior to that in many other countries.
We are still suffering from the effect of having allowed banks to be moneymaking enterprises. Not for-profit banks, like your local credit unions, provide perfectly good services and do not go bankrupt because they engage in risky speculations and lose their shirt.
Education is one of many parts of our society which suffers seriously from America's love affair with making money.
It is time that we remembered that money is not everything.

Thursday, December 20, 2012

Capitalism or Socialism

According to a recent Associated Press story, the weeks before the election sent many Americans scurrying to their dictionary to look up all sorts of things. According to Merriam-Webster's the words most often looked up were "capitalism" and "socialism."
We see in Merriam-Webster that in a capitalist society the means of production – farms, factories, laboratories, – are owned by private parties (or corporations). In a socialist society, according to Merriam-Webster's, means of production are controlled and owned by the state.
If you put it that way, it is clear that capitalism is preferable. But these two definitions completely distort the nature of both capitalism and socialism. The contrast is not between the free decision-making of private owners and a society where the government funds everything. Capitalism as we know it would do tremendous damage to many of us, if the government were not trying to protect consumers against unhealthy food, dangerous appliances, and medications that might well kill you.
Capitalism cannot function without a strong government--what many people call "socialism."
Capitalism, as we know it, leaves the control of means of production to the owners of factories, of farms, of research laboratories. More precisely it allows only a small subgroup of owners to control production and the protection process. The bulk of means of production is owned by private parties who have saved up their money and invested it in the stock market or by pension funds and others that invest money on behalf of private parties. These owners of stock do not manage the factories which they own a part of. They are called once a year to attend a stockholders meeting. Before the meeting management instructs stockholders how to vote their stock. The issues that come up for a vote usually have very little to do with actually running the company.
Here is an interesting example: a friend told me that some stockholders of a company in which she had invested some of her life savings, proposed a resolution for the stockholders meeting that would have instructed management to tell the stockholders of political contributions management made with company funds. Management refused to put this resolution on the agenda of the stockholders meeting. Management can do that. The stockholders have no recourse.
Capitalism leaves control of our productive machinery to a very small number of people. The law instructs these managers to increase stockholder value as much as they can. Making a greater profit demands sharp competition with competitors – lowering production costs, cheapening products, and reducing the wage bill either by cutting wages or by laying off workers.
In this competitive environment, the sleaziest operator always sets the rules. If you try to provide good value for your customers and a good work environment for your employees, you may have a larger wage bill or pay more for materials than a less scrupulous competitor. If you want to remain in business your costs must be close or equal to those of the less conscientious competitor. In spite of your best intentions you to have to substitute cheaper materials and lower your wage bill.
The result is that in a capitalist, competitive economy some outside agency is essential to make sure that the food you buy in the supermarket will not make you sick, that the car you drive will not kill you, that the cleaning materials you use will not harm you and your family, and that the medicines you take will not at some future time create more serious health problems for you.
The continual pressure for lowering production costs encourages producers to cut corners. Government protection for the consumer is absolutely essential. As products become more and more complicated, and as capitalism produce more and more different products, the government's surveillance apparatus becomes proportionally larger and more complex. Government interference with the economy increases as the economy grows and produces more products that can potentially create serious injuries.
Similarly, the government needs to step in to protect employees for being overworked, underpaid and exposed to dangerous working conditions. Only after many decades of vigorous agitation did workers succeed in getting a guaranteed eight hour working day (instead of a ten, 12, 14 hour day). The government has to forbid child labor and force employers to have a healthy working environment. In 2011 there, in spite of government supervision, were 3 million injuries and illnesses that kept people away from work. Left to its own devices the owners of workplaces would wreak untold havoc.
The growth of government activity in the economy is often called "socialist" by its opponents. But the growth of government supervision of the economy is an integral part of capitalism. Capitalism produces cigarettes, alcohol, soft drinks and fast food that contributes to the growth in obesity and diabetes. Capitalist drug companies constantly produce new medications many of which have serious side effects against which the government tries to protect us. Capitalists produce toys that may kill infants and cars that may seriously injure their parents. They would be even more destructive without some government action.
The progressive involvement of the government in the economy is not the result of "socialist" errors on the part of the government. It is an inevitable part of the capitalist system where competition for greater profits produces a wealth of dangerous products. Here company profits are more important than the well-being of consumers. They can only protect themselves against the capitalist owners by allowing the government to grow ever larger.
If you really are for smaller government, you need to work to put an end to this rapacious capitalism.

Friday, December 14, 2012

Deficit Reduction

Deficit Reduction
The current negotiations about tax reform and reducing the deficit by increasing the income tax for the super rich have the air of high drama. Many observers have the feeling that we are witnessing a carefully managed theater piece. They are right.
The United States has been spending a lot more money than it earns. Spending more than you take in sooner or later leads to bankruptcy because you owe so much money that you will never be able to pay your debts. When your creditors see that , they stop lending you money and you go broke.
The United States needs to tighten its belt; we need to reduce our deficit. Current targets are to reduce the deficit by about 2 trillion over the next 10 years.
The high drama about increasing government taxes on the superrich is intended to address increasing government income. But it now appears that this whole theatrical performance has a second purpose, namely to distract attention from some very obvious ways of increasing government income.
All this comes to light in this recent news item: "Google Inc. (GOOG) avoided about $2 billion in worldwide income taxes in 2011 by shifting $9.8 billion in revenues into a Bermuda shell company.” (
At its post-WWI peak in 1952, the corporate tax generated 32.1% of all federal tax revenue. . . . Today, the corporate tax accounts for 8.9% of federal tax revenue . . . The list of corporations keeping profits offshore is a Who's Who of multinational giants. Cisco, G.E., Apple, Google, Pfizer, Qualcomm, Walmart, Ebay, Dell, even Coca-Cola. Apple, for example, has $74 billion in profits parked offshore.” (
Under US tax law, foreign profits are subject to 35% U.S. tax when they are "repatriated," or brought into the United States, usually in the form of a dividend.
One internal document released by the [Congressional Investigative] panel suggested that HP [Hewlett-Packkard] routinely brought money into the U.S. without paying U.S. tax. An HP presentation noted that 'without planning, repatriation of foreign earnings could lead to tax payments.'
Loans by the foreign units to a related U.S. entity are considered a dividend for tax purposes but there is an exception for loans that are repaid within 30 days, according to the committee's tax experts.
HP set up a complicated series of short-term loans starting in 2008 to these businesses that were continuous without gaps, to get around that provision, the panel found.” (
“Tax losses to the United States amount to $1 trillion over a decade, according to the Congressional Research Service. “ (
I spent ten minutes on the Internet and found half of the 2 trillion the US government needs to say over the next 10 years without touching the income of the super-rich.
The tax manipulations by the large corporations are, on the whole, legal. In order to find half the amount of money needed to reduce the federal deficit, the US tax code would have to be changed to make it impossible for large corporations to save $1 trillion over 10 years in income taxes. Congress would have to take on all the large US corporations to make them pay their fair share of the cost of the US government.
Congress clearly does not have the stomach for that fight because they know they would lose and it would become clear to everyone that ours is a government "for, by, and of the large corporations".
Hence all the fighting about taxing the super-rich-- a theater piece carefully produced to confuse the citizens about what is really going on.

Friday, December 7, 2012

Brinksmanship at the Fiscal Cliff

Obama wants to raise taxes on families making more than $250 million a year. The Republicans are adamantly opposed to that.
One sort of argument in favor of not taxing the very rich more is known as “supply-side economics” which no respectable economist subscribes to.
To be sure those very rich shelled out a lot of money to get Mitt Romney elected. But Obama hauled in tidy sums himself. You do not need to cater to the superrich to win an election. In fact, experience shows that the money of the superrich was not quite enough to get Mitt into the White House.
So what is this fight about?
While Obama won, Romney did get 48% of the popular vote. Most of those folks were not superrich. Why did they vote for Romney? It is hard to believe that they cast their vote as they did out of concern for a possible tax increase for the superrich. We know that about 60% - 70% of voters support such a tax increase. At least about 12% - 22% of those voters must have been Republicans.
But perhaps asking what Republican voters were for is asking the wrong question. What were they against? That's pretty clear. The Republican agenda is not only looking to help the superrich get even richer but it is going to balance the budget by cutting back on government programs to support the unemployed, the poor and the elderly – all of them members of the 47% whom Romney accused of not being willing to get their life together but waiting, instead, for government handouts.
What's wrong with being poor except, of course, that it's a pretty miserable life: you work hard all week and have very little to show for all your effort.
Another interesting statistic may help us understand this: 88% of the vote for Romney was from white folks. White people – at least where I live – would be reluctant to be openly racist. That's not really acceptable anymore. But a lot of white people who think that they are open-minded, tolerant and dedicated to equal opportunities and rights for all, also believe that black people are the majority of those who receive unemployment insurance, who get some government aid to allow them to feed their children, in short, the 47% that Romney professed not to care about. These whites also tend to believe that black welfare clients could make a living if they were not so lazy or shiftless. Many whites believe that sort of thing without any evidence about the lives of the poor. The beliefs of many whites about welfare recipients are clearly prejudices.
The vote for Romney had a strong racial component. It was not in favor of African-Americans, Hispanic Americans, of women from all different backgrounds. It made no effort to appeal to African-Americans, Hispanic-Americans and women.
The fight about raising taxes for the superrich is symbolic. It is really about support for the poor, the sick, and the elderly. That fight is confused by an often unspoken racist and sexist background.
We may congratulate ourselves for having reelected a black man for president for a second term. But the price of this victory is renewed virulence of the disease of racism that we Americans have suffered from for the last 400 years.
The disease may not be quite as powerful as it was. But we are still very sick.
It may well push us over the fiscal cliff.