Stephen Hastings-King on Financialization of the University
For the MoneyLab #11: Disaster Capitalism Friday Session, Community Call-in: Across the Time Zones, March 29, 2021.
My partner Kelly Grotke and I are the Pattern Recognition Collective. Kelly specialized in 18-19th c. Germany; myself in post-1945 France, history of the Left.
While researching my book on Socialisme ou Barbarie, Looking for the Proletariat: SouB and the Problem of Worker Writing, I studied with Cornelius Castoriadis whose work seems to inform aspects of the language game to which Money Lab has been introducing me (theory of the social imaginary, project of autonomy etc.)
We’ve been working primarily in securities valuation, regulatory research, written comment letters various regulatory bodies, developing training materials for price construction in the context of fair-value accounting.
We’re also members European Parliament Portfolio Projects “Valorizing Expertise” and “Effective Communication of Policy” which spin out of a three-year project on the social status of quantification that was housed at the Heidelberg Academy, which has given us space to think about quantitative information and the various roles it plays in contemporary forms of heteronomy.
We’ve both been engaged with Syrian revolutionaries and have published some contributions to various discussions, including pieces with al-Jumhuriya.
What Brought Us Here
Coincidence, really, a tweet about the conference that coincided with some political work Kelly had been doing centered on her undergrad alma mater Oberlin College in Ohio (USA), which I’ll summarize quickly.[1]
The starting point was the college administration’s decision to fire 150 custodial and dining-service workers in the middle of a pandemic, which would have sent these people out with no insurance into a county with a poverty rate of over 24%.
The administration claimed that they were letting these people go in order to save $2 million. (They eliminated union positions and replaced them with outsourced contract positions (but that is another story).
Because she has been interested in the consequences of the financialization of university endowments partly as a result of the so-called Yale Model that encouraged investment officers to go heavily into illiquid, opaque and hard-to-value “alternatives” (close-end mutual funds like private-equity—which btw includes venture capital–hedge funds, REITs).
- Alts promise outsized returns that they’ve not delivered when measured against index funds since 2006:
- Private-equity investments lock up institutional investor capital on average for 10-12 years;
- Unlike every other financial entity, they not required to disclose their holdings (in Europe the regulatory regime for PE is a bit different, a soft regulatory space in which they are required to make some disclosures); information transparency for LPS with is stipulated the contract that links them to the vehicle and not by any sense of fiduciary responsibility;
- The lack of disclosures means there is no way to know what they’re invested in, what risks are involved or even whether statements of interim returns are real
- And they’re incredibly expensive.
Further it seems that adoption of the Yale Model is accompanied by a “professionalization” of endowment management (increased salaries for managers) in part because alts are considered among the “complex” asset classes (they may be but the problem is their opacity) which requires a specialized discursive toolkit, the introduction of which renders endowments obscure (including to other administrators) and seems to correspond to the arrival, sooner or later, of an autocratic managerial style.[2]
Turns out that Oberlin is significantly invested in alternatives (67.9 percent of its $890 million in 2019, a much higher level than many similarly sized endowments. And the College paid out a at least $14,872,522 in investment management fees between 2013 and 2017, averaging around $3 million per year.
If there’s time: During that same period, Amherst College paid out $186,601,258. At both colleges, investment management fees actually exceeded reported profits from investments several times.
Worse, the fees actually paid are probably around 5x higher than those numbers.
Which means Oberlin was paying out much more in PE fees than they stood to save from these firings.
Oberlin is a traditionally progressive school and the administration’s move upset many alumni, faculty and students (and some administrators and trustees). Some of the alumni and faculty mobilized. Kelly sent a letter offering to provide an independent valuation of the endowment’s portfolio in the interest of transparency—administration refused but the move opened up lines of communication that previous mobilizations around investment patterns (disinvestment in fossil fuels for example) had been unable to create—and, significantly, contributed to the administration’s decision to extend the health coverage of the fired workers for a year.
At the same time, the community of alumni and faculty that had been created by the mobilization formed a non-profit that raised money from other Oberlin alumni and distributed it to the workers. It was, they agreed, not enough but it was something—some material support, recognition of the situation, a gesture of care and solidarity.
Where we’re at now
Kelly’s American Prospect article generated a surprising response from across the US from student, grad student and some faculty organizations: we’ve been consulting with them, looking to get a sense of the situation(s) that obtain nationally, what work has been done to resist or reverse financialization and the various austerities for which it too often stands, and the problems such organizing has encountered.
One thing we’re finding is: people simply don’t know about finance-space: like neoliberal (McKinsey) capitalism more generally, it’s just the weather. We think we have to demystify the world of “alternatives” and heteronomy via accounting they embody.
We learned from the valuation offer that it might not be enough to declare finance to simply be bullshit and opt out of trying to understand how it works and what that space might offer that could be used as weapons against it (not least because trustees, endowment managers and upper-level administration are accustomed to challenges from outside the language-games of finance.)
We’d like to say hello to this community and learn about what you’re doing, what your range of concerns are and possibly link up with those among you who are interested in or engaged with similar interests and/or struggles.
I can be reached at swhking@gmail.com. I’d be happy to hear from you.
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[1] A more fleshed-out statement that makes clear the steps via which we have started to generalize about the Oberlin experience and think about the problems of organizing the overall situation poses is here: https://prospect.org/education/are-endowments-damaging-colleges-and-universities/
[2] A more autocratic style within a context already largely captured by versions of New Public Management ideology, a style that renders finance-related information incomprehensible to many administrators. In finance-space, the rhetoric of “complexity” is often used to conceal.