Global Financial Crisis and educational restructuring

Abstract

“Financialisation” is a term that describes an economic system or process that attempts to reduce all value that is exchanged (whether tangible, intangible, future, or present promises, etc.) either into a financial instrument or a derivative of a financial instrument. The original intent of financialization is to be able to reduce any work product or service to an exchangeable financial instrument. It is an aspect of increased symbolization, mathematization, and computerization of financial markets that are trends within knowledge capitalism. Neoliberalism is an expression of the power of finance that has gathered pace with the internationalization of capital and the globalization of markets. Some scholars suggest that neoliberalism and globalization are themselves expressions of finance, closely tied to the development of derivatives markets and the evolution of an international financial system where the international rentiers have managed to significantly increase their share of national income on the basis of systematic fraud, corruption, and widespread criminalization of financial practices. The current financial crisis is a systemic crisis of the entire capitalistic system based on interconnected global financial markets. This is a fundamental shift that represents the financialization of the reproductive sphere of life itself. Under this regime, the monopolization and privatization of knowledge and education has proceeded rapidly. One of the effects of financialization and the economic crisis has been to popularize a debate on budget cuts and “austerity politics” across the board for public services provided at the state level with massive cuts to education in all aspects, attacks on collective bargaining, and the sacking of thousands of teachers. This paper will explore education in the age of financialization and the Global Financial Crisis.

Introduction

The worldwide integration and globalization of finance is one of the major developments of this age. This process and its effects have been intensified through a range of factors, including economic and trade reforms following the collapse of the Soviet Union in 1991 and leading up to China joining the World Trade Organization (WTO) in 2001, as well as the subsequent development and opening up of Chinese capital markets in 2013. ¹ It coincided with the rise of a market-oriented neoliberalism that began in the United States and United Kingdom and then became dominant socio-political, economic policy systems in much of the Western world and Asia as it followed the Washington Consensus free-market ideology of economic structural reforms, macroeconomic stabilization, free trade and foreign investment, market freedom, and the minimal state. In addition, nation states have pursued neoliberal policies. We have seen the neoliberalization of major world policy agencies promoting free trade and privatization strategies. Education has been at the very core of such strategies.

With the emergence of neoliberal impulses, we have been experiencing “an increasing interest in the education of the workforce and the mobilization of financial resources to accomplish this task” (Harvey, 2014: 183). And, as Harvey (2005) argues in another context, if education is not ready to address such requirements, it needs to be privatized. Another vitally crucial parallel process that has highly influenced financial systems and intensified especially in the 21st century is the acceleration of technological innovation. New Internet Technologies (IT) have reinforced financial market integration through growth of fiber optics, mobile telephones, new forms of instant messaging, social media, usage of sophisticated algorithms in financial markets, and now high speed trading using lasers and so on. These trends and associated global governance and policy shifts have created and emphasized a form of interconnectedness and interdependence, yet the downside surely has to be a potential fragility in a collapse in any one part of a one-world integrated financial ecosystem that poses new systemic risks and contagion effects. The world has experienced high levels of technological accomplishments that simultaneously have severe global contradictions quite structural of a system framed by capitalist modes of production. Such contradictions have been insightfully exposed by Sousa Santos. Our current epoch is a paradoxical time: on the one hand, “our current time is marked by huge developments and thespian changes, an era that is referred to as the electronic revolution of communications, information, genetics and the biotechnological” (Sousa Santos, 2005: vii). On the other hand,

It is a time of disquieting regressions, a return of the social evils that appeared to have been or about to be overcome. The return of slavery and slavish work; the return of high vulnerability to old sicknesses that seemed to have been eradicated and appear now linked to new pandemics like HIV/AIDS: the return of the revolting social inequalities that gave their name to the social question at the end of the nineteenth century; in sum, the return of the specter of war, perhaps now more than ever a world war, although whether cold or not is as yet undecidable. (Sousa Santos, 2005: p. vii)

Systemic risk and system failure can be caused by many different (but interrelated) factors: too much debt (households, corporations, banks, financial institutions, governments), too much borrowing in foreign currency, sovereign debt, asset bubbles, overconfidence, large and complex banking systems, shadow banking system (non-bank institutions taking on banking functions), financial innovation leading to collateralized debt obligation and securitization, and the failure of mathematical models (Klemkosky, 2013). Neoliberal philosophy edifies an economic framework fully based on a non-stopped process of subjectification, that is, “subjective economy” Lazzarato (2011) dialogically yelled within the nexus “creditor-debtor” (p. 37). Debt is the archeology of global existence that has been subjectified in a perpetual neoliberal wrangle of “debtor-creditor.”

Following the 2007–2008 Global Financial Crisis (GFC) in the United States, the 2010 Dodd-Frank Act instituted a new set of reforms intended to reduce systemic risk and ensure greater system stability through the development of a new regulatory environment intended to supplement the existing Securities Acts of 1933 and 1934. The Consumer Financial Protection Bureau and the Office of Financial Research are supposed to monitor systemic risk for the Federal Reserve Board. ² These reforms amount to the most massive reform of the US financial system ever with the Securities Act, running to hundreds of pages, yet it is clear that the reforms have been incomplete and the regulators have underestimated the systemic risk in destabilizing financial markets. Perhaps even more tellingly, little thought has gone into the “risks” of the financialization of everything – the financialization of the economy, society, and culture. Within this financialization matrix, the state through its apparatuses plays a key role as well. It is in this context that it is crucial to demystify globalization as linear erosion of national sovereignties. Quite conversely, Leo Panitch (2011) argues, “the states are crucial, and the power of states are crucial to [the] phenomenon of globalization” (p. 79).

Education is a central aspect of the global world, seen now not so much as a social good, but as an economic good tied in with notions of human capital theory, and as crucial for any state to be competitive and to become fully engaged in the knowledge economy. As such, education entails investment costs both for the state and for individuals engaged in obtaining (or “consuming”) education.

The global picture is complex in terms of what and how much and which education sectors are publicly funded. Globally, we find that the schooling sector comprising primary and secondary education (K-12 in United States) in most countries is generally financed by the state since it is seen as important for advancing social aspects, such as equality of opportunity, addressing diversity, and social inclusiveness. Despite this, there is frequent political debate about the extent of that provision, and opponents to public education suggest not only voucher systems but also increasing the number of private or charter schools. Although generally a much smaller sub-sector, alongside publicly funded schools there are also privately funded ones.

In contrast to the K-12 sector, the early childhood education sector is predominantly privately funded, although parents may receive various levels of state subsidy. Higher education funding in much of the world is publicly funded, but students are required to pay increasingly high fees in many states, and there are also an increasing number of private higher education institutions emerging worldwide. Some countries still fund free university education. There is now a considerable discourse about a crisis in publicly funded education. Drawing on Hardt and Negri rationale, Peters and Besley (2006) warn of the need to frame the interface education – economy within a radical different cultural knowledge economy: one that is at grips not just with new dimensions of labor, such as flexibility and mobility, but also with the intricacies with the immateriality of labor, that concomitantly push education for new dynamics of ideological production. Peters and Besley (2006) claim that the postmodernization of production and labor implies unequivocally the postmodernization of the circuits of cultural and economic production and labor, unleashing new demands for education and educators.

However, education remains the prime institutional mechanism for the generation and transmission of values, culture, and knowledge. It has long been considered a vehicle for social mobility, for social cohesiveness, and for social equality, but it has been well and truly financialized. Education is also the vehicle for social transformation, leading to a more just and democratic society. This is a multifaceted and as yet incomplete process that has affected source of funding of education at all levels, particularly with the rise of private learning institutions and the financialization of student loans. The concept of public education accordingly has undergone a profound transformation, and it is unlikely to ever be the same again. Such discussions have opened critical avenues for a serious debate of how public is public education. Such debate is crucial at a time when the attempts for a global uniformity at all costs – so visible in most recent conservative educational policies, such as the Common Core – not only mask eugenic claims, but also place education at the center of rebooting new processes of mankind’s ideological revolution (Paraskeva and Torres Santome 2012).

Some five years after the crisis, the effects are lingering and some would argue that the structural issues that brought about the crisis have not disappeared but are inherent to the system. The stability and fairness of the world financial system is seen as one of the elements of global order, only recently integrating classical civilizations and regional blocs, especially China, India, and most countries of the Middle East, into a system poised between the old Westphalian order and the relatively new American-styled democratic order. A stable financial system, along with international rule of law, state sovereignty, and the national-state system, would seem to be a condition for peace and prosperity, yet the prevailing world order, if we can call it that, seems to be giving way to regional blocs that are sometimes based on religious belief rather than a scientific or rational outlook with the rise of movements and non-state actors. In this uncertain climate, world financial stability is a prerequisite for world order, and such stability implies a fair and neutral set of international controls, standards, and lawful regulation. But, in the present circumstances, it seems precarious.