The Financialization of The American Mind

Photo via Unsplash / Changbok Ko

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America wants to outcompete China. It wants the highest semiconductor engineers, AI researchers, and a workforce capable of rebuilding its domestic industry. That seems to be the sentiment of both recent left- and right-wing administrations, and not without merit. But what happens when the institutions responsible for producing that workforce start to become more valuable as financial assets rather than for their intended use: places of education? 

The growing financialization of American higher education did not happen without reason. Over the past several decades, a greater share of the cost of public education has shifted onto students and their families. This has left universities increasingly reliant on tuition and other non-governmental sources of revenue. In response, colleges and universities have had greater incentives to compete financially, sometimes in ways that do not serve their educational purpose. The irony is that America increasingly treats education as a private investment while relying on universities to produce the skilled workforce needed for its industrial future. 

This shift in funding has changed the way universities operate. When tuition becomes a more important source of revenue, attracting students becomes more than just an educational responsibility for universities; it is now a financial necessity. A study published in the American Economic Journal found that a 10% reduction in state funding was associated with a 16% increase in international undergraduate student enrollment at public research universities, indicating their efforts to make up lost revenue. There is nothing inherently wrong with a university looking for financial stability. The problem is when decisions about enrollment, spending, and priorities are shaped more by a university’s priority to generate revenue than by its contribution to education. At this point, universities look like a business, even though they are technically still nonprofit institutions. 

This is not a new concept. More than a century ago, economist Thorstein Veblen criticized the growing influence of business interests on American universities. He was able to foresee our future when he questioned institutions dedicated to knowledge operating based on principles of business. His criticism raised another important question: what happens to the fields of knowledge that cannot justify themselves financially? In the short term, research offers little to no commercial or monetary value, and under financial pressure, universities have a reason to favor programs and activities that provide more immediate returns. 

The real point of this column is to explain that the consequences of this go well beyond just the university. America’s industry depends on more than just building factories; it depends on the scientific discoveries and an educated workforce that make those industries possible. Universities are essential for this process; they perform almost half of the country’s basic research. This research can form the foundation of entirely new industries. However, their contribution isn’t just scientific discovery. Universities are responsible for developing the knowledge and skills of the people who will eventually work in those industries. If universities begin to prioritize financial performance over the quality of education they provide, America risks producing graduates who are less prepared to stay afloat in an economy that is based on technological advancement. The danger is not just what universities might stop discovering, but what their students might never learn. 

Of course, universities can’t operate without money. Things like research laboratories, professors, and other academic resources all do require major financial investment. There is also the argument that financial competition encourages universities to perform more efficiently and respond to the demands of the job market. But efficiency towards what end? A university that attracts more students and generates more revenue is not necessarily producing better educated graduates. The problem is not that universities have financial interests—it’s that those interests begin to determine what that university employs on its campus. If education in America is judged by its financial returns, we risk losing sight of the larger purpose it is intended to serve. 

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This article was edited by Maahi Kumar and Peter Leyba.