Issue 2 (April 2010)

 

Who Rules the University? To What Ends Do They Rule?(1)

Will Parrish and Darwin Bond-Graham

 

 

This past July, following the California State Legislature's decision to strip $813 million from the University of California's Fiscal Year 2009-10 budget, the UC's 26-member Board of Regents voted to declare “a state of financial emergency.” Such a “state of emergency,” the university's official by-laws state, should accompany an “imminent and substantial deficiency in available university financial resources.”

The Regents also voted to grant special “emergency powers” to UC President Mark G. Yudof.  Yudof promptly marshaled his new and vaguely defined authority to lay off hundreds of workers, impose pay cuts and furloughs on remaining university staff, and propose a 32 percent increase in student fees which the Regents approved in November.

At the same meeting, Regents Chairman Russell Gould announced the formation of a new UC Commission on the Future. It de facto functions to further the privatization of the university. Notably, Gould is one of California's most prominent financiers, a man who served as vice chairman of Wachovia Bank during its growth as one of the leading predatory (“subprime”) mortgage lenders in the United States. He and Yudof serve as the commission's co-chairmen. In Gould's words, the commission's task is "nothing short of re-imagining" the University of California.

The State of California's political elites and business leaders routinely use the language of crisis now whenever discussing the UC. In the past few decades, state funding of the university has suffered steady erosion. The UC now receives more funding than ever from private corporations and the federal government (the latter being in most instances pretty much the same as the former). Its various revenue streams range from student fees to several billion dollars in medical hospital revenue to private grants and donations, to its own hedge fund-like investments portfolio, to atomic bomb dollars from the Department of Energy.

Thus, despite the state budget cuts, the UC's overall revenue reached an all-time high of $19.42 billion in the 2009-10 academic year, and the Regents' claim that the UC faces an “imminent and substantial” funding deficit is inaccurate, to say the least. According to both the university's own financial documents and Moody's bond rating agency, the university had access to billions in investment funds and other pools of money it was holding in reserve at the time.

The university has undergone a neoliberal-style “structural adjustment” at the behest of the UC Regents, and this transformation has been accelerated during Yudof's tenure as president. Under the leadership of California's economic elite, the UC has become the leading prototype for a "disaster capitalist university."(2)

Since the mid-1990s, administrative salaries have absorbed a dramatically increasing share of the university's overall budget. According to a study by UC Berkeley Professor Emeritus of Physics Charles Schwartz, the number of UC administrative positions increased by an almost unbelievable 118 percent from 1996 to 2006, as compared with a 34 percent increase in faculty positions and a 33 percent increase in students over the same period.(3) As a result, there are currently 3,600 UC employees who make more than $200,000 a year, many of them through administrative positions.

An even more damning revelation was made public this past October when UC Santa Cruz Professor Bob Meister published his scathing analysis of the UC administration's use of student tuition dollars as collateral for construction bond debts. In addition to his PhD in political science, Meister serves as Chairman of the Council of University Faculties—essentially, a faculty union with representatives on all 10 of the university's campuses.(4) According to the Regents' own data and policy documents, the primary use of student fee revenue since 2004 has been as collateral for bonds to fund campus construction projects. In this "modified credit swap," students are forced to take out predatory student loans, often charging six percent interest, so the university can borrow money at a reduced rate to construct new facilities like--to take one example—the Blum Center for Developing Economies at UC Berkeley, which UC Regent Richard C. Blum's former construction company, URS Corporation, was contracted by the university to build.

Burnish this into your consciousness: The university’s construction budget reached an all-time high of $9.2 billion in the 2008-09 fiscal year, at the height of the university budget crisis: an increase of 13 percent over the previous year's figure of $8.1 billion.(5)

As for those predatory student loans, they're often owned by big banks like Wachovia and other financial outfits that many of the UC Regents and their business partners are shareholders or executives of. So the whole cycle begins and ends with massive public and student debts, both of which increase as the Regents partake in further undermining the tax base while looting the public sector, again ratcheting up the crisis rhetoric.

UC Los Angeles instructor Bob Samuels has observed that “Moody's even slipped into its bond rating for the UC system the need for the [UC] to restrain labor costs, increase student fees, diversify revenue streams, feed the money-making sectors, and resist the further unionization of its employees,” Samuels concludes that, “like the International Monetary Fund (IMF) or World Bank, the bond raters tie access to credit to the dismantling of the public sector and the adoption of neo-liberal ideology.”

To understand fully why the University of California's internal finances are being subjected to “economic shock therapy,” much like a Third World debtor nation under the thumb of the IMF, it's necessary to know a bit about the history and function of the university's power structure. Although it is nominally a public institution, the UC is not owned and governed by the State of California. Rather, it is the UC Regents who call all the shots. The Board of Regents is a corporate entity formed in 1879 for the explicit purpose of thwarting a populist social movement of small farmers who demanded that the university become more responsive to their needs.

"During a tumultuous decade in California history," historian John Aubrey Douglass has written of the period leading up to the establishment of the Regents, "many saw the new University of California as serving the interests of the upper classes, focusing on classical 'gentlemanly training' and replicating the Yankee private institutions of the East. The detractors of the university demanded that, as an instrument of social and economic development, the university primarily serve the training and research needs of agriculture and industry, the stated 'leading objective' of the institution under statutory law."(6)

During the California constitutional convention of that year, a clique of mostly San Francisco-based financiers and industrialists managed to defeat the democratic demands of farmers and small business owners. The crowning achievement of this elitist coup was the establishment of the UC Board of Regents, a corporate entity that owns and operates the university. To maintain their power against all opposition the Regents gave themselves twelve-year tenures that are explicitly meant to insulate them from any political pressures. The UC thus became what Douglass calls "a fourth branch of state government."(7)

Since then, the leading sectors of the California economy have self-appointed individuals who represent their economic interests on the Board. The Regents mold UC policies in broad ways that benefit capital's leading monopoly sectors. The current going price for an appointment—probably the most prestigious one at the governor's disposal, it should be noted—seems to be $50,000, bare minimum. Give the Governor this sum, and you too could be a Regent. As an example, Richard Blum and his companies donated roughly $75,000 to Gray Davis prior to Blum’s appointment as a regent, while raising more than $230,000 for Davis at private fundraisers. 

Until relatively recently, this meant the Regents would promote policies designed to build cutting edge economic sectors in and around the UC campuses, but they'd make sure to throw some of the university's gravy to less sexy and profitable sectors of the economy. So for much of the Board's history they have acted as Karl Marx's idea of government: an executive board for managing the common affairs of the whole bourgeoisie, working if not for the interest of every industry, at least for most of its monopoly sectors, and taking care not to destroy too many of the smaller fry.(8)

In recent years, the Board of Regents has become dominated by financiers, however. As with the economy at large, these wizards of hedge funds, credit markets, venture capital, real estate speculation, and all the other games played with billion dollar pots of money, have begun to run the university itself as a $19 billion dollar speculative bubble with ample opportunities for enormous growth through “volatility.” These new alpha Regents specialize in leveraged buyouts and privatization of publicly traded companies, and they have long practiced this same basic business philosophy on the university.

The most prominent among this cadre has been Richard Blum. As we detailed in one article in our recent series for the AVA/CounterPunch, Blum's five-decade career as a finance capitalist has been distinguished by the levels of skill and panache he has applied to the time-honored task of siphoning off public money into one's own corporate coffers, as well as those of one's financial and political allies. Blum, who is married to US Senator Dianne Feinstein, is one of the leading power-brokers in the Democratic Party within both California and the United States.(9)

Notably, it was Blum who virtually hand-picked President Yudof for UC President, having chaired the selection committee that oversaw Yudof's appointment. At a March 2008 press conference heralding the Yudof hiring, the San Francisco Chronicle noted that Blum seemed “visibly ecstatic.” In April, the Chronicle quoted Blum again, saying of Yudof, "we disagree on almost nothing. If I were giving Mark a grade, I would give him an A-plus.”(10)

Another prime example of the university's “investors' club” (the title of an upcoming series by investigative reporter Peter Byrne) is Gerald Parsky, a San Diego venture capitalist who reportedly commutes daily by jet to Los Angeles. As a Republican Party powerhouse, Parsky was so influential during his 1996-2008 tenure on the Regents that the American Federation of State, County, and Municipal Employees (AFSCME) dubbed a particularly influential faction of the Board “The Parsky Clique.” In addition to being president of Los Angeles-based Aurora Capital, recent additions to Parsky's resume include acting as senior economic advisor to John McCain’s presidential campaign and as chairman of the Schwarzenegger administration's Commission on the Twenty First Century Economy. Just as Parsky helped steer the UC toward ever-greater privatization throughout his tenure as a Regent, his commission issued a series of recommendations on reforming the state's tax and revenue system in a manner more favorable to big business, even prompting some observers to label the Parsky Commission's proposals “California's Shock Doctrine.”

Current Regents Chairman Russell Gould is another financier and California Republican Party heavy. In addition to his role at Wachovia Bank, he served as California Director of Finance in the Pete Wilson administration in the 1990s. After that, he served a stint as assets managers of the $5.5 billion J. Paul Getty Trust Fund, a charitable organization founded with money from the Getty oil fortune. The Gettys are neighbors of one Richard Blum and Dianne Feinstein in San Francisco's uber-bourgeois Pacific Heights neighborhood, where Mr. and Mrs. DiFi purchased a $16.5 million palatial estate in 2005.

The Getty Trust was run in those years by one Barry Munitz, former chancellor of the California State University System. From 1984 to 1991, Munitz was vice president of Maxxam Corporation under Charles Hurwitz, as the company clear-cut the lands and livelihoods of California North Coast residents. Munitz has since been a leading force behind shaping the California Business Roundtable's public education policy agenda, which strongly favors neoliberal privatization.

Another Regent, Paul Wachter, acts as Gov. Schwarzengger's personal financial adviser. Regent George Marcus is a lead organizer of The Real Estate Roundtable, the main political voice of real estate capital in the United States. Regent Judith Hopkinson, whose tenure recently ended, is a retired executive of Ameriquest Capital Corporation, a big mortgage company that is partly responsible for precipitating the current economic crisis: Ameriquest lent billions in sub-prime loans to families across the US knowing full well they would have trouble making payments down the line as rates increased.  Regent Leslie Tang-Schilling was a leading executive at Golden West bank, another large holder of predatory student loan debt.  And the list goes on.

One of the primary enterprises Richard Blum has presided over in recent years is the real estate corporation CB Richard Ellis. With projects in nearly 100 countries, CBRE is the largest brokerage firm on the planet. In a notable example of how Blum's own particular business interests have become increasingly enmeshed with those of the university, during the course of his tenure as a Regent, CBRE has contracted with at least eight of the UC's 10 campuses over the past decade. Most often, the company has consulted with these campuses to produce glossy reports highlighting the beneficial economic impacts on the immediate regions that host them, as well as that of California in general. The UC San Francisco, Davis, Berkeley, San Diego, and Riverside campuses have all paid CBRE to produce precisely these kinds of economic development treatises.

Each of these CBRE reports marshals a wide range of statistical data to promote a particular vision of the UC's role in California's larger economy and society. While paying occasional lip service to the UC's contributions to “the richness of California culture,” the reports overwhelmingly emphasize the UC's role in fostering high-tech business enterprise, premised on a decidedly Reagan-esque view of the inherent superiority of top-down economic spending. The core purpose of UC San Diego, according to one CBRE report, is to fuel “the expansion of the skilled labor pool for high-tech businesses and biotech businesses in San Diego.” UC Irvine is “an economic engine powering prosperity” owing to its various big business spin-offs and the high-tech start-up companies founded by its faculty.(11)

The implicit conclusion is that the university's complete subordination to capital is the primary reason for its existence, and that anything the UC could do for biotech, aerospace, real estate, and finance capital, it should do. In this way, the shift to privatization of the university's finances, including student fees that are redirected to pay for campus construction projects, goes hand-in-hand with the efforts of state and business elites to render the university a wholesale servant of California's neoliberal economic machinery. Under this model, State funding is seen as akin to "local matching funds," sweetening the overall pot for the real investors, the main purpose being not to make the university affordable for students, but rather to expand the university's physical footprint and build fancy new research centers that will create all manner of techno-gadgetry to inflate the next bubble.

The UC Regents, in other words, have come to conceive of UC campuses almost entirely as incubators for a constellation of mini-Silicon Valleys: alliances of venture capitalists, real estate speculators, and high-tech entrepreneurs that stake their claim upon large and overlapping swaths of California. It stands to reason that the UC's leadership would be enamored of the region of the United States that is home to more millionaires per capita than anywhere else in the country, but which has also seen one of the sharpest declines in real wages among its working class. Silicon Valley also leads the way with the most temporary workers per capita, the highest level of economic inequity between genders, and the greatest concentration of toxic Superfund sites in the United States.(12)

Even so, the Regents and UC's executives have long spoken in excited tones about spreading the model. The UC's newest campus, Merced, was sold entirely on the premise that it would produce a critical mass of biotechnologists, nanotechnologists, engineers, and other wizards of the ruling high-tech religion that mythically creates economic booms lifting all boats. Currently, though, the Central Valley is experiencing some of the greatest levels of unemployment and highest home foreclosure rates in the country. UC Santa Cruz, traditionally the arts and humanities campus of the UC system, was transformed during this era into what some administrators happily called "Silicon Beach." Much like with the global neo-liberal economy it has done so much to advance, the great majority who don't already possess ample resources are left under this model to fend for themselves.

There are tens of thousands of young Californians who are annually being saddled with crushing debts at UC and the CSU campuses, a condition that forecloses on their future choices, making virtual indentured servants of many of them.

As student fees continue to skyrocket, it is well to keep in mind that Blum is a part owner of a pair of for-profit education companies. Blum Capital Partners owns the largest stake in Career Education Corporation, the world's second largest private “diploma mill” corporation, which runs more than one hundred for-profit schools across the country, while also making tens of millions of dollars in sub-prime loans to its students. Blum Capital also owns a 19 per cent stake in ITT Educational Services, Inc., another for-profit school that makes millions off student loan debt. Blum, the UC Board of Regents' resident siphoner-in-chief of public funds, purchased more than 220,000 new shares in the firm soon after the UC Regents approved the University of California's latest fee increase this past November.

A recent New York Times article on for-profit colleges and trade schools featuring both of Blum's companies explains that:

"the [companies'] profits have come at substantial taxpayer expense while often delivering dubious benefits to students, according to academics and advocates for greater oversight of financial aid. Critics say many schools exaggerate the value of their degree programs, selling young people on dreams of middle-class wages while setting them up for default on untenable debts, low-wage work and a struggle to avoid poverty. And the schools are harvesting growing federal student aid dollars, including Pell grants awarded to low-income students."(13)

If the UC is prioritizing various toxic combinations of science and industry at the expense of most students, then what are those projects? Examples abound. In June 2006, the UC announced an agreement with the world's second largest oil company, British Petroleum, whereby it will receive half a billion dollars per year over 10 years, principally for research into genetically modified elephant grass and other transgenic plants that are candidates to produce alcohol for non-fossil car fuel. The project is housed at a facility on the Berkeley campus called the Energy Biosciences Institute (EBI). In keeping with the "public-private partnership" funding model that currently prevails, the State of California put up "matching funds" in the form of $73 million in construction bonds to help smooth the way for the EBI's landing on one of its campuses.

The EBI is one of UC Berkeley's largest current applied research programs, and it naturally comes straight from the “crisis” playbook. The project is justified under the pretense of helping to solve two major crises - global climate change and its twin bogeyman, oil depletion. In reality, biofuel monoculture has become perhaps the leading cause of dispossession of small farmers in the Global South, as well as the destruction of important ecosystems such as the Amazon Basin rain forest.

Berkeley's biofuels institute will only further enable multi-national corporations to penetrate, reorganize, poison and despoil the lands, livelihoods, and psyches of Amazon Basin and other cultures. The net impact of the EBI on the environment—that is, the actually existing ecosystems of South America, Indonesia, et al.—will be decidedly negative. On the day of the contract signing, then-UC President Robert Dynes heralded it as “a great day for Mother Earth.”(14)

Both Dynes and Lawrence Berkeley National Laboratory Director Stephen Chu, now duly installed as the Obama administration's secretary of energy, referred to this project as a “new Manhattan Project.” It was a fitting designation, although the original Manhattan Project never quite ended, and it has only gained ground under a president who sold the world on “hope” and “change.” The UC continues to co-manage the Los Alamos and Lawrence Livermore nuclear weapons compounds, which have designed every nuclear weapon in the US arsenal dating from the annihilation of Hiroshima and Nagasaki, as part of for-profit partnerships with the world's largest construction and engineering firm, Bechtel Corporation. The UC-Bechtel contracts are worth as much as $80 billion in revenue over the course of their 20 year lifespans, a hefty chunk of change when you're concerned with your bond ratings.

On February 1, the Obama administration unveiled a budget in which both of the UC's weapons labs would receive a massive funding “surge.”(15) The proposed funding increase of 23 percent at Los Alamos would be the facility's largest since 1944. Much of that funding is for a new factory to produce plutonium bomb cores, the explosive triggers of modern thermo-nuclear warheads, for the express purpose of outfitting the first new nukes to be developed since the end of the Cold War. The investments are sold as the need to “maintain the US nuclear deterrent” in a time of rapidly escalating threats, allegedly, from Iran, North Korea, and potentially even nuclear-armed terrorists.

Again, crisis begets opportunity if you are properly positioned in the most privileged circles, so it is fitting that one of the two junior partners in the UC-Bechtel management team should be Richard Blum's now-former company, URS Corporation. At the time Blum became a Regent, URS already had a $125 million contract to perform construction and engineering at Los Alamos. It was a natural extension of his general business philosophy that Blum would have been eying wholesale ownership of the weapons lab at the time. That in mind, perhaps a little Q & A is in order. Which entities now run the Los Alamos and Lawrence Livermore weapons labs? The University of California, Bechtel, and URS Corporation, along with a couple of other junior partners. Which UC Regent had a lucrative financial partnership with the Bechtel family, via a $3.5 billion medical technology supplies company named Kinetic Concepts, that precedes the UC-Bechtel weapons lab partnership by eight years? Richard Blum. Who was URS Corporation's primary financier and vice president for three decades? Richard Blum. Which UC Regent was among a select group of policy wonks who participated in a nuclear weapons policy conference in Oslo, Norway, in 2007, organized largely by a long-time Bechtel executive, George Shultz, who has been instrumental to securing the weapons labs' recent funding increases? We won't even bother answering that last question – this exercise has become entirely rhetorical.

From its inception, the University of California has been an institution inherently bound up with the course of American empire. It was the eighteenth century British philosopher George Berkeley's poem “America: A Prophesy” that inspired the university's early trustees to adopt him as their flagship campus' namesake. The poem's final stanza perfectly captured their vision of the university's larger social role, that of intellectual hub for ever-expanding American capitalism, which was itself to herald an end-of-history liberal utopia. Notably, the same stanza also helped occasion the idea of “Manifest Destiny,” the widely held belief in the mid-nineteenth century that a Protestant God had divinely ordained the United States to expand westward to conquer and subdue the American Indians and the “wilderness” they inhabited.

“Westward the course of empire takes its way;
The first four Acts already past;
A fifth shall close the Drama with the day;
Time's noblest offspring is the last."

The poem's last line provides a fitting epithet for the university, as for so many institutions instrumental to the era of US economic dominance now passing in a financial meltdown. While the aggressive and opportunistic plans of the UC Regents and their hatchet man, President Yudof, are the most immediate cause of the university's rapid descent, this larger context demands greater attention from students, faculty, workers, and the people of California. It is highly improbable that the UC and institutions like it will ever return to an idyllic era of reliable state financial support. There may never again be low fees, an ever-expanding roster of PhDs, or increasing and diverse student enrollments. The UC is an unsustainable institution that developed as part of a wildly unsustainable period of American economic and imperial expansion. We are now amidst the world capitalist economy's unraveling and the decline of American imperial strength, and as an integral part of this political economy, the university is coming undone right along with it.

That said, this ongoing crisis represents a challenge for all of us as we engage in the long overdue process of radically re-thinking the university and its functions. So far the Regents, Yudof, and other neo-liberal privatizers have been more radical in their vision of a re-structured UC: one that more readily serves corporate and military masters, now absent of even the marginal level of accountability fostered by state sponsorship of undergraduate education. While we may cringe at the austerity of their reforms—with their basis in raw exploitation of indebted youth, systematic racism, and visions of La Jolla imposed across the state's bioregions—the fact is that UCOP and the Regents have taken incredibly bold steps. They, unlike so many participants in the ongoing rebellion of students, faculty, and workers, take serious the proposition that we have entered a long-term structural crisis of capitalism and legitimation thereof.

We conclude with this prescription: our visions for education and knowledge production must not only counter those of the neoliberal privatizers with calls to "defend" or "save" the university, but must also acknowledge that the UC was designed from the ground up as an institution subservient to the imperatives of California's political economy—one that today builds ten prisons for every university while imposing a system of de facto apartheid education across all socioeconomic sectors. During the best of times for higher education in California, the UC was instrumental to the production of many of the greatest horrors of modernity, ranging from a system of utterly destructive monopoly agribusiness perfected in the California Central Valley and later exported wholesale to the Global South, to the breakthroughs in physics that led to the production of atomic weapons and energy, to the more recent development of genetic engineering technologies. We should acknowledge as a central part of our strategies for resistance and renewal that this underlying system—one in which education is subsumed under the auspices of America's greatest empire state—is ultimately not worthy of defending. From this position, it may be possible to speak of more than just "restoring" state funding (a politics that, after all, has allowed the governor to propose prison privatization and oil drilling in state waters!). It may be possible to talk of more revolutionary transformations of what education is and means.

 

Will Parrish is an independent scholar and organizer. He attended UC Santa Cruz from 2000-2004, where he was denied his diploma as a penalty for organizing a protest. Darwin Bond-Graham received a BA from UC Santa Cruz and completed his PhD at UC Santa Barbara in March 2010. For other installments, see http://theava.com/archives/author/will-parrish.

 

_________________________

1. An earlier version of this story was first published in the Anderson Valley Advertiser and on the Counterpunch web site. This edition features some information exclusive to R e c l a m a t i o n s.

2. Klein, Naomi. The Shock Doctrine: The Rise of Disaster Capitalism (New York: Metropolitan Books, 2007).

   3. Schwartz, Charles. Notes on Transparency 101 Seminar, p. 12. http://socrates.berkeley.edu/~schwrtz/Transparency101.pdf.

4. Meister, Robert. “They Pledged Your Tuition.” http://www.cucfa.org/news/tuition_bonds.php.

  5. “University of California Annual Report on Major Capital Improvement Projects Fiscal Year 2008-09.” Budget and Capital Resources, University of California Office of the President, p. 3. http://www.ucop.edu/facil/pd/documents/majorcap0809.pdf.

  6. Douglass, John Aubrey. "Creating a Fourth Branch of State Government: The University of California and the Constitutional Convention of 1879." History of Education Quarterly 32, 1 (Spring, 1992): 31-72.

  7. Ibid.

 8. Marx, Karl and Frederick Engles. The Communist Manifesto. Marx/Engels Selected Works, Vol. 1 (Moscow: Progress Publishers,1969), 98-137.

9. Parrish, Will and Darwin Bond-Graham. "DiFi and Blum: a Marriage Marinated in Money."  Counterpunch. February 26, 2010. http://www.counterpunch.org/parrish02262010.html.

10. Doyle, Jim. "UC President Points to Progress." San Francisco Chronicle. May 6, 2009. http://articles.sfgate.com/2009-05-06/news/17201782_1_uc-executives-mark-yudof-president-yudof.

11. “UC – University of California and the Economy – Economic Impact Reports.” http://www.universityofcalifornia.edu/economy/impactreports.html.

12. According to the Silicon Valley Toxics Coalition, "Silicon Valley is home to 29 toxic EPA Superfund sites, the highest concentration in the country. This pollution came from the original high-tech manufacturing facilities, which have since moved to places around the globe with weaker environmental and worker protections. Millions are still being paid to clean up the remaining high-tech toxic legacy which is disproportionate concentrated in low income communities of color." See the "Silicon Valley Toxic Tour."
http://www.svtc.org/site/PageServer?pagename=svtc_silicon_valley_toxic_tour.

13. Goodman, Peter S. "The New Poor: In Hard Times, Lured Into Trade School and Debt." The New York Times. March 13, 2010. http://query.nytimes.com/gst/fullpage.html?res=9502EEDC113DF937A25750C0A9669D8B63.

14. Boal, Iain. “BPerkeley, Inc.?” Mute Magazine. May 9, 2007. http://www.metamute.org/en/BPerkeley-Inc.

15. Bond-Graham, Darwin, Will Parrish, and Nicholas Ian Robinson. "'Four Horsemen' Call For Nuclear Weapons Surge." Z Magazine 23, 3 (March 2010).