Among the little truly predictable—or at least those rare things I’ve been able to successfully predict—I would suggest these three truths.
First is the inevitability of recessions. Whether the result of human folly or business cycles, the economy will contract—probably about once every decade, give or take, and probably in direct proportion to the degree to which we lived beyond our means in the years leading up to the crash. This could be called the “stupidity curve.” The fall is relative to its preceding and precipitating bubble.
Second is the belief that, in prosperity, these good times will just keep on rolling. We will declare this a New Economy, with novel and perpetual characteristics that ensure eternal, linear growth. Debt should be casually incurred, risks taken, commitments made, in the delusional fantasy that a rosy future is guaranteed to more than pay current costs.
Third is the fall. Bubbles will burst, myths shatter, plans unravel and pain sadly borne unjustly by those who didn’t have a hand in the decisions that put their organizations in harm’s way. And then the next fantasy sets in—the New Normal—the nightmare that this is a unique reality, the worst ever since 1929 and possibly the longest lasting. If we ever get out of this mess, we promise to live better, to be more cautious and conscientious with resources, and never again to precipitate the giddy go-go mentality that put us in free-fall.
Then the cycle of recession amnesia repeats itself. Recessions will never recur, we tell ourselves, then they surprise us yet again, and we fear this is the one time that this low will persist indefinitely. A recent and aptly titled book, This Time is Different: Eight Centuries of Financial Folly, traces this syndrome where we rationalize the run-up of excessive debt: “Financial professionals and, all too often, government leaders explain that we are doing things better than before, we are smarter, and we have learned from past mistakes. Each time, society convinces itself that the current boom, unlike the many booms that preceded catastrophic collapses in the past, is built on sound fundamentals, structural reforms, technological innovation and good policy.”
Academe–home of the smartest in our society–has a record barely better than the rest of our institutions. Universities are organized to assume uninterrupted growth in enrollments and endowments, steady public funding, an annual ability to inflict tuition hikes on students and their families, everlasting degree programs, vast building operations and permanent commitments to a senior professoriate. Lacking an agile and responsive governance structure, and with fixed costs mounting in a massive physical plant and labor intensive enterprise, the modern university is brittle when suddenly confronted with changing realities. Responding and restructuring imaginatively are beyond the scope of decentralized, entrenched universities. There are precious few exit strategies when times get tough.
Academe has trouble waking up to wake-up calls. By the time colleges and universities mobilize with creative ideas for new initiatives, it is too late to make a difference.
The academic sector hit worst this recession has been well-endowed research universities, accustomed to living off the returns on investments. Their operating budgets had become increasingly dependent on steady endowment income. Their financiers were rewarded for how cavalier they were with other people’s money and then crucified when their riskiest strategies soured. The goal was not to be prudent, but to compete successfully with other investment managers at other universities.
The second sector taking a disproportionate hit has been public institutions, particularly those aspiring to the stature of their state’s flagship university. State schools struggle to juxtapose growing enrollments and declining financial support (especially with the forecasts of stimulus funds ending and tax revenues declining). States like Nevada, facing steep economic decline and dramatic enrollment growth, have been especially overwhelmed by this paradox. Attracting even more students becomes a threat and nuisance rather than an opportunity. It has been a rude awakening throughout public higher education to learn that faculty and staff are mere civil servants lumped into their state’s budget slashing plans, and that their campuses cannot count on the fragile and fickle support of their government benefactors. The price paid in lost self-governance can suddenly seem high as the publicly funded share of their operating budgets erodes.
Many would argue that higher education, at least in the broadest sense, is immune to recessions, or at least should be—that education is essential, and perhaps more so, when the economy is disrupted. This is complicated by competition for students among institutions. Do cheaper providers secure more market share in a downturn, or does reputation take on even greater importance? Do students accelerate or decelerate their studies in bad times? Do adults return to college to bolster their credentials when their jobs are in jeopardy or their earning power dips? The answer is likely some complex combination of all of the above. Over time and over all institutions, academe is less subject to cycles than most other types of organizations. Demand might slow or hasten, and some schools might win or lose, but higher education, in aggregate, retains its value.
Still others would argue that New England is the world’s mecca for higher learning, and that we can simply extend our global reach to make up for local shortfalls. But will the growing number of indigenous institutions stem the brain drain from Asia and elsewhere? Will India and China become more receptive to the presence of foreign universities on their soil? Will online distance learning eventually find a foreign market and reduce the need for international students to relocate to the U.S.? Here too the answers are complicated. Growing academic opportunities within China, India and other countries are unlikely to keep up with their growing middle-class needs for academic credentials.
The U.S., particularly our institutional mix in New England, has concocted the secret sauce yet to be replicated elsewhere. Even with the rapid institution-building occurring globally, I don’t believe we will see our success copied anytime soon: a rich variety of institutions with their own strengths and identity, a diverse menu of disciplines and programs, a focus on the whole student, a respect for liberal learning in undergraduate education and for lifelong learners to reinvent themselves throughout their lives, and a pervasive belief that higher education is not a spectator sport—that courses and laboratories must be engaging, that work should be interspersed with learning, and that wisdom should be drawn from a total experience both within and beyond the conventional classroom.
The key to the competitiveness of individual institutions, our region and the American academic system as a whole is to maintain their distinctive features, their vitality and connection to the world, and their focus on the myriad needs of students. As recessions go, this one was the first in decades where New England fared better than the nation as a whole.
But how do we break the syndrome of recession amnesia, as we muddle our way out of this recession? By recognizing our short-sightedness and lack of historical perspective, while continuing to try, even futilely, to make sense of our strengths and vulnerabilities in an otherwise perplexing world ahead.
Jay A. Halfond is dean of Metropolitan College and Extended Education at Boston University.