I remember the morning Bernie Madoff was to be sentenced that it seemed I was waiting along with everyone else to find out if “disgraced financier” got twelve years or one hundred and fifty years in federal prison, a.k.a. “Camp Cupcake.”
By now, the details are well known. Madoff, according to the authorities, took in money from one group to payout nominal “dividends” to another group without ever having made an investment; that is, without investing except in his own lavish lifestyle.
The classic Ponzi investment scheme is a “shell game” that works well until everyone wants to cash in, which is what happened, more or less, when the economy tanked late last year.
The lesson of Madoff, I would like to contend, is not that we should be on guard against rip-off artists. Most people knew that long before Madoff’s well publicized confidence game. The lesson is this: the entire economy is more or less a networked Ponzi scheme. Bundling high and low risk mortgages and selling them as excellent, insured investments meant that when the housing market collapsed everything would collapse with it since nothing had the value it was presumed to have had.
The “make believe” quality of Madoff’s rip-off and the mortgage sector over-valuation (not to mention the easy credit across the board) became illustrations an economic “perfect storm” that we are still sailing through today. Madoff is just a small example of how a larger system can be easily “gamed” without anyone in charge knowing or, more to the point, without anyone in “charge” caring.
With the fallout from the worst economic disaster in decades, my question is, “What about higher education? In my last post on “Business Model University” I argued that business didn’t fail to appreciate the more nuanced and finer aspects of college and university life; we’ve always known this; remember Oscar Wilde’s famous statement that money people know the “cost of everything and the value of nothing.”
No, the real problem as I described it was that business failed at business. Business had all the right answers, correct? It could run the world! It could run higher education! In fact, as the new CEO of GM has said in so many words “I don’t need to know cars. I know business.” Well, this is the same stupid confidence in make believe “science” that has led to the crisis that we are currently in and bound to repeat.
I think that this point is very important for the simple reason that higher education has been “making believe” with budgets and finance for years. Colleges and universities, mostly, are non-profit institutions. This status allows them to function as corporations without having to deal with the inconvenience of “taxation.” So, major universities can run “professional” sports programs that take in millions of dollars and everyone makes believe that it isn’t happening. In many cases, the sports “money” is shielded from the college or university budget at-large. This is nothing new.
What is new, however, is the way in which other sectors of the corporate university have separated from the core function of the institution. Last year, The Chronicle of Higher Education ran a story about how colleges and universities worked with credit card companies on campus to lure students into “teaser rate” cards, with the institution getting a kick-back.
At one level, I suppose it is okay to treat students as “fans.” Sell them hats and sweatshirts to raise a little cash; however, when institutions make a radical shift and begin thinking of students as “customers” or “potential customers,” this, as Bill Readings noted in The University in Ruin, is the beginning of the end. Instead of the university as a modest enterprise, charging tuition and fees to cover operating cost, the “university-corporation” drives toward greater and greater “profit.”
With the concept of profit comes the concept of liability, a.k.a. the faculty. So, what would a university or college look like if it maximized it profits and drastically reduced its liabilities? Well, it would look like Bernie Madoff University.
Bernie Madoff University would have to look “good.” Just as Madoff had an upscale office and account statements and employees, Bernie Madoff University would need buildings, sports arenas, ample parking, comfortable dorms with 24-hour cafés, and coffee kiosks every few hundred yards. It wouldn’t hurt to have a bell or chimes that marked the hour across a sprawling campus. "Comfort, convenience, and pleasure" would be the motto (preferably in English so everyone would understand it).
And now, the most important part. Bernie Madoff University would need one famous writer, one famous scientist, and one famous business person. The remainder of the so-called faculty would be on and off site “adjuncts” or “teaching associates” who would work on a per student rate—time and materials arrangement. This would be a Ponzi scheme at its highest level—an ultimate something for nothing.
The irony is that if Madoff had run a university he would have been a hero. His appearance over substance strategy could have been the model for all college and university presidents; or, I should say college and university presidents could have unashamedly embraced his model. . . outright. The problem with Bernie Madoff is that he ripped off real people for real money, giving them only a good feeling in return. Had this been in the context of higher education, all would have been well. Take the money and tell them how good they feel; he never would have had to pay out one cent in dividends.
It may not be too late, however. If Madoff were to get "parole" after two years or so, despite his actual 150-year sentence, he could still do wonders for American higher education. A book, a few appearances on Morning Joe where he curses Obama’s "socialism", and a charity event in the Hampton could put him back on top.
All it would take would be one college or university to hire him! It could happen. If it doesn’t, we’ll all have to wait a few years until everyone else catches on to his brilliance. By then, we’ll certainly have made greater progress toward "comfort, convenience, and pleasure."
Victor E. Taylor is Associate Professor of Comparative Literature, Philosophy, and Religious Studies in the English and Humanities Department at York University of Pennsylvania.