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Can Elite Universities Justify their Wealth?

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The coronavirus pandemic has forced universities to contend with the prospect of collapsing revenues, with a number of colleges already announcing cutting back programs and initiating rounds of layoffs. The United States’s largest urban public university system, the City University of New York, could face cuts of up to $95.3 million; one of their campuses, Brooklyn College, is considering reducing fall course offerings by up to 25 percent.

But the burden borne by the pandemic will not be the same across the board. Over the past decades, while CUNY and other public systems have struggled to function on increasingly stringent austerity budgets, elite private colleges have amassed billion dollar endowments. The vast division of wealth between public and private universities reflects the growing gap between rich and poor Americans. And as it has done with the class divide, coronavirus has thrown these inequalities between universities into sharp relief. Elite private institutions, like those of the Ivy League, will survive a drop in revenue. But public universities—already starved of government funding—will be severely crippled.

By throwing our old claims to normalcy out the window, the pandemic has given us the opportunity to reckon with the possibility of a radically different world. The wealthiest universities have, in theory, the most resources to be able to envision and fight for alternatives to our currently broken system. But in practice, while underfunded public universities drive social mobility, the wealthiest colleges help maintain class divides that undermine democracy and perpetuate conditions in which those at the bottom flounder. In the face of a future in which only the richest schools thrive, it’s worth asking: what value do these institutions serve for the rest of society?

After an upsurge of public pressure, a host of elite universities, including Harvard and Yale, turned down the millions of dollars in federal relief aid which had been offered to the schools under the Coronavirus Aid, Relief, and Economic Security Act. But this is far from the first time that the wealthiest universities have had the chance to profit from taxpayer money.

Research by the Haas Institute reveals the public cost of federal tax breaks to Ivy League institutions—measures like tax-deductible donations and untaxed endowment investment returns—amount to a staggering $20 billion reduction in federal tax revenue annually. On top of this starving of federal tax dollars for public use, Ivy League institutions are some of the biggest landowners in the cities and states they occupy—on a tax-free basis.

So what justifies the enormous wealth of elite private universities? When public university systems flounder, what logic upholds the fact that a handful of Ivy League institutions possess more wealth than many countries?

The given answer, from the elite institutions themselves at least, seems to be that Ivy League students are worth investing in; that students from these schools are exceptional and have the most to offer society. Columbia University’s admissions office, for example, claims a commitment to attracting “the best minds,” a maxim echoed by other elite schools. From the fact that Ivy League and similarly elite institutions students hail disproportionately from the top one percent, it seems that the “best minds” are defined as those with the most money. Elite universities serve as a springboard—or more accurately, a rather short step, given that most students don’t have far to leap—into the gilded place at the top.

The claim that elite university students, as a result of their elite, billion dollar–fueled education, will go on to change the world in some positive way is at best disputable. According to Columbia’s Center for Career Education postgraduate survey results, of the 71.5 percent of students in the Class of 2017 who were employed immediately after graduation, nearly half, 34 percent, went on to work in careers in financial or consulting services. Those statistics are the same or higher across the Ivy League. From Columbia to Harvard to Yale, students overwhelmingly go onto careers high in profit and low in societal value.

While banks certainly provide essential services, the financial sector has grown massively in scale and influence since the shift towards neoliberalism in the 1970s. Today, the finance sector has long lost sight of the public interest, driving economic inequality and profiting massively—at the expense of most Americans. Since the 1970s, lending industry regulations have loosened, concurrent with the withering of the welfare state. What has followed is a crisis of over-indebtedness, in which the financial services industry has stepped in to fill the gap between what people have and what they need, profiting from lending that damages rather than promotes borrowers’ financial well-being.

Financialization has increased the dominance of financial institutions over the economy and in politics, and grown the distance between Wall Street and the real economy. Big banks prioritize shareholder interests above customers and the broader economy, seeking profits without actually producing anything. Of the money entering the financial sector, only 15 percent leaves it. Financialization fosters an enclosed bubble at the top of the socioeconomic ladder, in which the rich profit off of one another.

The disconnect between the claims of elite liberal colleges and the world to which large portions of their students graduate is illustrated by the fact that, even though climate activism is fast growing on campuses, the nation’s biggest banks like CitiBank and JP Morgan have made a business out of pumping over $700 billion dollars into financing for the fossil fuel industry.

Aside from banks, management consulting firms like McKinsey & Company and Boston Consulting Group are the most popular employers for Ivy League graduates. McKinsey, perhaps the best known, has faced a barrage of public criticism for its ethical tradeoffs in pursuit of profit, from profiting off the opioid epidemic, recommending brutal treatment of immigrants detained by the U.S. Immigration and Customs Enforcement, and working for numerous governments with records of human rights abuses.

The Ivy League-to-finance pipeline is a well documented phenomenon. But criticism tends to focus on the “brain drain” argument: that such careers draw the “best and the brightest” students away from other fields. In the Huffington Post, Amanda Terkel asks, “What if top students didn’t go to Wall Street? What if, rather than creating complex financial products that collapsed the global economy, they were building bridges and creating new technologies instead?”

This critique somewhat misses the point. It upholds the false narrative that those admitted to elite schools are exceptional and ignores the realities of deeply inequitable higher education. Those who lament the lack of Ivy League brains in other fields fail to recognize that brilliant minds in fact exist across the country—and are being actively starved of funding for their education. By putting so many students on the path to finance, elite universities do not just neglect to tackle the problems of the world—they actively worsen them.

The path to finance is not an aberration of the otherwise solid Ivy League purpose; the popularity of careers in investment banking fits comfortably within the role these institutions play as conduit to the ruling class. While critics are right to disparage the preponderance of Ivy Leaguers on Wall Street, they ought to seriously question the same trend in other areas. That Ivy League graduates make up almost the entire Supreme Court only justifies the existence of the ruling class in different terms. The inequity in higher education between astronomically wealthy private universities and underfunded public systems has led us to place a false premium on Ivy League graduates, whether they go into finance or into politics.

As with wealth inequality across the country, the divide between public and private universities requires both a systemic fix and increased scrutiny at an individual (in this case, institutional) level. Jeff Bezos’s trillions are a symptom of capitalism, not the root of the disease; but his behavior can’t go unchecked. In the same way, it’s worth looking at what exactly Ivy League institutions do with their billions—while keeping in mind that Yale should not have 65 times more money than the University of Connecticut in the first place.

Ivy League institutions are caught up in a corporate cycle of spending money to make more money. Last year, as a student caller in the Columbia Call Center, I recounted Columbia’s latest lavish enterprises, like the $6.3 billion Manhattanville campus, boasting our flashy new buildings in an attempt to seduce donors to pour yet more money into the University’s coffers. At another level, Ivy League institutions pay vast sums of money to keep their wealth intact; for example, they spend billions on hedge fund managers to grow their endowments.

Columbia graduate student workers went on strike last month, demanding increased financial support and a rent freeze for those living in university accomodations. At Columbia and across the Ivy League, institutions rely increasingly on the underpaid labor of these graduate instructors and adjunct faculty, who lack job security and basic benefits, facing a precarious existence. Meanwhile, University President Lee Bollinger sends emails from the six-story President’s House, which underwent a $20 million renovation during the years Bollinger moved in. The residence is just one nontaxable benefit among other bonuses and compensation that bring Bollinger’s salary to over $3 million.

By hoarding billions while refusing essential resources and job security to vulnerable workers to whom the university plays boss and landlord, these institutions send a clear message to their students—that they prioritize profit over people. When universities behave like corporations, perhaps it is not surprising that the corporate attitude has filtered down to their students.

But it’s more than just a finance-friendly feeling in the air; while capitalism has certainly ingrained the desire for money at a deeply individual level, students do not necessarily enter college with a career in finance in mind. Many are led to it through their college experience. At the top schools, career fairs are flooded with consulting firms and investment banks, who start aggressive recruitment early, seducing students with money.

The path to finance represents a fundamental failure on the part of colleges to teach students to think critically. In a letter of advice to the Class of 2021, Ivy League professors urged students to “[question] dominant ideas,” and “think for yourself.” The dominant ideologies held and taught on elite campuses are left of center; students and faculty mobilize against far-right speakers, and overwhelmingly support progressive candidates. But when hundreds of students end up working for the same handful of elite companies, crammed with other Ivy League graduates lured by the promise of wealth and prestige, how far are these exhortations making a difference?

Elite universities are failing to live up to even their own commitments to the pursuit of “service to society” (Yale) and “greater human understanding” (Columbia). And arguably, it is because of the vast saturation of wealth they spend so much time and money cultivating. It’s hard to overstate the degree to which elite colleges are cut off from the lives of average Americans. In New Haven, where I grew up, one in four residents live below the federal poverty line (a threshold that already severely underestimates poverty). But as a Yale University student, spending time on campus and the surrounding downtown area, you would never guess. The city’s center—much of it owned and controlled by the University—caters only to Yale affiliates, boasting a Lululemon, Patagonia, Barbour, and multiple stores selling ski equipment.

When even in a city of twenty square miles students are never confronted with the realities of poverty, what sort of human understanding can they gain? And it’s a mutually reinforcing phenomenon: wealthy kids come to wealthy colleges where affluence is constantly on full display—they go on to join the upper echelons and never stop to consider that their lives are far from normal. For the low-income students among them, elite schools repeatedly fail to foster an inclusive environment that meets even the most basic needs.

The backdrop for the Ivy League conduit to the ruling class is the income inequality that has skyrocketed since the 1970s. In the past three decades alone, the net worth of the top percent percent has increased by $21 trillion, while that of the bottom 50 percent has dropped by $900 billion. With the growth of wealth inequality comes a host of ills: the erosion of democracy, greater environmental degradation, and, most pressing at the moment, the widening of health disparities. As the coronavirus pandemic has shown in the most brutal light, inequality kills, as the poorer are worse affected due to existing health problems, overcrowded living conditions, reliance on public transportation and being disproportionately represented in the essential workforce.

The Ivy League problem is ultimately a problem of unequal distribution of resources, at both an institutional level and also across institutions as a whole. At an institutional level, colleges must be more democratic, giving students and the most vulnerable workers an equal voice in institutional decision making. Admitting more students from the bottom 60 percent than the top 1 percent is one obvious, badly needed change.

When capitalism places the pursuit of money above all, universities are one of the few places left that could potentially serve as places of truly free thought. But in practice, public universities lack the funding needed to realise that potential, and the elite schools that have the money—far more than necessary—seem to be actually impeding the ability to think beyond profit. In an ideal future, the educational system should be overwhelmingly, entirely public.

Khadija Hussain studies intellectual history at Barnard College.