The Impact of Neoliberal Policies on Education in California

March, 2012

This text was meant to be delivered at a teach in at the State Building in San Francisco on March 1, 2012, as part of the Occupy Education National Day of Action. (Instead, this happened: < >.)

To understand what it means to “occupy education” in 2012, we can to look to the recent history of school occupations. Arguably, the issues and tactics of Occupy Wall Street where first put forward by students. Youth have the biggest stake in this economic crisis where the upwards redistribution of wealth is combined with a push for austerity that targets education and social services.

In September of 2009, in protest of budget cuts, students at UC Santa Cruz occupied the graduate student commons. This is two years before Occupy Wall Street, about the same time as Iran’s “Green Revolution,” also largely a youthful movement. It is a year before the Arab Spring: in December 2010, Mohammed Bouazizi , a recent college graduate, burned himself to death in protest of police harassment and poor prospects, setting off a wave of protest that cascaded across 17 countries in the middle east.

So the Santa Cruz students are not alone in their youthful outrage and indignation. They were inspired by the Greek students that rose up in the prior year, and by students at the New School who did the same. Soon after, students at UC Berkeley also occupied a building. And then the revolt spread to many campus across both the UC and CSU systems and they continued over the following year. Last year, the impulse to occupy campus re-emerged, now under the banner of Occupy as a national movement.

Youth all over the world are the ones leading the struggle, and we should pay attention to how and why. Paul Mason has argued that what we are seeing is a new “sociological type”: the graduate with no future. Higher education is more and more accessible, and yet the prospects for graduates are less and less positive. Youth unemployment across the middle east is about 20% and it’s just about that high in the US as well. The sacrifice required in order to get an education is no longer necessarily rewarded with upward mobility. Frustrated youth are networked creatures, so their grievances and tactics of resistance quickly spread as digital memes. Mason argues that there is something like an internet enabled international youth culture. So where oppositional institutions like unions and parties are weak or non-existent, youth invent and transmit rebellion for themselves and to each other.

At Santa Cruz, the students cited as the reason for their action, California’s broken promise of a free public college set out in the 1960 California Master Plan for Higher Education. This plan codified the three-tier system of community colleges, Cal State, and University of California. All of them were meant to be free. But at UC in 2009, they faced a 30% year-over-year fee increase to more than $10,000 a year, and they took action.

How did we go from free public higher education to a system so expensive it requires crippling levels of student debt? If education is still a public good, why have we shifted the burden of paying for it to youth­ who have to mortgage their future in order to learn? And why have we started to ration education?  Enrollment has been cut across the system: the 2010 school year saw drops of 68,000 students at community colleges, 20,000 at the CSUs.

The Santa Cruz students suggested the answer when they wrote in their statement of grievance: “The university is being run like a corporation.” That actually explains a lot: Why executives and managers get 10% raises in years when teaching faculty are furloughed and get 10% pay cuts. Why at UC more and more undergraduate teaching is done by poorly compensated Graduate Students; Why part time lecturers, who earn much less (about 40% less) than professors and have little security of employment, have replaced much of the full time faculty at all public campuses. (In the 80’s 75% of CSU courses where taught be tenured faculty, now it’s only 50%.);

These are all specific changes that are consistent with the business practices of corporations more generally: they squeeze more out of employees and shift compensation to the top. But more importantly, they impose a corporate business model on an institution that had most successfully been run as something else: a public good.


The proper name for this impulse to make everything a business, to explain everything in terms of markets, to make everything once public now private, is “neoliberalism.” The “liberal” here refers to classical libertarian economics of the Adam Smith variety, of the Invisible Hand of the market, that is, of the 18th Century. Neoliberalism emphasizes the importance of free markets and insists despite all evidence to the contrary, market solutions are the definitive answer to every challenge and crisis. This way of thinking is associated with the economists, including famously Milton Friedman, of the Chicago School. They gained influence under Reagan and Thatcher. And a range of their policy changes carried out in the US under both Republican and Democratic regimes drastically altered the distribution of wealth in this country.

Keynesianism had ruled economic policy since the depression when it saved capitalism from itself; government intervention in markets and monetary policy as well as public sector spending was seen to compensate for the problems inherent to capitalist economies. But, the economic crises of the 1970’s gave Chicago School economists an opening to advocate for the abandonment of Keynesian policies and for the implementation of a range of alternative measures: restriction of public spending (except on defense), lower taxes, privatization of state enterprises (like prisons and hospitals and schools), deregulation, de-unionization, and financialization (that is, a turn away from industry and manufacture to pure market speculation, especially with highly abstract derivative instruments).  

From our vantage point at the end of 30 years of this radical experiment, we can see that it was a miserable failure. All our actions in Occupy are attempts to call attention to this fact.

Robert Reich, published an info graphic in the New York times which brings our situation into sharp focus. It contrasts two roughly 30 year periods: The Great Prosperity from 1947 to 1979 and The Great Regression from 1980 to 2009. After WWII, productivity rose steeply so that by 1979 it had increased 119% and worker compensation just about kept pace. But in the next period, when neoliberal policy was instituted, although productivity increased almost as steeply, to 80% over 30 years, wages were stagnant increasing only 8% over the entire period. Obviously, all that productivity didn’t disappear, it just went to the wealthy instead of to the workers.  

In the period of prosperity, income gains were spread across all income brackets, but in the last 30 years, the income of the top fifth grew 55% while those in the bottom fifth lost 4%. So now we have the same sort of income inequality as in the roaring twenties: the 1% have a quarter of all wealth. Meanwhile average household debt now exceeds disposable income for the first time in history and it takes two workers instead of one per household to get by. It’s not just that the result is impoverishment, it’s that in order to compensate for the shift of income and wealth to the top 1%, everyone else must borrow and work more.

Various aspects of the neoliberal program interlock in a mutually reinforcing system. The creation of crisis is paired with the management of crisis, and each stage justifies the next and completes its effect of transferring wealth upwards. David Harvey has written that there actually has been very little real economic growth in the period of neo-liberal dominance; the new wealth of the 1% comes from 99%.


The present economic crisis, as we well know, has its roots in financialization – in the collapse of a speculative housing bubble, fueled by risky loans, and the fraudulent packaging of derivative securities based on them. The economic clout of wall street bought off regulators and rating agencies. So through action, influence, and criminality, Wall Street did this themselves and to us, and they profited greatly a along the way. But through the same political power that allowed them to create the crisis, they engineered, its solution which involved raiding the public piggy bank to recuperate the private losses. Rich financers continued to get obscene bonuses out of public monies, while the public suffered the depredations of a failing economy: lost value in retirement savings and pensions, high rates of unemployment for extended periods of time, high rates of home foreclosures, and increases in homelessness and poverty.

For neoliberalism, every crisis is also an opportunity. Even though monetary policy made capital cheap, the captains of industry essentially went on strike refusing to commit resources to new productive investments. By withholding investment they would gain more in the downward pressure on wages than by immediate profits from production. By taking back homes they would gain more than by renegotiating mortgages. But most importantly for education, the deepening of the crisis provides a justification to impose the whole raft of neoliberal policies on schools, shifting the responsibility for education from the public to the students, and at the same time remaking education into a profit center.

Lower Taxes

The claim is put forward that in order to recover from crisis, corporations and wealthy “job creators” need to be sheltered from taxation. This is a kind of doubling down on the ultimatum of the corporate strike. Unless they get free money and unless they get lower taxes, they won’t put their resources to work for the economy. And accordingly, government revenue suffers, both as production declines, and as tax policy is made to be even more favorable to corporations and the wealthy. Corporations got what they wanted, but they still haven’t responded with significant increases in spending or hiring.

The biggest change to California state revenue happened back in 1978 as the result of Proposition 13, which limited property tax levies that had been a major revenue base for education. Property tax revenue dropped by 57%. This is the beginning of the tax-revolt wave which swept the nation – it was perhaps the opening salvo of the neoliberal assault. Prop 13 also made it almost impossible to raise taxes by requiring a 2/3 voter approval for tax increases. Californians have been struggling with public funding ever since.

In 2001, the combination of deregulation and energy speculation cost the state tens of billions of dollars in high priced emergency energy because the markets were manipulated by Enron and 23 other Texas corporations. At about the same time, under the governor Gray Davis, tax cuts and license fee reductions were made. Revenues were still up because it was during the dot-com boom years. But after 9/11 and the dot-com bust, revenue fell steeply and deficits mounted. Education budgets were cut modestly in the subsequent years, but then recovered starting in 2004.

The point to be remembered is that the tax policies that are now in place make public financing of education extremely sensitive to economic conditions. Every economic downturn is the occasion for cutbacks and restructuring. Recessions happen every few years as part of the normal economic cycle, and the machinations of corporate criminals like Enron are perennial dangers. So there will always be ample opportunity for proponents of the neoliberal agenda to intervene.

Short of overthrowing capitalism, fighting the precariousness of educational funding means changing tax structures. That is what efforts like the “millionaires tax” attempts to do by raising taxes on the wealthy and earmarking revenues for education and other social services. But note that the two competing initiative measures increase taxes on everyone, not just the rich and expire in a few years, thus leaving us vulnerable as the next inevitable crisis appears.

Restriction Of Public Spending

So once the precariousness of revenue and the precipitation of crisis are in place, things progress to austerity. Within a neoliberal framework the restriction of public spending is a goal anyways; this pressure is constant. In a crisis, with revenues dwindling, it is argued that there is no choice but to have privatizations, cut backs in services, and take backs from public employees. At a time of crisis there is less resistance since the ideas are  proposed as a solutions to the problem not just the same old party platform.

As of this time last year $20 billion had been cut from California schools budgets and 30,000 educators  had been laid off since the start of this recession. $2-3 Billion more in cuts followed. Schools have closed, class sizes increased, there were teacher and staff furloughs and pay cuts, enrollments in higher education have shrunk, available courses declined, tuitions increased, and student debt load has ballooned.

All California higher education was intended to be free of tuition based on the 1960 master plan. But over the years, small fees were instituted that were meant to be for non-instructional services. From 1979 to today, those fees have exploded to the point that they represent significant payments of actual tuition. Community colleges had no fees until 1979 and now they are up to $864 a year for a full time student. In 1979, CSU fees were $144 per year, now they are $5,472. UC fees went from $320 a year in 1968 to the current $13,200. The last few years have seen year-over-year increases in the range of 20% and 30%. Across the US, the average cost of all higher education (public and private) in the last decade increased at a rate roughly 3 times the rate of inflation. So this is not simply a result of inflation.

Schools are now recruiting more out of state and international students who pay significantly higher tuitions. In 2011, UC had a 14.4% increase in out of state enrollments and a 4.6% increase in international students. The tradeoff for increased revenue is less space for in-state students and increased competition to for acceptance. 

Grant monies are not keeping up with increased costs. Federal Pell grant amounts have been cut and eligibility rules have been tightened. Federal aid as grants is slowly being replaced by federal loans. So students work and students borrow.

In 1970 full time undergrads worked an average of six hours a week. By 2000 this rose to 11 hours. Since these figures include non-working students they are missleading. The average working student in 2000 labored for 22 hours a week. Academic performance suffers when students work more than 10 hours a week. In recent years, the student employment rates have actually dropped slightly, but this is likely attributable to the lack of jobs.  

With students working as much as they can, and more than is good for them already, the only remaining funding source is loans. The result is unprecedented levels of student debt. There are some that liken the education boom to the now collapsed housing boom fueled by the easy availability of loans. Again it is the banks that stand to gain. Predatory loan practices are rife within educational lending. Certainly, many students don’t fully understand consequences of the loan documents they sign, they are unprepared to negotiate with banks, and really have little choice if they want to stay in school. They tend to accept whatever banks and school advisors give them. And recent changes in the law have exempted student loans from bankruptcy protection, truth in lending rules, fair debt collection rules, and usury rules. Students have no protection and no shelter in the case of deceptive practices or unforeseen circumstances like sudden illness.  

The average student debt burden at graduation was only $2,000 in 1984, by 2010 it reached $25,250. Since this is an average, there are many students graduating with much higher debt burdens. This is a boon for banks, but it is disaster for students entering the workplace during a recession with youth unemployment rates at record highs. Loan default rates are on the rise. The Department of Education reports that lifetime default rates are between 19 and 31%.

Students find themselves starting their work life with unmanageable levels of debt – debt they will never be able to afford to pay off because the payments would take too large a portion of their income to allow them to have a decent life. They are put in a precarious situation, where if anything goes wrong, the debt can rapidly increase because of fees and penalties.

But this isn’t a problem for the banks. Sallie Mae, the largest purveyor of Student loans, has bragged that its earnings from defaulted loans are responsible for the greater share of their growth.  Fee income went up 228% from 2000 to 2005. Just as in the foreclosure crisis, banks are motivated to default on loans because through fees, they stand to increase their profits.

Private loans make up a greater and greater proportion of loans: 5% of students had them in 2003, 14% in 2007. Private loans are more likely to have high interest rates and large penalties for lack of payment that quickly can double and triple the amount owed. Many students will be paying these banks the rest of their lives – becoming virtual slaves, indentured to the banking industry, and unable to access credit for other purposes like buying a car or a home.

Privatization Of State Enterprises

The privatization of debt has multiple causes. One is the inadequate supply of public monies which pushes students to private lenders. But there is also direct privatization: Sallie Mae was originally a government sponsored enterprise but though its loans remain federally insured, its privatization was finalized in 2004. So now, risk is the government’s responsibility, and profits are doled out to its executives and shareholders.

Privatization of loans is only the tip of the iceberg. In K-12 education there is a persistent push, so far unsuccessful in California, for vouchers to allow public money to be used for private schools. Private takeovers of public schools in the form of charter schools have succeeded. First legalized in the early 90s, there are now nearly 700 charter schools, representing 7% of K-12 schools. Studies of student performance at these schools remains inconclusive. But it is certain that more public education spending finds its way into the coffers of private corporations. Bill Gates and the WalMart/Walton family are some of the biggest investors in charter schools. And even when these schools are not run by for-profit corporations, they are exempt from union mandates and serve to de-unionize education and put downward pressure on teacher wages.

In higher education, there have always been public institutions, private non-profit institutions and private for profit institutions. But after a 1992 regulation change allowing federal aid to students at for-profit schools, their growth exploded. These institutions tend to have higher costs, lower levels of aid, lower levels of graduation, but the highest levels of student indebtedness.

At public institutions there are other mechanisms of privatization. As budgets have been slashed at UC, there is greater reliance on private funding for research. Rather than understanding primary research as an end in itself, a neoliberal understanding imposes market forces to determine the monetary value of scholarship. This means researchers must essentially prostitute themselves for grants rather than rely on general funds for their research. As a result, research that directly benefits the bottom line of large corporations will be more likely to receive funding. Corporate interests come to control research and curricular decisions because they fund large portions of school budgets and aren’t inhibited from imposing a quid pro quo. Applied sciences tend to benefit while the humanities languish. Public schools become publicly subsidized private labs for big business. For example, recently at UC Berkeley, BP of gulf oil spill fame gave $500 million for research on biofuels.

All this raises questions about the purpose of higher education. The withering of the humanities is a blow to the idea of a liberal arts education, focused on studying a broad range of subjects across both scientific, historical, and literary disciplines. Rather than aiming to develop well rounded, articulate and critical citizens, there is a vocationalization of education: a focus on work skills. The only value is the use of knowledge in the workplace and the marketplace. This depoliticized and instrumentalized notion of education produces unthinking apolitical and unhappy worker drones.

It is no coincidence that right wing stalwarts like Rick Santorum have recently disparaged the idea of higher education all together. Cynically using the lofty rhetoric of the “dignity of labor” he suggests that anything beyond vocational school is “snobbery”. It is just the start of a push back against the growing movement of students who want more than that: who want to learn in order to have a richer intellectual life, who demand fulfilling and meaningful work after graduation, and who will not be made debt slaves as a condition of their education.


We must return to the values of the 1960 Master Plan and make all higher education tuition free. We must fully fund education through taxing the rich. We must cancel and forgive crushing student debt, and we must protect students from predatory lending practices by restoring bankruptcy protection and regulation of the student loan industry. 

The logic of neoliberalism excludes from debate all considerations that can’t be quantified, that can’t be measured against monetary value, and that can’t be decided outside of market mechanisms. But education is a process of learning that properly exists as a means of intellectual expansion and the attainment of human potential. It should be useful not just for work, but for citizenship, community, creativity, happiness, and life more broadly. Maximization of profit is not the ultimate value, it is not the measure of the mind and it is not the solution to every problem. We cannot let neoliberalism transform school into a factory for the production of useful idiots. And we cannot let neoliberalism transform school into a system for the extraction of profit at the expense of freedom. We ought to end the failed experiment of the last 30 years now. Neoliberalism is enslavement to the market. But the best things in life are free.