“Don’t waste any more time or energy on the presidential election than it takes to get to your polling station and pull a lever for a third-party candidate-—just enough to register your obstruction and defiance—and then get back out onto the street. That is where the question of real power is being decided.” Chris Hedges, May 2012

Runway capitalism is moving unrelentingly towards sociopolitical-environmental collapse—cheered on by a two-headed single party machine known as US Congress. Activists, who see the coming disasters as catastrophic, are seeking revolutionary change through non-cooperation, and occupy disruptions. Yet, many are the still delusional hopefuls desperately fumbling with traditional responses; including “Kum ba yah” marches, and the futile support for progressive left-leaning candidates seeking positions of influence inside the Washington beltway.

Do we understand that habeas corpus is no longer a legal protection in the US or that the US president can torture and kill American citizens, let along anyone in the world? How can we ignore the inconvenient truths of warrentless wire taps and electronic monitoring for everyone? Why do we tolerate that US-NATO forces killing people in over one hundred countries in the world using special service operatives, private assassins and drones—a million civilians deaths in Iraq alone? How can we be so blind as not to see our corporate media is a propaganda fog machine for the one percent? These questions, reflecting the reality of America today, are so far from the values of our traditions that accepting any aspect of authority from Washington DC is a sacrilege to our honor. We are in desperate times.

In Congress, wealth begets membership, and wealth is the reward for correct action. The members in the House and Senate have a collective net worth of $2.04 billion, up from $1.65 billion, in 2008. While at the same time, Americans’ household net worth has continued to declined and the number of people living in poverty has risen for the fifth year in a row.

The American Congress is in reality an artificial organization serving as cheerleader to the transnational corporate class of the world. Congress offers its members little more than a transitional path into the good life of corporate affluence as long as the members remain loyal to party discipline. Our legitimate electoral process has been completely usurped by the Supreme Court ruling that a corporation’s free speech rights allow unlimited campaign spending, and congressional lobbying knows no bounds. Any candidate willing to serve in the Democrat or Republican parties in the US congress today, even as a gadfly of resistance, is stepping beyond the pale of constitutional government.

Even if a Progressive Democrat of America—Moves On into the congressional circle, the magnitude of compromise demanded makes effective action impossible other than occasional symbolic votes of resistance. Those stepping out of party lines will invariably result in orchestrated opposition during the next selection cycle—Just ask Cynthia McKinney.

Reform is not an option. The only action possible is a complete and total return to the social justice values of our US Constitution and the Bill of rights. We cannot allow extrajudicial killings, privacy invasions into our homes, and police state interceptions in the commons. We cannot allow global capitalism to continue to kill and impoverish billions of people and destroy the planet

Protecting and even rewriting our Constitution and our Bill of Rights will require revolutionary acts. We must retool our elections and eliminate/ignore the dark clouds of corporate media. A mass movement at this level requires grass roots action by a core of at least ten percent of our population. Getting one out of ten people actively involved is not at all impossible; this is where our traditional values meet human rights. We are a people of hope that only need to overcome our fears and find the voice of our values by using radical democracy for human betterment for all.

The right to vote is a long held value. We am often asked, “Why waste your vote on an independent third party candidate, they will never has a chance to win.” Can voting for a candidate who reflects your own political values and beliefs be a wasted vote? It seems that voting for your true beliefs is a self-actualizing act, and compromising one’s values to pick the lesser of two evils is self-alienating. Therefore, we urge all to continue to vote, but find candidates outside of the two party oligopoly. Maybe someday, self-actualized voting will be fashionable.

Peter Phillips is a professor of political sociology and social movements at Sonoma State University. He is the president of Media Freedom Foundation/Project Censored, and co-host with Mickey Huff of the weekly Project Censored Show on KPFA.

Part I: http://www.projectcensored.org/top-stories/articles/occupied-sonoma-state-university-no-billionaire-left-behind-and-the-sordid-tale-of-the-financialization-and-corporatization-of-one-california-state-university/

This section, part two, of a four part series on Sonoma State University (SSU or “the college”) is more abstract, a bit more theoretical.  It has to be; in order to understand the financialization of the university, its corporatization and the dire consequences all of this poses to campus life we must critically understand the conceptual dimensions of financialization itself.

As I mentioned in the first part of this series, SSU has been quite literally turned over to the exigencies of the private capital market and Wall Street bond underwriters with reckless abandonment.  In this scenario, the campus can be understood as a ‘borrower’.  SSU has also made a number of questionable loans and investments with its monies, lending more support to the conclusion that SSU is more investment bank than academic institution.  In this case, the university has operated as a ‘lender’.  Operating as a lender, SSU has gambled with both private endowment and public funds and lost pitifully.  Couple this with the fact that more and more students borrow to attend SSU and we can see that debt plays a prominent if not central role in the life of the university and its stakeholders.  It also, as we will see, plays a dominant role in the financial machinations of Wall Street, real estate hucksters and equity firms.

To understand the growing financialization of education, it is crucial to examine ‘financialization’ as a concept and thoroughly define it.  In this case, SSU is a part of the growing financialization of the entire global capitalist economy and although this is no place to engage in an in-depth discussion of capitalism, education, like all institutions, cannot be understood divorced from the economic system that underlies it and which it reflects.

With this in mind, I can only hope the reader will persevere in attempting to develop a more nurtured and systematic approach to an understanding of what has and is transpiring at public institutions of higher education, in this case SSU and the California State University (CSU) system.  Rather than using politics as the lens for critical understanding, we must use economics for as Woodward and Bernstein, the two famous Washington Post reporters once counseled: “Follow the money.”

Defining terminology

The term ‘financialization’ simply speaks to the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies.  For further elaboration see: (http://www.peri.umass.edu/fileadmin/pdf/programs/globalization/financialization/chapter1.pdf).

Specific examples of financialization under capitalism would be worker/citizens who, through a financial contract and instrument such as a mortgage, are able to trade their promise of future work/wages for a home financed by debt.  Similarly, financialization of risk sharing makes the issuance of all kinds of insurance possible, like home, life, automobile and yes, health insurance.  The financialization of the U.S. Government’s promise to pay debt (bonds), make all federal and state deficit spending (debt/deficits) possible, as in the case of SSU.  For the rentier class (those who lend money like banks and Wall Street investment firms), financialization makes profits derived from economic rents a reality.

When we speak specifically about the ‘financialization of education’, we are addressing how financial motives, markets, specific powerful individuals, corporations and financial institutions impact all of public education.  In grades K-12 we can see the financialization of education through the power of private textbook companies, publicly traded companies like K12 Inc., Educational Management Corporations that manage charter schools and that trade on the NY Stock Exchange, testing corporations that also trade on Wall Street, charter schools, charter school construction fueled by venture capital, for-profit services for such thing as school lunch programs and the corporate financial management of public pension funds, to name just a few financial activities.

At the college and university level, we see it in the issuance of debt by Wall Street in the form of bonds to finance massive deficits for capital construction projects.   In the case of SSU, we also see financialization employing university funds to loan millions of dollars to unsavory real estate moguls for questionable land deals in an effort to seek high-yield returns to pay down debt.  SSU also chased high-yield returns and invested in stock that plummeted with the Great Financial Crisis of 2008.  The problem, of course, is that the administration used Endowment funds to chase risky investments.

Some history of financialization

The wave of financialization began in earnest in the 1980s and was permitted through governmental deregulation and when necessary, re-regulation (neo-liberalism).  Deregulation under neo-liberalism has had the effect of transforming the financial system into one of the most central and powerful sectors of redistributive economic activity in the world.

Here in the United States the repeal of the Glass-Steagal Act that permitted Wall Street investment banking firms like Goldman Sachs to gamble with their depositors’ money held in affiliated commercial banks is the most widely known example of financialization, but hardly a solitary one.  As we will see, SSU, even though it is a public institution in name, much like Goldman Sachs it also used money that did not belong to it (taxpayer and private endowments) to gamble on risky investments.

In fact, the entire span of the last 35 years has seen the wholesale deregulation of the entire American economy and the rise of financialization of the economy or what is also known as a Casino economy.  The result has been the growth and rupture of wave after wave of financial asset bubbles washing ashore more and more innocent bodies under the massive weight of its brute force.

Why financialization?

In 2007, John Bellamy Foster, an internationally recognized economist of some repute developed a critical understanding of the concept of financialization as it pertains to the evolution of the capitalist system over the past three decades:

“Changes in capitalism over the last three decades have been commonly characterized using a trio of terms: neo-liberalism, globalization, and financialization. Although a lot has been written on the first two of these, much less attention has been given to the third. Yet, financialization is now increasingly seen as the dominant force in this triad. The financialization of capitalism—the shift in gravity of economic activity from production (and even from much of the growing service sector) to finance—is thus one of the key issues of our time. More than any other phenomenon it raises the question: has capitalism entered a new stage?” (http://monthlyreview.org/2007/04/01/the-financialization-of-capitalism).

We now live in a monopolistic capitalist economy questionably in global descendency, but surely, an economy based more and more on financialization.  The monopoly capitalist economy can be identified as an exclusive system of private production that generates huge surpluses (profits) for a tiny minority of monopolists/oligopolists (the one percent) who are the owners and the chief beneficiaries of the capitalist economic system.  They are aided and abetted by the neo-liberal state (the corporate boardroom) and a coordinating class of politicians who manage the state.  The giant firms strive to achieve the lowest possible costs and this means using the cheapest materials possible and employing cheap labor with little or no environmental regulations. It also means automating entire factories to reduce labor costs.

The crisis of capitalism: stagnation and overproduction

As John Bellamy noted, any understanding of financialization involves comprehending historical capitalist relations of production.  In order to realize and maximize profits, capitalists must invest their surplus/profits into activities that ensure the ever-greater accumulation of more and more surplus (profits) – this means seeking out profit generating and maximizing opportunities.  And this is where the dilemma inherent in the nature of the capitalist system shows itself to be contradictory.

The dilemma the system faces is precisely that capitalist economic conditions of production tend toward increasing stagnation (a slowing down or cessation of economic activity) and overproduction (production in excess of need).  This creates a quandary for the capitalist economic system as a whole; for the same material conditions that give rise to surplus/profits simultaneously create barriers that limit profitable investment due to the dual twins of stagnation and overproduction.

In an effort to understand financialization better, take the following example: presently, corporations are barely able to sell the existing levels of goods they produce to US consumers at prices designed to yield the going rate of profit.  The reason: a fall in consumption due to a fall in consumer demand results in cutbacks in the corporate utilization of productive capacity.  As capitalist/corporations scurry to avoid overproduction and a fall in prices that would threaten their profits, the result is a build-up of excess productive capacity and eventually investment in new capacity must inevitably shrink.  It simply is not profitable for the capitalist to continue to invest in production due to “a crisis of overproduction”.

Currently, 75% of productive capacity (maximum possible output of the economy) is being used in the US while 25% of this capacity lies dormant.  The irrationality of the system means that millions of workers languish with no jobs while one quarter of productive capacity lies quiescent because it is not profitable for the capitalist to invest.

The corporatist’s main solution to the problem of stagnation and overproduction has been, from the 1970s on, to shift and expand the demand for financial products, as opposed to actual productive capacity or real products, as a means of investing capital and maintaining and expanding it.  In other words, capital has looked for more profitable investments in finance than it can find in goods or services production as demand falls, production forced to decrease and personal and public debt rises.  Financialization now represents 40% of the capitalist economy in the U.S. as jobs have been outsourced.  The majority of US citizens are now basically broke and in debt; the domestic production of manufacturing goods and many services have dried up or have been shipped overseas.

On the supply side of this process, financial institutions have stepped forward with a vast array of new monetary instruments for the capitalists to invest in: there are now financial products like futures, mortgages, options, derivatives, hedge funds, student loans, bonds, debt, and the list could go on. The result of these new financial instruments has been skyrocketing financial speculation that has persisted now for decades with frequent bubbles, accompanied by a parallel meteoric rise in private and public debt and eventual collapse.

As public funds continue to dry up for colleges and universities with hardly a trickle remaining, there is now big money to be made by Wall Street through crisis-debt issuance, bond underwriting, debt financing, debt management and the like. The revenue from higher education alone in the US is worth over $400 billion or more (http://www.economywatch.com/world-industries/education-industry.html) making the educational sector extremely attractive to financial hucksters looking to make a profit off the public dole.  The best way to do this is through the issuance of debt.

The growth of debt and the financialization of education

Economist Paul Magdoff, writing in the economic journal Monthly Review, in 2006, made this salient point:

“The divergence between the growth in outstanding debt in the economy and the underlying economic growth is truly astounding. In the 1970s, outstanding debt was about one and a half times the size of the country’s annual economic activity (GDP). By 1985, about the time that they were increasingly focused on the subject, it was twice as large as the GDP. By 2005 total U.S. debt was almost three and a half times the nation’s GDP (see chart 2), and not far from the $44 trillion GDP for the entire world” (http://monthlyreview.org/2006/11/01/the-explosion-of-debt-and-speculation).

That’s just public debt.  Private debt is also skyrocketing with student loan/debt now surpassing $1 trillion dollars, not to mention credit card debt of close to one trillion.  All of this is related to the skyrocketing tuition and fee costs.  We spoke about tuition at SSU in the first part of this article. Tuition in the CSU system has tripled since 2002-03 (http://www.sfgate.com/cgi bin/article.cgi?f=/c/a/2011/11/16/BA2L1M001V.DTL#ixzz1tA1BeJ9o).   Nationally, it is up 45% from August 2009-2010 (http://collegecost.ed.gov/index.aspx?ebe6b8e1edeae8c4cb0bfcea1efeddce9e).

Student loans are a prime example of financialization through debt.  With no jobs awaiting them when they graduate college, student loan debt is not even serviceable, let alone payable (The Bureau of Labor recently reported that only 54.3 percent of adults 18-24 are employed, making it the lowest level of employment since the government began tracking data in 1948).

The financialization of the student loan debt occurs when student loan debt is transformed into asset-backed securities (ABS).  The value and income payments from the ABS’s are ‘collateralized’ (“backed”) by a specified pool of underlying assets.  None of the ABS can be sold individually.  This is why they are sold to large institutional investors.  By ‘pooling’ the assets into ABS, this allows them to be sold to general institutional investors.  This process is called securitization.

Securitization allows the risk of investing in the underlying assets (ABS) to be diversified because each security will represent only a fraction of the total value of the diverse pool of underlying assets.  Asset Backed Securities can include payments from credit cards, auto loans, mortgage loans, royalty payments and even movie revenues (everything is financialized).  As the reader can see, ABS’s are the origin of the sub-prime mortgage fiasco. Like the sub-prime mortgage loans, there is nothing backing the ABS’s except promises to pay.  When the bridge goes down as it did with the sub-prime mortgages, all the ABS that reflect sub-prime mortgages go down as well.  The same will happen with student loan debt.

Student Loan Asset Backed Securities (SLABS) are a major sector of the ABS market. There are more than $400 billion in assets backing various student loan deals that are issued in the market.  SLABS, like the sub-prime loans, are traditionally a favorite for fixed income investors.  This is owed to their high credit quality (as stamped by the crediting agencies like Moodys) and low volatility.  SLABS are now institutionalized as well; they form a regular fixture in all the major institutional investors’ portfolios.

Now that student loan debt has reached a milestone — $1 trillion on April 25, 2012, many investors realize there are many other variables, which affect the timing and realization of cash flows of student loan securities.  One such factor that was not accounted for when investors originally invested in SLABS is the massive student default rates that are sweeping the country.  This coupled with bleak employment opportunities have forecasters already talking about the next financial bubble to burst.  Many financial investment firms boast investment tools for determining the risk of a SLAB and managing them as investments (http://www.educationinvestmentgroup.com/).  Like capital construction debt, the whole sordid affair is big business.

At the same time massive debt and high levels of unemployment constitute the landscape of student lives advertising, selling, buying and managing this debt continues to hold out great promise and profits for the financial institutions involved in dicing them up into little pieces, scattering them with SLABS and selling them.  For example, on July 1, 2012 student loan rates are due to double, from 3.4 to 6.8 percent, all good news for the banks that hold the paper (http://www.washingtonpost.com/business/economy/durbin-targets-private-student-loan-defaults/2012/03/20/gIQA3mtFQS_story.html).

The beauty of the SLABS for investors is that since the debt is non-dischargeable in bankruptcy court, the financial institutions and holders of the SLAB have nothing to worry about; they get paid by taxpayers if students default — a form of direct subsidy or what is referred to as “socialism for the rich”.

A simple Public Records Act Request to SSU should reveal how many students at Sonoma State University are taking out student loans.  Public Record Act Requests take time though, and for the purposes of this article there is no time; one can suspect that many, many SSU students must avail themselves of debt in order to receive an education.  This then leads to another realization: at SSU and at most colleges and universities faculty is paid through student debt; students never tender tuition and fees at one time.  Unless their parents, some loved or benefactor is able to proffer the ‘cash’ up front, many if not most students rely on some form of student debt – Stafford Loans and the like – to pay for tuition which partially constitutes revenue used to pay faculty.

Boiling higher education down into a sickening monetary roux

The notion of college itself is pitched, hocked and marketed just as SLABS, as a mere commodity — ‘an investment in the future’ with a ‘high yield return’ for meager employment purposes.  The stale rhetoric of business permeates the entire enterprise.  Under the neo-liberal regime of financialized capitalism, students are now forced to spend an exorbitant amount of time on their own personal finances — things like applying for grants and student loans; or waiting for notice if a loan has been approved; asking their parents for financial support; arranging promissory notes with financial aid officers or bankers; finding work or looking for a part-time job to ease their debt.  All of this when students are supposed to be engaged in study and attending classes.  The relationship between the institution and the student is now simply an ‘exchange relationship’ and one of unquestionable waste, since nothing is produced but debt for the majority and wealth for a select few.

On the supply side faculty are told that that they need to think about ‘instrumental rationality’.  This would include ‘efficiency savings’ (‘salary savings’) or the need to be concerned with how to best ‘invest in the future growth’ of the school (acceding to privatization).  ‘Knowledge’ is now also viewed as a commodity to be produced for future ‘revenue sources’ (research for private companies).  Then, of course there is the rancid language of competition, which clearly expresses the immoral underpinnings of the entire enterprise like, ‘competing with China’, or ‘competing with other countries in the world’.

All this sophistry revolves around finance and profits for a select few, not opportunities for human development for the majority of citizen/workers.  So at SSU, one will find little discussion from the president or his administrative cohorts on issues such as academic excellence, comprehensive teaching, critical learning or the contemplative life and educating a public citizenry.*

In the summer of 2009, speaking about how “universities are doing in this highly uncertain, fiscally-brutal environment”, GlobalHigherEd, an online journal, quoted Moody’s, one of the two big global financial rating agencies.  Moody’s chose the following language to speak about what have now become investment opportunities in public education for private capital:

“…universities are proving to be appealing investments for government stimulus efforts due to the sector’s stabilizing, countercyclical nature in the short term as well as its potential to stimulate long term economic growth” (http://globalhighered.wordpress.com/2009/07/07/moodys-special-comment-report-on-the-global-recession/).

Moody’s argument: as the economy plummets for the 99% an increasing amount of people are more likely to consider “investing” in higher education.  From Moody’s point of view they do so not necessarily to become educated, but as a means of waiting out recession, positioning themselves for the capitalist employment market if, and when, it revives.  In other words:

“For Moody’s this all means a possible ‘tail-wind’ for universities as student demand increases — particularly those who have an access oriented agenda” (ibid).

Moody’s even states in their 2009 report, Global Recession and Universities: Funding Strains to Keep Up with Rising Demand  that:

“the global public university’s’ ‘credit quality’ is “steadier” than that of private universities” (ibid).

All of this is paradoxical and dialectical for Moody’s also noted in their report that in order to weather the storm, public universities throughout the world were going to have to become more ‘private’.  This is because, in Moody’s judgment, they will face government disinvestment due to austerity or budget cuts and thus the public universities will have to augment their budgets by wooing private funds.  Moody’s couldn’t be closer to the truth.

When we look at institutions of higher education we can find financialization in almost every corner of their budgets.  For the purposes of this article we will limit our discussion to the most salient and look at three prominent financialization issues that are now ravaging the SSU campus.

I.      The issuance and service of debt in the form of bonds, specifically related to unfunded massive capital construction projects;

II.    The corporatization of SSU’s governing process and the financialization of accounting;

III.   Poor, unwise and irresponsible, if not illegal, investments in real estate and the stock market.

We start with the service of debt: last year’s 2011A bonds issued as debt by the California State Treasurer on behalf of the entire CSU system.

I.

Sonoma State University Debt: how CSU debt pays big time for Wall Street

The fourteenth issue of The Chronicle (see part one for a full explanation of the origins of the Chronicle), dated December 2009, addresses the increasing financialization of SSU with the resultant wholesale abandonment of its academic mission.  The issue is debt:

“Even considering General Fund and enrollment cuts, student fees increases [sic], and employee compensation decreases, we believe the administration’s management of our burgeoning debt is the single most pressing problem facing SSU” (Chronicle XIV: Debt 101 Revisited, December 2009).

The report continues on observing:

“Since 2002, SSU has taken on over $318M in debt (including interest) in the name of its auxiliaries.  Debt payments total $11M a year for the next 20 to 34 years. And, if all goes well for the administration’s plans, they will take on an additional $122M in debt principal, not including interest, over the next five years (ibid).

Explaining recent figures of SSU debt is the following from Robert Karlsrud:

“SSU’s long term debt was $159,236,392.  Now you have to add the $60,570,000 for the Student Center for a total of $219,806,392. Principal plus interest 2012 through 2040 is $286,248,500 plus $126,828,240 for the Student Center for a grand total of $413,076,740.

Last year the interest payment came to a little over $7M while the principal payment was $4M.  So that is $11M before the Student Center is figured in.

The debt is held in System-wide Revenue Bonds so that means (as far as we can tell) that the public owns the debt” (private e-mail from Robert Karlsrud, 3/26/2012 9:40:26 A.M. Pacific Daylight Time).

Add in the tens of millions of debt for the new Student Center due to be open in late 2012  and SSU’s debt payments will have nearly tripled since 2007.  Servicing the debt is now the mission of the college, not education.

In 2008, arguing that the ‘crisis’ at SSU is self-imposed and not result of the state budget, the Chronicle noted that the Chief Financial Officer (CFO) of SSU admitted to gross levels of debt:

“The CFO recently confessed that from a “debt perspective,” SSU is “highly leveraged for a campus of our size”. One can only wish that the CFO had followed the sage advice given by Mr. Micawber to young David Copperfield: “Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, – and in short you are forever floored” (Chronicle IX: Debt 101, April 3, 2008).

The debt crisis facing the college has no grown to arguably unmitigated levels.  The current state of the budget can be seen in the machinations of persistent tuition and fee hikes that have permeated the crisis.  Yet student fee increases and auxiliary revenues do not go to teaching and learning, instead they are pledged to debt service and debt reserve. **

Rubber stamping decades of capital construction projects and hurling the university into debt is now having the unintended consequences, or blowback, of forcing the university to scale back its academic mission to educate students.  As we will see in part three of this series, students cannot get in the institution (admissions) and they cannot get out (graduation) due to unbearable costs and lack of accessible classes.***

California issues bonds for the CSU system

On November 1, 2011 the amount offered in public bond purchases by the State of California for the CSU system was $429,855,000. The proceeds of the Series 2011A Bonds that were floated as debt were designed to be used solely for the purpose of financing and refinancing the acquisition, construction, improvement and renovation of certain facilities of CSU.

Specifically, the 2011A Bonds were issued to be used for campus student housing, student unions, parking, student health facilities, continued education facilities, and facilities of certain auxiliary organizations and other entities throughout the CSU system.  The 2011A bond issuance amount was problematic for it was above and beyond the already $3,179,768,000 aggregate principal amount of revenue bonds that were then currently outstanding (http://www.calstate.edu/FT/sysrevbnds/2011A-Official-Statement.pdf).

To pay the cost of interest (the bonds are 25 year and 30 years in maturity and pay 4.52% and 4.60% respectively) the CSU trustees indicated that:

“….revenues pledged under the System Wide Financing Program generally include student housing fees, student union fees, parking fees, health center facility fees and continuing education fees derived from substantially all of the housing, parking, student union, student center, student health center and continuing education facilities owned or operated by the Board and other projects and revenues designated by the Board for inclusion in the Systemwide Financing Program” (ibid).

The debt service for the bond issuances must be paid for at SSU by filling the dormitories and raising revenues from meal plans.  Dormitory revenue has been pledged to bond issuance.  The campus wants freshmen who are then also required to purchase a full-meal plan when the rent dorms. As Chronicle authors noted:

“Full dorms and meal plans generate revenue. No one should doubt that at SSU debt drives curriculum” (The Chronicle, Chronicle XXII: State of the University, 2012, March 19, 2012).

Here is the way the bond process works.  Once the Series 2011A Bonds were issued in November of 2011, they were purchased by an underwriting group represented by Barclays Capital Inc. The bonds were subsequently purchased directly from the California State Treasurer who was authorized by the Board of Trustees for CSU to issue and sell the bonds to investors.  The underwriters purchased the Series 2011A Bonds at a price of $473,980,541.72.  The price represents the principal amount of the Series 2011A Bonds, plus a net original issue premium of $46,206,768.55, less an Underwriters’ discount of $2,081,226.83.

As the underwriters and sellers of the bonds, the usual suspect Wall Street firms such as Merrill Lynch, J.P. Morgan, Barclay Bank, and others have entered into selling agreements with still other corporate interests to sell the bonds to institutions and the general public.  Financialization occurs each time the firms sell a bond and take a commission or fee. **

Pledging future projected revenues as collateral for debt is how the CSU system plans to pay investors for the cost of the bonds.  The problem arises when the projected revenues are based on unexamined and erroneous assumptions.  In this case, the bonds would not be able to be paid and the system would go bankrupt.  This is precisely the crisis that SSU faces today with unreasonable projected revenues.

Buying and selling financial instruments, such as government bonds, while skimming off fees is big business for the ‘one percent’.  Municipal bond scams are also one of the great sources of big business by the one percent (http://content.usatoday.com/communities/ondeadline/post/2011/12/calif-financier-is-10th-guilty-plea-in-muni-bond-fraud-case/1).  Investigative journalist, Matt Taibbi recently related the story of how Bank of America rigged municipal bond bids (http://www.democracynow.org/2012/3/22/too_crooked_to_fail_matt_taibbi).

Summary

All SSU requests for approval for construction projects must go through the CSU Chancellor.  The Chancellor has never turned down a request from SSU, even though the 2012 debt service alone ($12 million) will be over one-third of the 2010-11 Academic Affairs fiscal budget for ($34 million) (The Chronicles, XXII, March 19, 2012).

It seems that at SSU, a coordinating-class of highly paid administrators, under the medieval mindset of SSU shot-caller, President Ruben Armiñana and with the collusion of the CSU system, has gambled recklessly and shamelessly with the finances of Sonoma State University.  They appear to have lost. SSU’s income and assets are insufficient to cover the debt. The result could be disastrous for SSU and the CSU system at large.  It is already proving, as we will see, to be catastrophic for students, faculty and workers.

II.

The Corporatization of Sonoma State University

When Ruben Armiñana became president of Sonoma State University in 1992, the road to corporatize the university was already being well paved.  What Armiñana was able to do in his twenty-year tenure, however, was unlike anything his predecessors had envisioned.  Armiñana had a singular vision of the financial development of the campus and this was to hinge on more and more construction.

The rise of a plutocratic coordinating class

For Armiñana to embark on the path of financialization and construction, he realized he would have to employ a supplicant coordinating class of highly paid administrators to set into place the corporate infrastructure. SSU paid 76 administrators over $100,000 in 2010 (http://www.watchsonomacounty.com/2011/07/education/ssu-salary-database-shows-76-earned-over-100000/).

In a sophistic slight-of-hand, Armiñana in an attempt to divert student attention from his unilateral imposition of $150 dollars in student fees for a new Student Center, Armiñana, told students on February 23, 2012 (after construction on the Student Center was already underway) to press Governor Jerry Brown to stop cutting state colleges and to restore funding to the state’s public higher education system (http://www.watchsonomacounty.com/2012/02/sacramento/ssu-president-urges-students-to-press-governor-over-budget-cuts/).

Certainly public education in the state of California needs revenues and these revenues must be raised through a tax on the one percent.  Armiñana is correct.  But this is a red herring in the context of Armiñana’s actions. For what Armiñana is really attempting to do is place blame on the problems at SSU primarily on the state and this is little more than manipulative propaganda.  Armiñana, in a clever move, is hiding behind both a crisis in public education and a catastrophe he helped create at SSU (http://www.watchsonomacounty.com/2012/02/sacramento/ssu-president-urges-students-to-press-governor-over-budget-cuts/).

Take for example Armiñana’s own salary.  Armiñana is one of the highest paid CSU presidents in the 23 member system (http://www.sonomastatestar.com/news/president-armi-). Referring to himself as CEO of a public institution, he is also the highest paid government official in Sonoma County — $341,283 a year.  This is nearly twice what Governor Jerry Brown earns (http://www.examiner.com/article/shared-sacrifice-at-sonoma-state). This is not counting his $60,000 he receives annually as a “housing allowance”, nor the $12,000 annual “car allowance” he receives.  All of this in the face of the fact the SSU faculty is among the lowest paid in the system http://ssufacultyforqualityeducation.org/sonoma-state-university-faculty-are-among-the-lowest-paid-in-the-state-university-system/) and the Sword of Damocles is descending on public education.

Privatizing the organizational structure of SSU

The new mini-investment bank campus would need to shuffle monies from actual education to other categories in an effort to support the myriad capital construction projects. Enron accounting strategies would be needed to move money around like a game of Three Card Monty.

Part of this new corporate infrastructure included the internal privatization of certain ‘auxiliaries’, such as the Sonoma State Enterprises (SSE) and the privatization of Sonoma State University Academic Foundation (SSUAF) that serviced the campus for years.  So, for example, the SSUAF was transformed from an academic support center servicing the students, into an arm of the campus as ‘investment branch of Bank of Sonoma State University’.  The Foundation has no employees. It is managed by Administration & Finance (A&F). President Ruben Armiñana serves as Chairman of the Board.  SSU’s VP for Development serves as President and SSU’s CFO as VP and Chief Operating Officer. According to the Chronicle, in recent years, the Foundation has become a pass-through for the new Green Music Center funding (Chronicle XII, March 19, 2012).  It seems now the Student Union Auxiliary seems to be on the block with (A&F) set to colonize the auxiliary and plunder the funds.  All of this will fold into the new Student Center building (private e-mail from SSU professor, April 23, 2012).

In the Chronicle XII of September 30, 2009, the authors argue that ever increasing debt associated with the Green Music Center and other campus construction projects has sunk one academic and student-oriented program after another.  Money, they concur, is consistently moved from one shell organization to another in an attempt to service debt and capital construction (page 78 and 79 of Chronicle IX: Debt 101, April 3, 2008, shows some of the debt and the SSU auxiliaries involved in servicing and paying it.  This all serves to lend credence to the fact that corporatization of the university turned auxiliaries into institutional branches with murky accounting practices). ****

All of these auxiliaries were all diverted from their original mission of assuring academic excellence, corporatized, packed with cronies and redirected towards the development of the Green Music Center and other coveted capital development projects.

From the perspective of the Chronicle, the college has become an oversized construction site equipped with an accounting office that has seen its responsibilities shift from students and education to Wall Street and capital construction projects.

As reported in Chronicle X:

“A faculty SSE Board member has gone so far as to suggest that votes be by secret ballot as everyone is beholden to the President who chairs the Board. Board members include the President, 2 administrators from A&F and 1 from AA, 3 faculty, 2 staff, 3 students, and 2 community members. Both community members are donors to the Green Music Center (GMC) — one in the $200,000-$500,000 range” (Chronicle X, September 3, 2008).

Conglomerating academic departments and throwing faculty on to the ‘computer rack’ of distance learning have all been floated by Armiñana as cost saving measures in this new corporate model of education that seeks to sacrifice education for physical development.

Summary

In effect, what the corporate reorganization of the college has managed to accomplish is to assure that there is plenty of ready cash for Armiñana’s pet construction projects; meanwhile students suffer the loss of access to the college and classes, access to academic programs, and remain the objects of rapid and regular fee increases.  Ironically, SSU displays the grotesque features of a Latin American dictatorship, as faculty suffers the humiliation of being reduced to low-cost Wal-mart workers with little say in how their workplace and the college are run.

III.

SSU loans money to land developers: speculative investments that fail using endowment funds, the Carianalli loan scandal and chasing high-yield stock returns on Wall Street 

Another way that financialization works at SSU is through university portfolio stock investments.  Stock investments, of course, are part of the financialization process; so too, in the case of SSU, are real estate loans.

The Carianelli real estate loans

Between 1994 and 2007, the SSU Foundation entered into numerous and scandalous real estate loan agreements with Mr. Lem Carianalli, a well-known Sonoma county real estate developer, now bankrupt. Carianalli conveniently sat on the SSU Foundation Board, and the loans he pocketed from SSU came just two days after he resigned from the SSU Foundation Board of Directors.  There is no direct evidence that Carianalli arranged these loans behind the scenes with perhaps other members of the SSU campus or board.  His sudden resignation coming right on the heels of direct loans of $9.6 million from the same SSU Foundation he sat on.  This smells awful fishy.  If nothing else there’s certainly an appearance of impropriety.

Why did the university loan money to shady real estate developers during the heady days of artificially rising real estate prices and plummeting stock prices?  The answer might be that SSU was searching for the highest returns they could get so they could shovel the money into more capital construction projects, or at least pay off the debt for the projects they had taken on.

In Chronicle XV we learn:

“Carianalli stopped making payments to creditors on his $200 million debt this June (2009), he had two outstanding obligations to the Foundation: a $1.25 million loan on 10-acres of vacant rural land near Windsor and an unsecured $232,500 loan.  Foundation executives, who urged approval of the loans, stated on numerous occasions that the loans were secured, although legal documents showed that one was not” (Chronicle XV).

The local county newspaper, The Press Democrat, reporting on the nebulous loans, challenged the University to “offer a complete public accounting of what transpired” regarding all of the $9.6 million in Carianalli loans (the Press Democrat (11-16-09).  The SSU Foundation had become, in the eyes of the Press Democrat and the faculty and staff at the college, little more than a corporate lending arm of the university, analogous to what GMC Finance was to General Motors.  In the case of GMC Finance, the corporate arm earned more money than General Motors Corporation did by manufacturing and selling automobiles.

Similarly, the SSU Foundation was more interested in floating real estate loans than focusing its attention on academic issues and excellence.  The university, for all intents and purposes, had become a corporation on to itself with its own higher echelon of “corporate decision makers” with big yield targets.

On November 20, 2009 the SSU Foundation Executive Committee issued a statement regarding the chronology of the Carianalli loans:

“Foundation executives provided their chronology for the $232,500 loan, which began as a secured $732,500 agreement in 1997. Carianalli repaid $500,000 in January 2005, requested and received a lower interest rate and extended term in 2007. In June 2009, Carianalli stopped making payments to creditors and the Foundation commissioned a title search that found the loan unsecured. When contacted by the Foundation with this information on July 8, 2009, Carianalli responded that it must be an error in County records and fully repaid the loan the next day. Foundation officials “believed” Mr. Carianalli since they had been “unable to locate any documents indicating that it had authorized the release of all parcels securing the loan” (ibid).

Apparently, the Foundation executives, clubby as they were with Carianalli (they shared a seat on the board) evidently chose to put their blind trust in Carianalli rather than the Official County Records that proved the loan unsecured. Even more troubling, they never mentioned any of this during investigations by The Press Democrat, nor was any of this revealed to the public.  Even more amazing, the university, using the Foundation, chose to service all their mortgages through Sonoma Mortgage & Investment Company, a company owned by Lem Carianalli.   Carianalli was astoundingly also allowed to pick his own appraiser for the $1.25 million Windsor loan the Foundation gave him. To top off the whole seedy scenario, the co-author of the appraisal lost her license for forging documents.

Much like the financialization schemes on Wall Street that resulted in bubble bursts and the Great Financial meltdown, the Foundation-Carianalli connection reeks of illicit white collar behavior, procedural problems and questionable loan deals. The university was either so fatigued by this point they were asleep or alternatively, so up to their necks in cronyism they simply didn’t care.  The Foundation didn’t even undertake the due diligence necessary to notice that the appraisal used figures for land within the Windsor town limits that was zoned commercial and urban residential, while the subject property of the loan was unincorporated, zoned rural residential and agricultural (Press Democrat 11-3-09).

As the Chronicle drives home, all of these financial relationships raise some very important questions that to this date have not been answered.  For example, isn’t the goal of an endowment to make safe and secure investments that provide stable income to programs in good and bad years?  And what about the Foundation losses in the stock market?  Was the university gambling with other people’s money?

Chasing high yield returns

Foundation investments, in both the stock market and the Carianalli loans, may once have yielded decent returns for the university.  However, one can’t say this now looking at the $10 million dollars in losses from various faulty investments.  The $1.5 million in bad Carianalli loans actually “pales in relation to the other Foundation’s $8.2 million investment losses for 2008-09” (The Chronicle XV).

Total funds managed by the Foundation have resulted in a decline of assets of nearly $50 million since 2007. The restricted Endowment funds managed by the Foundation, whose earnings are supposed to pay for scholarships and academic programs, has remained stagnant since 2004 and declined in value, all to the programs’ detriment (ibid).

Meanwhile, in the last few years the Foundation’s pooled investments lost 25% while many students are unable to get in the university due to the high cost of tuition, imposed fees and filled classes, and those attending are unable to get out, or graduate, due to a lack of available classes.

The Chronicle noted that in April 2008 the Foundation revised its Investment Policy to a higher risk strategy that included greater asset allocation to International Equity and Alternatives (e.g., Hedged Equity and Real Estate funds).  This was done to chase high interest yields.  Under the Allocation Planning Model, known to SSU’s investment broker, the Common Fund as the “Monte Carlo Simulation,” only 11% of funds were invested in Fixed Income, with the remainder in Equities (SSUAF minutes, 4-08 as quoted in Chronicle XII: A Closer Look at the SSU Foundation, September 30, 2009).

As in any casino, SSU gambled and lost. Chasing high interest yields is the stuff of investment banks, like Goldman Sachs.  Interestingly one of the members of the Foundation also works for BAMN Advisor Services.  The company pegs itself as “prudent and proven”:

“a turnkey asset management provider, BAM provides support and guidance to a nationwide base of advisor-firm-clients who demonstrate a shared commitment to offering investors superior wealth strategy services (http://www.bamadvisorservices.com/main.taf?p=4,1).

Their motto: “Leveraging your time to build a super investment advisor firm” (ibid).  this of course all lends credence to the claim that SSU operates more like Goldman Sachs than it does an institution of higher learning.

The minimum long-term total return objective for the Foundation portfolio is inflation plus 5% (SSUAF audit 2008, pg. 15, as quoted in Chronicle XII: A Closer Look at the SSU Foundation, September 30, 2009).  With the low inflation of recent years a five percent return surely was possible and would have provided a safe harbor for investments at the peak of the mortgage crisis. As the authors of the Chronicle opined, one can only wonder if the aggressive investment strategy pursued by the Armiñana administration was designed to increase unrestricted funds (the difference between the 4% distributed and the 10%+ earned), so that this money could then be allocated as discretionary and used to fund the Green Music Center, spiraling debt or other pet projects.

Summary

The SSU Foundation has morphed into little more than a mini-investment bank for expensive capital construction projects like the Green Music Center.  Its executives seem to see themselves as flashy CEO investment bankers or vulture venture capitalist chasing high-yield returns in a descendant capitalist system.

Surely all of this financial wheeling and dealing and the Foundation’s and president’s entrepreneurial hustling has detracted from SSU’s stated educational mission.

SSU not alone: the financialization of education is a national phenomenon as performing arts centers spring up throughout the nation

The issuance of debt through for capital construction projects (performing arts and music facilities) is a national trend and not simply limited to Sonoma State University, the Green Music Center or the state of California. Costly art and performing centers are sprouting up at campuses throughout the nation, even in face of the rising costs of tuition and fees.  It’s all good for business as bonds are issued by the neo-liberal government, Wall Street buys and sells them for a fee and the actual construction of the projects are contracted out to corporations. Internally, highly paid college administrators are employed to shepherd along the projects, manage paperwork and supervise accounting systems that hide or bury debt.

Here are just some of the high-end capital construction projects scheduled or completed at campuses throughout the US:

• The 85,000 square foot Hylton Performing Arts Center, on the Manassas, Virginia, branch campus of George Mason University, opened last fall at a cost of $46-million. Modeled on 19th-century European opera houses, its 1,121-seat theater includes a copper ceiling and three levels of box seats.  The Arts Center was built by Architecture in New York and Hughes Group Architects (HGA) in Sterling, VA; *****
  • Officials of California State University at Northridge spent 10 years planning a $125-million performing-arts center and figuring out how to pay for it—securing more than $60-million in capital-projects money from the state and raising millions more from gifts and grants. They pleaded with donors and local politicians to make up shortfalls and promised anxious students that none of the money would come from their pockets.  The center was also built by HGA Architects and Engineers, Minneapolis;

• In February of 2011, James Madison University, in Harrisonburg, Virginia, opened its five-venue, $82-million Forbes Center for the Performing Arts. The 175,000 square foot Forbes Center is comprised of the Dorothy Thomasson Estes Center for Theatre and Dance and the Shirley Hanson Roberts Center for Music Performance and houses five state-of-the-art performance venues: the Main stage Theatre (450 seats, the Concert Hall (600 seats), the Recital Hall (196 seats) the Studio Theatre (200 seats) and the Earlynn J. Miller Dance Theatre (200 seats). It also includes classroom, rehearsal and office facilities. Architects for the project were Hanbury Evans Wright Vlattas Co. and the contractor, Nielsen Builders;

Performing Art facilities have opened within the past year or so not just at George Mason University’s branch campus in Manassas, Virginia, but also a $46-million project at Sam Houston State University, Texas, $38.5-million project on Montgomery College’s campus in Silver Spring, Missouri, and a whopping $31-million project has been spent (http://chronicle.com/article/In-an-Era-of-Campus-Cutbacks/126691/).

Summary

The fingers of financialization have managed to reach deeply into SSU’s pockets.  President Ruben Armiñana’s legacy will certainly be up there with that of mysterious Easter Island.  For Easter Island, the theory of the island’s collapse was based on the notion that the minimum number of individuals required to sustain the species was higher than the maximum number of individuals the island could provide for.  At SSU the situation is diabolically the same.  SSU, as an island of debt is unsustainable.  The unfortunate part is that it might have already crossed the Rubicon when it comes to economic recovery.  This could mean a number of things as time goes on from closing the campus to selling seats to the burgeoning Asian upper and middle classes who would like nothing better than to spend some time in beautiful Sonoma county, sipping wine, enjoying the music at the Green Music Center, shaking hands with notable personages like Sanford Weill, former CEO of Citigroup.  One thing is for sure, under the current Sword of Damocles, in the casino economy one can bet that US working class and middle class students will find it harder and harder to get into SSU — unless of course they wish to labor for minimum wage at the Green Music Center under the tutelage of the one percent.  Perhaps it is time to take stock in our peculiar age of descent and begin to think critically before it is too late.

And this brings up one final point: as we will see later in the series, there is also a cultural component to this sordid story of financialization.  The conception and development of these art and performing centers around the nation offer the rich and famous (one percent) unique opportunities to host music, art shows, and wine and dine their friends while students serve figuratively and literally at the Green Music Center as valets and butlers, laboring at minimum wage for the same institution that is driving them into debt — all under the auspices of education.

Part one of this series attempted to look at some of the problems at Sonoma State University with an eye on the capital construction projects that have left the school swaddled in debt.  In this section of the article, I hope the theoretical discussion of financialization and corporatization as they apply to SSU sheds some light on the current predicament the college and its stakeholders find themselves in.  As I write this, faculty at the CSU system will be voting on whether they should authorize a strike.  Decades of productivity increases accompanied by flat salaries and over-crowded classes have left faculty at the entire CSU system with little choice, if they are to protect public education and the students they serve.  The entire public commons is at risk now in the State of California due to the financialization and privatization of education.  From charter schools to the corporatization of education, privatization is a package deal – part of a modern enclosure movement that is cascading over the nation.

In part three of this series, we will look specifically at the ominous consequences of the Ruben Armiñana’s regime of capital construction and corporatization on the SSU faculty, students, classified staff and even more ominously, on the entire fabric of public education in the State of California.  With the Great financial Crisis now in its official fourth year, the chickens have indeed come home to roost for SSU with devastating implications for the college, the CSU system and the nation at large.  The university’s feathered past is no longer sustainable and the dreadful stewardship of Armiñana, along with pawning the college off to Wall Street investors, must come to an end.

References

*For a good, simple discussion of privatization and financialization readers can go to: The Market Ticker, http://market-ticker.org/akcs-www?post=195434

** Writing in March of 2012, authors of the Chronicle address the current budget crisis:

“Budget crises are endemic to SSU. And, of course, it just gets worse each year for students and faculty. The 2011-12 State budget cut the CSU by $650 million, of which $146 million was replaced by tuition increases for fall 2011 and an additional $62 million by enrolling fewer students (Armiñana campus email, 5-20-11). Despite protests, the CSU trustees raised tuition another 12% in July 2011, making tuition 23.2% more expensive than the previous fall and twice the cost of 2007 (SF Chronicle, 7-13-11). In November 2011 at another contested meeting, the CSU trustees narrowly approved another 9% tuition increase of $500 per student per year beginning in fall 2012. Due to shortfalls in State revenue, as anticipated, the CSU’s budget was cut another $100 million in December 2011, for a total of $750 million of which $300 million had been replaced by student tuition increases (CSU Employee update, 12-14-11). The CSU system had saved some federal stimulus money and it was used to cover the $100 million mid-year trigger on a one-time basis (The Chronicle, Chronicle XXII: State of the University, 2012, March 19, 2012).

** Until State appropriations rise and allow for an increase in enrollment, SSU will be in a downward spiral—over enrolling large classes of freshmen to fill the dorms, then unable to field sufficient classes to enable 4-year graduation paths, making more students each year with fewer classes (The Chronicle, Chronicle XXII: State of the University, 2012, March 19, 2012).

*** The list of underwriters for the 2011 A Bonds are:

• Backstrom McCarley Berry & Co., LLC (BMcB), one of the Underwriters, entered into a non-exclusive Master Selling Group Agreement with Mitsubishi UFJ Securities (USA), Inc. and a Broker/Dealer Agreement with Stern Brothers & Co. for the distribution of certain securities offerings, including the Series 2011A Bonds, at the original issue price.  Pursuant to the distribution agreements, Mitsubishi UFJ Securities (USA), Inc. and/or Stern Brothers & Co. will purchase Series 2011A Bonds from BMcB at the original issue price less a negotiated portion of the selling concession applicable to any Series 2011A Bonds that such firm sells.

• Pershing LLC, a subsidiary of The Bank of New York Mellon Corporation, and Barclays Capital Inc., is also one of the underwriters. They will receive a selling concession from Barclays Capital Inc. in connection with its distribution activities relating to the Series 2011A Bonds. In May of 2009, they established an arrangement which enables Pershing LLC to participate as a selling group member and a retail distributor for all new issue municipal bond offerings underwritten by Barclays Capital Inc. This includes the Series 2011A Bonds offered by the state of California.

• J.P. Morgan Securities LLC (JPMS), is another one of the Underwriters.  This company entered into negotiated dealer agreements with each of UBS Financial Services Inc. (UBSFS) and Charles Schwab & Co., Inc. (CS&Co.) for the retail distribution of certain securities offerings at the original issue prices. This includes the California 2011A Bonds and UBSFS and CS&Co. will purchase Series 2011A Bonds from JPMS at the original issue price, less a negotiated portion of the selling concession applicable to any Series 2011A Bonds that such firm sells.

• Prager, Sealy & Co., LLC, one of the other Underwriters, entered into distribution agreements (the Prager Distribution Agreements) with HSBC Securities and HSBC Private Wealth Management Groups for the retail distribution of certain municipal securities offerings.  This includes the California 2011A Bonds and Prager, Sealy & Co., LLC plan to share a portion of its underwriting compensation with respect to the Series 2011A Bonds with HSBC Securities and HSBC Private Wealth Management Groups.

• Stone & Youngberg LLC, yet another of the Underwriters, entered into agreements (the “Stone Distribution Agreements”) with Stifel, Nicolaus & Company and First Republic Securities Company LLC, Member FINRA/SIPC, a subsidiary of First Republic Bank, for retail distribution of certain municipal securities offerings, at the original issue price. If they participate in the sale of the Series 2011A Bonds, they too will share a portion of its underwriting compensation with respect to the Series 2011A Bonds with Stifel, Nicolaus & Company and First Republic Securities Company LLC (http://www.calstate.edu/FT/sysrevbnds/2011A-Official-Statement.pdf).

**** From Chronicle XII: A Closer Look at the SSU Foundation

September 30, 2009:

“In hindsight, it is apparent that the administration moved G&C from the Foundation because this allowed them to implement a creative set of charge-backs that have richly underwritten the 102 President’s wishes. For example, while the Foundation no longer employed G&C workers and had few projects, the G&C program still supplied $507,973 to the Foundation for undisclosed services between 2000 and 2004 (CFO handout: Grants and Contracts Utilization of Indirect Cost Revenue 2000-2001 through 2005-2006). G&C financed Foundation development operations and provided discretionary funds for the President’s use. Meanwhile, G&C distributions to the Schools dwindled, as the G&C program’s returns somehow never met A&F’s “needs” to manage it. In 2003 there were no endowment fund distributions to programs; nevertheless, the Foundation transferred $35,000 to the SSU President and $10,000 to the Provost for “public relations” and an undisclosed sum to A&F for G&C administration (SSUAF minutes, 6-03, pg. 5).”

***** Hughes Group is a major firm that has received contracts to build such college capital construction projects as:

University of Houston Campus Recreation and Wellness Center,
Trinity University – Trinity Center,
University of Virginia – Aquatic & Fitness Center,
University of Illinois at Urbana – Champaign – CRCE,
University of Illinois at Urbana-Champaign – ARC,
George Mason University – Aquatic & Fitness Center,
Georgetown University – Athletic & Recreation Facilities Master Plan,
Georgetown University – Multi-Sport Facility,
University of Texas at Brownsville – Health, Kinesiology and Wellness Center, University of Texas at Arlington – Maverick Center,
Shepherd University – Wellness Center,
Delaware State University – Wellness and Aquatic Center,
Virginia Tech – Additional Recreation, Counseling and Clinical Space,
Young Harris College – Wellness Center,
Coastal Carolina University – Student Recreation and Convocation Center,
University of Delaware Carpenter Sports Building,
Georgetown University Yates Field House,

Kennesaw State University Recreation & Wellness Center

(http://www.hgaarch.com/college.html)

Part I

Introduction

By Danny Weil

In the early part of the 20^th century the fertile valley of Sonoma county was the former stomping grounds of author, Jack London and refuge for Jewish chicken farmers fleeing Russia and Eastern Europe.  Now beautiful Sonoma State University sits at the foot of those majestic cascading mountains nestled in the lap of bucolic wine country.  The institute of higher learning is seated on the far eastern edge of the city of Rohnert Park, just 50 or so miles north of San Francisco.  In the late winter and early spring, the morning fog rolls in from the ocean and moves westward, draping the luscious green landscape in an eerie cloak of steel-grey. White clouds hover mysteriously like cotton balls high on top of gently rolling hills to the east while mallard ducks and Canadian geese clothe the sky, making their noisy way through generations of southern migration routes.

The campus is pristine; it always has been.  The topiary that makes up the campus is lush with fantastic duck ponds, majestic meadow-like manicured lawns and upscale residential villages complete with pools and hot tubs.  Built like a fortress, the walkways and various trails that mark the campus allow for a contemplative, philosophical peripatetic meandering through cascading water fountains and variegated old growth vegetation.

The history of Sonoma State University (SSU) tells the remarkable story of one, tiny California public state university and the corporatization and transformation of this diminutive liberal arts college into a muscular mini-investment bank, now $300 million dollars in debt and hovering on the precipice of bankruptcy.

Against the backdrop of the stunning northern California hillside, it’s a grim tale of the corporate colonization of a public college and is replete with a peek into the ‘life-styles’ of the New Gilded Age millionaires and billionaires who have flocked to the public university with pockets of cash, looking to convert the campus into their own private cultural grounds for music, fancy eatery and arts center, complete with symphony orchestras. These rapacious captains of high finance have unceremoniously tagged themselves as new-age philanthropists in an epoch of cunning thievery and plunder. They now literally ‘occupy’ Sonoma State University, turning the college and its culture into their own private hunting grounds.  Meanwhile, students wander around campus, ferreting out accessible classes so they might graduate, wondering if they will ever find work or be able to start a civic and family life or pay off staggering debts in the form of student loans.

In this four part series, we will look specifically at Sonoma State University (SSU or “the college”) one of the 23 state universities in the California State University system (CSU), the financialization of the college, its corporatization and the dire consequences this all poses for public education at the college and beyond.  Most notably, we will examine how the college and its governing structure have been compromised and autocratically restructured in the interest of financialization and corporatization.  The article will examine how SSU has been quite literally turned over to the exigencies of the private capital market and Wall Street bond underwriters with reckless abandonment coupled with deleterious effects for both those who work at the campus and for students who yearn to receive an education.

It is also the intent of this article to shed some light on the role of the new uber-billionaires, in what can only be labeled the new ‘Gelded Age’ of public institutional castration; this to distinguish our epoch in history from the Gilded Age at the close of the 19^th century and dawn of the early 20^th century — a time when industrial Robber Barons, like the financial Robber Barons and buccaneers of today — roamed the national landscape like prehistoric predators looking for profits and prey.

Placing the campus under the critical lens of scrutiny will also allow for a full granular examination of the role played by the campus coordinating class of publicly salaried upper management who, working in tandem with the SSU president, developed the corporate superstructure necessary for the increased financialization of SSU.  Furthermore, any suitable understanding of the financialization of the college requires a copious comprehension of the unique role played by capital construction projects at the campus and how they have been fueled and subsidized by massive public debt managed by Wall Street banks and brokerages.

The backdrop: construction, construction and more construction

Remarkably, in face of the Great Financial Crisis of 2009 the current president of  Sonoma State University, Ruben Armiñana, continues to promote, finance and muscle through the state bureaucracy literally hundreds of millions of dollars for campus capital construction projects like there was no tomorrow (http://colleges.usnews.rankingsandreviews.com/best-colleges/sonoma-state-university-1156).

Indeed, the capital construction projects over two decades have placed Sonoma State University in the position of institutional debt peon.  Meanwhile, fee increases imposed by the president on current students and future students are rocketing through the roof with no end in sight.  As readers will discover, much like students who take out costly loans to attend higher institutions of learning, it seems highly unlikely that the SSU institutional debt can be serviced, let alone paid off.  The school is now in a briar’s patch of financial obligations that sees the university struggling to get its hands on cash, sacrificing its educational mission to serve students and faculty, while mortgaging its future to pay bond holders.  All of this spells a noxious brew of future obligations and bursting financial bubbles.

The Green Music Center (GMC) and the Student Center are examples of two projects that are scheduled to leave a debt stain of over $200 million in their wake, which will then suck another annual $7 million off the top of SSU’s funding for the next 30 years.  Add to this an additional $3 million that will be needed annually to fund the GMC programming.  At the apex of SSU’s monetary problems is the GMC and represents a costly sinkhole.  Once the Student Center is online and added to the cost, SSU’s debt payments will have nearly tripled since 2007 (ibid).  Clearly, the cost of these two projects alone is mindboggling.

Ruben Armiñana has dedicated his tenure not to the mission of higher public education, but to an obsession for monuments manifesting in over one million square feet of construction projects for a student body of 8,500.  In his Easter Island approach to never ending construction and his penchant for edifice creation, he has warped the college and turned its mission away from education and un-hesitantly towards financialization and corporatization.  The results have not been pretty for either faculty, classified staff or students.

Austerity and the State of California

Composed of 23 state universities, the California State University (CSU) system is presently $500 million in arrears even after raising tuition with serial frequency throughout the last ten years (At Sonoma State University, tuition has jumped from $1,428 in 2001 to $5,472 during this academic year.  With fees, full-time SSU students pay $6,862 a year).

Governor Brown has forced deep austerity cuts in the California State University (CSU) system wide funding. In fiscal year 2011-2012, $750 million in state funding cuts alone have butchered the CSU system and at least an additional $200 million is slated to be sliced from the California budget next year.

Certainly, the current economic condition of the country, along with the present sorry state of California’s fiscal landscape, bare responsibility for the crisis of public education, from kindergarten to university.  Students in the entire CSU system, not just at SSU, find that gut-wrenching budget cuts translate into non-availability of classes, high student to teacher ratios, limited opportunities for enrollment, delayed graduation and barred opportunities for education.

According to the Daily Titan, the Student Voice of California State University Fullerton:

“Public universities in California may have been dethroned as being cheaper than private schools for middle-income students. According to the San Gabriel Valley Tribune, schools like Harvard and Princeton provide a cheaper alternative to schools like San Jose State and University of California, Berkeley.

Private schools are generally even cheaper than Cal State Fullerton. To go to Harvard, it costs $4,000 for a family with an annual income of $30,000. At CSUF, it costs $16,331 for a full-time student” (Private universities cheaper than CSU schools, The Daily Titan, March 19, 2012, http://www.dailytitan.com/2012/03/private-universities-cheaper-than-csu-s, The Student Voice of California State University Fullerton).

The quoted cost of $4,000 per semester is due to Harvard being able to offer fistfuls of financial aid, which the CSU (including SSU) can’t match, but the comparison is compelling insofar as the CSU system has a specifically targeted student population based on a 1960 Master Plan and was supposed to be tuition free (http://www.ucop.edu/acadinit/mastplan/mpsummary.htm).

It has become painfully obvious to even a casual observer that what many would call middle-class students are being denied access to California state universities due to the ruthless economic policies of neo-liberalism, especially now with austerity foisted on the state campuses by the material economic and political conditions of capitalism.  This is true throughout the nation, not just in California.

Given this reality, the signs are that middle class public state colleges and universities may not be economically viable to serve students in the future California.  Students may be headed for a two-tiered system of education whereby community colleges and for-profit colleges make up the bulk of working class and middle class educational opportunities while the private and more affluent CSU system serves the American ruling class.  This is not so far-fetched.  After all, a two-tiered educational system would then more realistically reflect the growing class disparities that are now an essential feature of the United States.

It is important to understand that the 23 California State Universities are not state-supported — they are state-aided. This means that that each CSU is to directly supply a portion of their operating costs through fundraising and entrepreneurial activities to their subsistence as an institution.  Given this system-wide inducement to corporatize campus structure, basically turning state universities into businesses, Sonoma State University has been operating as a commercial branch of a centralized corporatized state university system (i.e. CSU), steering the university towards increased financialization and corporatization. What this does is basically turn education into a revenue generating business and, as we will see, this has had many cultural and financial impacts on both workers at the college campus and students who attend it.

Problems at SSU under the current regime

It would be a mistake to blame SSU’s problem on budgetary woes facing the entire CSU system alone, as the current president of the college would like the public to believe.  Certainly the CSU system has been fiscally compromised over more than three decades and this has affected the campus.  Moreover, there is no doubt the Great Financial Crisis has driven down needed public revenues to cover the cost of programs.  However, fiscal problems at SSU are also the result of a deficiency of theoretical imagination, shortsighted thinking and a lack of critical thinking and decision making on behalf of the corporate governing structure of SSU itself.  In short, they are a result of a dearth of democracy as life at the college is administered by a despotic and autocratic upper management.

Noel Byrne, former sociology professor at Sonoma State University, pointed out back in August of 2007 that the financialization of the college and the rise of the new corporate culture at the university specifically affected SSU:

It should be added that since each of these developments is unique to Sonoma State University, we cannot attribute their origins to limitations of budget sent to the California State University system as a whole.  All of these serve to “brand” SSU as different from other CSU institutions in a way hardly to be desired by our students, by their parents, by this community or by the California State University Trustees (SSU, Problems Have Local Origins, Noel Byrne, Sonoma State University, August 23, 2007).

Byrne is pointing the finger directly at crucial economic decisions made by SSU president Ruben Armiñana that have undermined both the mission of the college and its financial solvency.  These economic decisions are part and parcel of the financialization of SSU.

Robert Karlsbud, Dean Emeritus and co-author of the Chronicles agrees, noting:

“SSU’s wounds are in part self-inflected due to the increasingly large debt carried by the campus—a debt that will have fallen below the CSU limit once the Student Center is included” (Chronicle XXII: State of the University, 2012, March 19, 2012).

Shadowy decision-making, restructuring auxiliaries away from education and more towards business and finance, non-disclosure, lack of transparency all have orchestrated themselves to refashion the once bucolic campus into a financial juggernaut of spiraling debt — thereby setting the stage for more “financial crisis” in the future.  Even more distressing are the long term effects that financialization and corporatization have had and continue to have on education at SSU.   Below are just a few of them.

Faculty, administration and governance at SSU

Faculty salaries remain steadily stagnant or fall in face of spiraling inflation while student-to-faculty ratios have climbed through the roof.  Tenure tracks for faculty dry up faster than the nearby hillside in summer as adjuncts, or ‘freeway flyers’, are brought in to fill once tenured teaching vacancies.  Sonoma State University faculty is among the lowest paid in the state university system.  The average SSU full-professor makes $3,400 less per year than the average full-professor in the entire 23 college CSU system.  SSU Associate Professors average $6,600 less per year than counterparts on other CSU campuses (http://ssufacultyforqualityeducation.org/sonoma-state-university-faculty-are-among-the-lowest-paid-in-the-state-university-system/).

Dissension and lack of trust between faculty and top-level administration run like an electric current throughout the campus and has been for years.  In May 2007 68% of eligible faculty turned out for a no-confidence vote on President Armiñana leadership.  SSU faculty voted 73% “no-confidence” in the administration of SSU President Ruben Armiñana.  The vote reflected faculty concern over the redirection of university resources from instruction to the Green Music Center (GMC), a massive capital construction project; the creation of a substantial debt burden to finance the GMC and the decades of debt service; and the disproportional increase in the number of highly paid administrators and managers (http://ssufacultyforqualityeducation.org/ssu-faculty-vote-no-confidence-in-president-ruben-arminana/).

During this trouble period of no-confidence, some faculty began to document economic and political abuses at the university.  Meeting amongst themselves outside of campus, this small gaggle of professors developed “The Chronicles”.* I have used The Chronicles as a source for much in this article.  According to the Chronicle authors:

The Chronicles developed out of a fortuitously misdirected email questioning events surrounding the closure of the California Institute for Human Services (CIHS) in the context of a possible vote of no confidence in Sonoma State University (SSU) President Ruben Armiñana. A team developed in a quest to understand what happened with CIHS and why. We found the Armiñana Administration to have been dishonest in its portrayal of both its role in the events and in the cost of CIHS’s supposed misdeeds to SSU. In the midst of a pending no-confidence vote, job losses for over 100 loyal SSU employees and discussion of criminal charges, we felt a responsibility to take our information public. And thus began the Chronicles in May 2007″ (The Sonoma State University, Chronicles, November 2011).

In terms of governance of the SSU institution, despotic autocracy and hierarchy have replaced democratic decision-making as the governance structure of the college is being transformed into a corporate organizational arrangement that serves finance.  In their rash dash to corporatize SSU, the president and campus administration have left in their wake a vertical organizational configuration with a rigid top down allocation of power.  All of this has resulted in a lack of consultation and transparency in allocating campus resources (http://empirereport.org/reports/20091006-a-closer-look-at-the-ssu-foundation).

The lack of transparency at Sonoma State University even resulted in FBI raids on campus in 2010, embarrassingly turning the college into a virtual crime scene.  The same year also saw a State Attorney General investigation into fiscal problems and irregularities at the college ((http://www.pressdemocrat.com/article/20100218/ARTICLES/100219459).

In March of 2009, less than one year after the Great Financial Crisis, Noel Byrne, former SSU sociology professor, compared and contrasted various state universities with Sonoma State to get a glimpse of just how many of the CSU campuses employed administrators that earned over $100K.  He discovered that SSU’s Administrators constitute the largest percentage of the $100K club and has the highest number of $100K+ Administrators of any comparable campus (AIG and SSU: Local Lessons from the Fate of a Nation, 3/29/09, Noel Byrne, Sociology).

Students and Financialization

Student fees at Sonoma State University rise faster than foam at a campus keg party.  Students at SSU pay the third highest fees of all the 23 CSU campuses, yet professor salaries are the lowest in the CSU system (A Lesson from California’s Students: ‘WE Make The Crisis’, by Will Parrish on March 3rd, 2010, Anderson Valley Times) ((http://ssufacultyforqualityeducation.org/flashing-red-lights-at-ssu-high-student-fees-low-faculty-salaries-high-debt-and-lots-of-administrators/).

These fees have dramatically increased with, for example, a new administration-imposed $100 mental health fee.  Beginning in April 2011, an additional $150 was paid by students and will continue to be imposed each semester to cover the cost of a new student center.  Many faculty, students and activists called the vote by students to authorize the increase in fees ‘illegal’. Subsequently a group of public interests lawyers volunteered to contest the election.  The contestation was of no avail for the student center was eventually authorized, to the tune of at least $65 million dollars above and beyond the objections of students.

To pay for never-ending capital construction projects and the interest on them that pock mark the Easter Island campus with spiraling debt, SSU increasingly prioritizes and admits larger freshmen classes.  Each year the dormitories become filled with fresh faces and wallets as capital is extracted to cover various meal plans and campus sales. This makes it even more difficult for local working students who live at home and transfer students from the local Santa Rosa Junior College to get into SSU (http://ssufacultyforqualityeducation.org/sonoma-state-student-center-could-bankrupt-the-campus/). Current students at SSU, and potential students, also struggle with limited class offerings, barred access to the college due to overcrowding, mounting private debt, unemployment, costly housing and a foreclosed future.

Financialization and cuts to programs

The Women’s Center at Sonoma State, once a jewel of the campus, no longer exists.  In 2006 it was absorbed into what was renamed the Center for Culture, Gender, and Sexuality (now called the Multicultural Center), and, in the view of many, compromised its mission.  This move also meant that the number of professional staff addressing issues related to women was reduced, thereby affecting campus services for women.

In April of 2007 Sonoma State University phased out the California Institute of Human Services (CIHS).   As a result, SSU faced federal and state investigations for their handling of state and federal money.  Two top officials were placed on leave and an audit of the CIHS books was conducted.

The institute trained social service providers and provided training for Head Start teachers and recruited students for AmeriCorps.  The CIHS was simply another casualty in Arminana’s war against academics in an effort to transfer funds for pet projects.  The institute operated on $22 million of in state and federal grants and ran programs that trained providers of services that dealt with pre-school and after-school programs, child abuse, family violence and literacy.

SSU’s vice president for finance and administration, Laurence Furukawa-Schlereth, when asked about the closure said:

“The work is quite noble, but does it make a strong contribution to curriculum?  You have to make sure” (http://www.pressdemocrat.com/article/20070405/NEWS/70405011?p=1&tc=pg).

Concern for academic integrity was not the real agenda of the Vice President of Finance and Administration, nor the president of the college.  According to the Chronicles of May 14, 2007, President Arminana and his upper echelon were more interested in using the auxiliary within the college, Administration and Finance (A&F) for the purpose of:

“(1) undercutting CIHS’s administrative funding, (2) taking the results of an A&F internal audit public rather than working with the Institute to correct the identified problems, (3) redefining delegated authority to deflect blame from within A&F onto CIHS and Academic Affairs, (4) providing misleading information to CSU and federal investigators, (5) using EO753 to fund campus infrastructure before the prudent management of grants and contracts within the schools and centers where they are housed, and (6) criminalizing the CIHS Directors during the investigation” (May 14, 2007, The Chronicles).

The authors of the Chronicle suggest, in their comprehensive study of the mismanagement and investigations surrounding the CIHS and its closure, that getting access to CIHS’s assets was a driving factor in felling the organization; this and seizing the management of grant money.  The authors also infer that A&F managers set out to destroy one of the most reputable grant-funded human service operations in the universities history.

As we will see, Armiñana and his henchman seemed to want to get their hands on the institute’s assets so they could redirect the funds to the Green Music Center or if not the GMC, then other programs impacted by the serial building of ever more capital construction projects.  Transforming the campus into an elite enclave set in the heart of wine country was and is more important to the current gaggle of administrators than supporting pre-school and after-school programs, child abuse, family violence or literacy.

Whether a tomorrow exists for the university or if there is no tomorrow, one thing is for sure: SSU is facing a severe financial bubble and a crisis fueled by out of control debt and erroneous projections of revenue.  The social, economic and political blowback of decades of financialization, corporatization and an obsession with high cost construction projects threaten the university’s integrity and viability as a public institution designed to serve working class students. The actions and mismanagement of the president of SSU, in concert with top level management, have abdicated and vitiated the educational mission of SSU in favor of corporate interests, pursuits and goals.  As such, the dire situation at SSU is now a travesty.

The SSU seal and logo (a consultant firm created the logo for $100,000 as part of a mandatory ‘corporate branding’ that the separate CSU’s were required to create for marketing purposes) is represented by a soaring dove, meant to symbolize peace or freedom of spirit; the flaming torch found on the seal is designed to represent the flame of learning; and the tree is to suggest the beauty and strength of the redwood, which gives the wine county region its name.  With construction projects a perpetual and seemingly permanent feature of SSU, the campus seal might as well euthanize the dove, extinguish the flame and cut down the tree and replace them with a skyline image of a construction crane.

Sonoma State University – The early days

‘Sonoma State College’ was planned in the early 1960’s but received its real start in 1966.  It was not until 1978 that Sonoma State College became Sonoma State University.  The school always represented ‘an alternative’.  For awhile, Sonoma State University had one of the best dance groups in the state.  Similarly, during the 1970’s the school had the largest psychology department this side of the Mississippi.  There were 5,000 students from 1974-1978 and the campus was re-known for its various humanity programs and in the late 70’s, solar projects.  This all was to change with the advent of Reaganomics and the growth of Sonoma County as a bedroom community for the bay area.

The surrounding community has continuously provided tax funds to fuel university growth.  The school built a large swimming pool which was completed in 1982 and a 500-seat theatre which was completed in 1989. The college underwent a series of enrollment increases and where the school was once a commuter campus, a series of administrative changes and upper level decision-making by President Ruben Armiñana refashioned the new state university as a residential campus. The building of Verdot Village, a dormitory, was completed under Armiñana administration in 1995.  More ‘villages’ would come on their heels as construction became the raison d’être of the college.

In spite of the early creation of capital construction projects at the university, it was not until the change of the millennium that rapid capital construction projects began to earmark the college.  Forty-six acres of new property was added to the university’s portfolio in 2000 and the construction of the third phase of on-campus housing, named Sauvignon Village offering housing to non-freshmen students, was built.  That year, the Jean and Charles Schulz Information Center was completed as well.  A large portion of the funding to build the information center was donated by Charles Schulz, cartoonist and author of the popular Peanuts comic series, and his wife Jean.  The high technology facility was built to be a prototype library and information complex, accommodating more than 400,000 volumes. The center also houses an advanced Automated Retrieval System (ARS) which contains an additional 750,000 volumes in a computer managed shelving system in the library wing (http://en.wikipedia.org/wiki/Sonoma_State_University).

The year 2003 at SSU would not only see residential villages popping up like mushrooms in Alice in Wonderland, but Darwin Hall (the science building) would undergo a complete renovation.  Tuscany Village, a residential project, sprung up during these years and as a result, brought close to 700 more beds to the campus.  SSU was now attempting to remake itself as an Ivy League university catering to the sons and daughters of the affluent.  What we will see is that appearance once again mugs reality, for SSU is an Ivy League school without an Ivy League curriculum.

A series of Sonoma State University Presidents

In its more than fifty year history, Sonoma State University has had only six presidents.  These presidents have all had their fair share of controversy and adversity.

Controversies surrounding Sonoma State University presidents begin with Marjorie Downing Wagner, who was run out of the university in 1976 as a result of her poor handling of a campus occupation by students over arming the campus police.

Her successor, Peter Diamandopoulos, stayed a short time and then ‘graduated’ from Sonoma State University. He assumed high ranking positions at other notable institutes of higher learning, where charges of misconduct, excessive compensation and gross mismanagement followed him about.  In each case, he managed to slither out from scandal virtually unscathed. (http://www.nytimes.com/1998/12/06/nyregion/president-who-was-forced-from-job-at-adelphi-is-hired-at-boston-university.html?ref=peterdiamandopoulos).

David W, Benson took the helm at SSU in 1984 and spearheaded the rise of the corporate campus.  The Foundation and Endowments, as championed by President Benson and in the early Armiñana years, held great promise as a source of student scholarships and program revenue (http://ssufacultyforqualityeducation.org/fiscal-mismanagement-continues-at-ssu%e2%80%94chronicles-xxii-1-2-4/). Benson eventually retired in 1992 and was replaced by the current president, Ruben Armiñana.

The current Emperor has no clothes

Robert Karlsrud, Dean Emeritus, and Tony White, professor emeritus, both from SSU, recently wrote in an editorial piece for the Press Democrat, Sonoma County’s leading newspaper:

“When Ruben Armiñana arrived at SSU in 1992 he made physical development of the campus a top priority.  He began to redefine the college structure to serve the interests of fundraising and endowments” (A Closer Look at the Sonoma State University Foundation, Karlsrud, R. at Oct 06, 2009, http://empirereport.org/reports/20091006-a-closer-look-at-the-ssu-foundation).

In 2009, SSU enrolled 8,500 students, had residential space for 3,100 students and offered 41 major and 46 minor programs at the bachelor’s level.  Fourteen more programs were offered at the master’s level. As of 2009 the campus was comprised of 65 departments and programs with six academic schools. The university offers a joint doctorate in educational administration with the University of California at Davis as well as a joint master’s in mathematics with San Francisco State University.  Nine different credential programs are offered at SSU in teaching and education-related fields (http://www.sonoma.edu/50th/timeline/).

When we look much closer at Sonoma State University’s governing structure (in part three) it will become apparent how a coordinating class of administrators, headed by Armiñana, turned a public institution over to Wall Street managed public debt.  Readers will discover how a shortsighted managerial class led by an autocratic university president helped destroy one of the jewels of the CSU system and left it hemorrhaging, unable to adequately serve the students it purports to serve.

Although Sonoma State University certainly is not the only university that has squandered funds, usurped its educational mission in favor of capital construction projects fueled by mounting debt, abdicated its faculty to the ravages of the private market and approved the construction of Coliseum-like music centers for the rich and famous,  it certainly is a saga we all can learn from if we are going to prevent the neo-enclosure movement from privatizing public education and gobbling up the entire public commons.

Conclusion

Sadly, what has transpired at Sonoma State University and the California State University system as a whole is not novel.  It is in fact indicative of the financialization, privatization, and corporatization of public education. It is also indicative of the virulent attacks on the public commons by austerity measures and decades of de-funding and deregulation. What has transpired at SSU can be seen as part of a host of neo-liberal attacks on the public commons. Neo-liberalism is also a neo-enclosure movement aimed at fencing off the commons in favor of privatization.

I hope that a critical scrutiny of SSU will be helpful to those attempting to make sense of the dramatic neo-enclosure movement aimed at education and the virtual deliquescence of public higher education in California and more generally in the U.S.  It is my intent that the situation at the university be understood metaphorically as a canary in the coal mine for public higher education in California.  I am also hoping that those teachers, students, parents and activists who are currently struggling against the financialization and corporatization of K-12 education will see that the struggle against the privatization of K-12 education is the same struggle that is facing the privatization of colleges and universities.  In this way we can begin to forge larger coalitions that can organize and fight a reactionary neo-enclosure movement from devouring all public commons in favor of privatization.  I hope this analysis is helpful for understanding the larger concepts and issues that confront public higher education in this historical epoch of neo-liberalism or late-stage capitalism.

In part two of this series we will look specifically at ‘the financialization and corporatization of education’ and specifically what this has meant for Sonoma State University.

*The following is by Chronicle authors, “Anonymous (plural) and Bob Karlsrud“.  They call themselves “the accidental activists”:

“We never meant to become campus rabble-rousers individually or as a group.  The Chronicles developed out of a fortuitously misdirected email questioning events surrounding the closure of the California Institute for Human Services (CIHS) in the context of a possible vote of no confidence in Sonoma State University (SSU) President Ruben Armiñana. A team developed in a quest to understand what happened with CIHS and why. We found the Armiñana Administration to have been dishonest in its portrayal of both its role in the events and in the cost of CIHS’s supposed misdeeds to SSU. In the midst of a pending no-confidence vote, job losses for over 100 loyal SSU employees and discussion of criminal charges, we felt a responsibility to take our information public. And thus began the Chronicles in May 2007.”  You get more information about the Chronicles or to procure copies contact: Robert Karlsrud at: karlsrud@comcast.net

Jeremy Cloward, Ph.D.

Diablo Valley College

“…change is impossible so long as power is left in the hands

of a privileged minority of the population.”[1]

Introduction

In the United States the American working class has seen itself become increasingly involved in fighting imperialistic wars abroad, financing a growing military budget, and losing its social safety net at home yet at the same time regularly acting politically inconsistent with their own class interests.  This has been to the gain of US-based multinational corporations and to the detriment of working people.  Until the working class in the United States realizes that the predominantly corporate-controlled state does not serve their personal and class interests they will not see any significant improvement in their lives.   On the contrary, as long as working people continue to support the two major parties they can expect to see many more years of corporate dominance of the United States political, economic and social system.  The primary issue that working people must address to resolve this problem is the question of false consciousness.

False Consciousness                         

False consciousness is a term derived from the Marxist tradition which identifies a state of mind of an individual or a group of people who neither understand their class interests nor act politically consistent with those concerns.  Karl Marx, himself, did not use the term false consciousness.  However, many who are intellectually aligned with the Marxist tradition trace the concepts’ origin back to a theory first developed by Marx known as commodity fetishism.  Commodity fetishism is the idea that people place a value on commodities apart from the ones which they intrinsically possess.  For example, a diamond, once it becomes a commodity, is not simply a rock with the properties of a rock but instead an object that people value and admire as if the rock possessed some built-in power which makes it different and more valuable than any other rock.

False consciousness as a concept was first used by Marx’s friend and collaborator Friedrich Engels in July of 1893 in a letter to Franz Mehring.  While writing about the concept of historical materialism he claimed that “ideology is a process accomplished by the so-called thinker consciously, indeed, but with a false consciousness. The real motives impelling him remain unknown to him; otherwise it would not be an ideological process at all.”[2]  Thus Engels, in two brief sentences coins the term and argues that false consciousness and ideology (i.e., worldview) are intellectual constructs.

The first notable person to discuss the idea of false consciousness after its introduction by Engels was the leader of the 1917 Russian Revolution, V.I. Lenin.  In State and Revolution, Lenin argued that a false consciousness had been imposed on working people in Russia through the state and bourgeoisie.[3] The state  was used by the landowning elite and Czar to hold up its political and economic value-system as the only legitimate worldview for the Russian people; the intent being to force the whole of Russian society to embrace capital ownership and class division as natural.  With little protection from the owning class, Lenin surmised, that a “dictatorship of the proletariat” was needed to lead the Russian working class in revolution, teach them a proletarian ideology, and govern over the Russian working class during the initial stage of a newly established socialist state.

Subsequent to Lenin, a group of scholars known as the “Frankfurt School,” further developed the concept of false consciousness.[4]  One member, Herbert Marcuse wrote in One-Dimensional Man that “men must come to…find their way from false to true consciousness, from their immediate interests to their real interest.”[5]   Marcuse believed that many people were not aware of their true concerns but instead needed to develop a consciousness that is consistent with their class position.  Similarly, Frankfurt scholar Erich Fromm argued that “only if false consciousness is transformed into true consciousness, that is, only if we are aware of reality can we also become aware of our real and true human needs.”[6]  Like Marcuse, Fromm argues that there is a need for human beings to develop a true understanding of their class location if their individual and class interests are to be realized.

Apart from the Frankfurt School scholars, a number of Marxist thinkers have written about false consciousness since the 1920s.  For example, in the 1930s Karl Mannheim argued that the class position of the bourgeoisie and the proletariat distorts their view of reality.  From this perspective reality is subject to one’s class membership and not imposed upon individuals by a separate class or the state.  In the same decade, Italian philosopher Antonio Gramsci made a unique contribution in the development of the concept of false consciousness.  He contended that the working class is not simply subject to the political and economic ideology of the bourgeoisie that is imposed on them by that class but instead can help shape its own conscious mind through its own institutions (e.g., labor unions, workers literature, etc.).  Implicit in Gramsci’s argument is that genuine power rests within the working class to shape and control the political, economic and social dimensions of their lives.  Later, in the early 1970s French philosopher Louis Althusser argued that ideology and consciousness are not one in the same thing and that state institutions impose ideology and knowledge on each class.[7]   Finally, in the mid-1990s Michael Parenti concluded that to deny false consciousness is to “assume there has been no indoctrination, no socialization to conservative values, no control of information and commentary, no limitation of the topics to be considered in the national debate…and that a whole array of powers have not helped prestructure how we see and define our own interests and options.”[8]

Others have made similar or slightly different contributions to the false consciousness literature.  However, the fine point of their scholarship is this – some men and women can and do fail to understand their class position and in doing so fail to grasp their correct corresponding political ideology.  The failure to understand one’s class position and its corresponding ideology is the essence of false consciousness and can have a dramatic impact on the political, economic and social lives of working people.

To better understand the political and economic situation of working people our discussion will benefit first from an assessment of the state and class in the United States.

The State and Class in the United States

From a traditional Marxist analysis we can separate US society into five economic classes: the US-based international bourgeoisie, the bourgeoisie, the petty bourgeoisie, the proletariat, and the lumpen proletariat. However, if we want to understand who has real power in the United States and thus who can shape ideology (or consciousness) then we must understand not only each class’ position in a hierarchical structure but also each class’ relationship to the state. This is important because the state more than any other institution in US society sanctions (i.e., approves or makes valid) political and economic thinking for the whole of society.  So, whichever class controls the state will also play a significant role in shaping state opinion.  As we shall see, the US-based international bourgeoisie, more than any other class controls the state.  While some may argue that the corporate-owned media in the United States shapes public opinion, more often than not the media simply serve as an uncritical voice for the state narrative; in general, merely relaying state opinion on the political and economic issues of the day.

Even if the media is to differ with the state, the media is controlled by the US-based international bourgeoisie so its differences will be necessarily limited in scope and never critical of state opinion in a genuinely radical sense as the institution that it is at odds with, i.e., the state, is serving the interests of the class which it is a member of.[9]  Accordingly, through an understanding of who controls the state (and consequently sets national policy) we can also understand who is most influential in shaping opinion (or ideology) for the whole of US society.  In addition, we can understand why the Democratic and Republican Party cannot and will not ever serve the interests of working people in the United States as these two parties are presently constituted.

If we view class in the United States from a top-down hierarchy, we see at the top of the class structure the most powerful political and economic class in the country – the US-based international bourgeoisie (also known as the US-based cosmopolitan bourgeoisie or US-based international capital).  In understanding the relationship of this class to the state (Washington D.C) we, in turn, become aware of why the state regularly works inconsistently with most peoples concerns but nevertheless consistent with the interests of a specific group of individuals and economic forces.   It is not that the state is not serving anyone’s interests but in fact is serving the class interests of those who control the state – the US-based international bourgeoisie.[10]  The US-based international bourgeoisie is the owners of the means (or major means) of production whose workings and capital ownership is literally international.  In fact, if we are to look at the upper-strata of this class we will see that the wealthiest 1% of the US-based international bourgeoisie owns 40% of the wealth in the United States. (Notably, the liberal economist Paul Krugman has shown just how rich these individuals are by calculating that the wealthiest quarter of this 1% has incomes greater than the other 99% of us combined).  This class’ major source of income is inheritance, corporate ownership, property ownership, and stock and bond holdings.

The US-based cosmopolitan bourgeoisie actively participates in politics either directly by serving in government or indirectly by financing office holders in government.  Examples of members in this class include Bill Gates, the Bush Family, Warren Buffet, US Senator John D. Rockefeller IV, John Kerry and his wife Teresa Heinz, former vice-president Dick Cheney, Senator Diane Feinstein and her husband Richard Blum, the board of directors and major share holders of corporations such as Exxon-Mobil, Chevron-Texaco, Bechtel Corporation, Nike Corporation, Kaiser Inc., A.I.G., Goldman Sachs, Wells Fargo, Coca-Cola Inc., GE and Halliburton, to name a few.  This class, as we will see, has for all practical purposes seized control of the state and has made the state work or act on its behalf to the detriment of the proletariat, the petty bourgeoisie, the lumpen proletariat, and even the bourgeoisie.

The second economic class in the United States is the bourgeoisie. In the US, the bourgeoisie is most notably characterized as the owners of the means of production.  We segregate this class from US-based international capital through its capital ownership (property and money).  The bourgeoisie’s capital, unlike the US-based international bourgeoisie, is confined to the nation’s borders.  For example, they are owners of relatively small businesses such as grocery stores, car dealerships, construction companies and real estate companies.  This class overwhelmingly votes Democratic or Republican and supports the economic system which has allowed it to prosper financially.  Members of this class tend to believe that “the system works” as they are beneficiaries of the existing political and economic order.  In the United States we see an increasing amount of criticism coming from this class about the reach of the state into people’s lives and fear that government is becoming “too big.”  In fact, whether accurate or not, this is a common complaint that crosses nearly all class boundaries.

The third class in the United States and in our hierarchy is the petty bourgeoisie. The petty bourgeoisie might be described as an “in-between class.”  It is literally in-between the bourgeoisie and the class below it, the proletariat.   The petty bourgeoisie sees itself as upwardly mobile.  The class consists of independent but minor businessmen or tradesman, e.g., a plumber, a liquor store owner, an accountant, or electrician who is in business for himself and either has no employees or one or two employees which he or she works alongside.  In addition, professional people such as bankers, lawyers, doctors, or college professors who do not own their own banks, firms, practices or schools fit into this class.  The petty bourgeoisie generally possesses little or no capital in terms of property ownership with the exception being a house or even a vacation house for its more well to do members. Often, for the more wealthy members of this class their concerns are literally “petty,” i.e., “do I buy a boat or do we vacation in Europe this summer?”  Members of the petty bourgeoisie tend to vote Democrat or Republican with some consideration of 3^rd parties, such as the Libertarians, Greens, etc. which is indicative of this class producing some educated and semi-educated people who try to participate politically in a “socially conscious” way.

For the Marxist, the most significant tier in this hierarchy is the fourth class – the proletariat.  This historical class, who the majority of the American people are members of, includes blue collar and white collar workers who are owners of little or no property or capital other than possibly a family home. However, many members of this class are simply rent payers.  The proletariat (or working class or working people) makes its money from selling its labor to the bourgeoisie and the international bourgeoisie.  The vocations represented in the American proletariat range widely from low-paid office workers and waitresses to construction workers and teachers.  Politically, the proletariat in the US, much like the bourgeoisie and petty bourgeoisie before them, almost wholly vote Democrat or Republican with a very small but more educated number voting for the Green Party or Socialist Party USA, when possible.   Of course, some of the more confused members of this class cast their votes for the right leaning Libertarian Party or American Independent Party or support the contradictory labeled “populist”-Tea Party movement.

The proletariat is the class that Marx believed had the historical role of taking control of the means of production from the owning class(es) and bringing into existence a socialist state and society.  His belief, as is the belief of Marxist thinkers in general, was that the socialist state created by workers would figuratively and literally act as an intermediate stage between liberal capitalist society and the establishment of a communal society with no state.  The creation of a communist world, according to Marx, was inevitable.  Critically important to this process is recognition by the proletariat of its membership in this class which requires overcoming its false consciousness (which in the case of the United States manifests itself through working people’s support of the two major parties) and replacing it with a proletarian ideology.

The last class in the Marxist class-hierarchy is the lumpen proletariat.  The lumpen proletariat in the United States (and in any society for that matter) is made up by, among others, the poor, the homeless, the drug and alcohol addicted living on the street, the uncared for mentally ill and people in prison.  They are possessors of no property and little or no monetary capital.  To be sure, members of the lumpen proletariat are often too caught up in their own troubles to participate in politics at all.  The state, itself, pays little attention to this class with the exception of excessive funding for the overcrowded prison systems and minimal funding for rehabilitation programs and half-way houses.

These five classes then, compose the class structure and hierarchy of the politico-economic and social system in the United States. The four bottom tier classes regularly give their hard earned tax dollars to the state only to see the state turn around and give that money to the international bourgeoisie for large war contracts, funding for research and development to the lucrative pharmaceutical industry, and hefty state subsidies for agri-business.  These bottom four classes have largely been responsible for financing the 2008-2009 $2.5 trillion dollar “bailouts” of the automotive and banking industries as well as the expected $3 trillion dollar price tag for the ongoing war in Iraq.[11]   And, if the state giving public funds in 2008-2009 to insolvent US-based multinational corporations wasn’t bad enough, in 2010 working people had to watch as the federal government allowed many US-based global corporations pay less than their fair share in taxes.  To cite just a few examples, in 2010 Exxon-Mobil and Citigroup paid no taxes while GE and Bank of America received tax refunds in excess of $1 billion dollars each.  Thus, without state privileging of the US-based international bourgeoisie at the expense of the other four classes, the richest among us would not be able to accumulate the same degree of wealth that they have and in doing so, maintain the near hegemonic control over the state which they do.

To fully understand the state-class dynamic and false consciousness within the American working class we now turn to three major issues impacting working people’s lives and assess this class’ response to each concern.

The United States Military Budget 

Known as the base defense budget, during fiscal year (FY) 2010 the United States government spent some $680 billion dollars on the military, the wars in Iraq and Afghanistan, and its more than 750 military bases in 130 countries around the world.  When funds allocated for nuclear weapons, space defense, military aid, supplementary war spending, Homeland Security, interest on past military spending, as well as benefits and care for our veterans were included, the actual military budget exceeded $1.2 trillion dollars (or just over half of our $2.38 trillion federal tax revenues for 2010) and was more than all other 194 countries combined.  Globally, China was second in defense spending for FY 2010 with a published military budget of $100 billion dollars.   In other words, the United States could have reduced its FY 2010 actual defense budget by 9/10ths and still outspent second place China by $20 billion dollars.

Has the American working class shown concern for the massive sized military budget which has cut into social services which are essential to this class’ survival?  If we answer this question in relationship to presidential voting the answer would have to be no. The American proletariat as much as any class was responsible for electing President Obama who went on record during his presidential campaign as wanting to increase the size of the Pentagon’s budget (to $721 billion dollars) which, in fact, was accomplished by the United States Congress in 2011.  Today, after first refusing to open the military budget up for spending cuts as he did with the rest of the federal budget, President Obama has now accepted a reduction of $300 million dollars a year in defense spending for the next 12 years; a reduction that is equal to about 1/30^th of the actual annual military budget.

Moreover, half-way through his first term when President Obama proved not conservative enough for working people they turned on him and helped hand over the House of Representatives to the Republican Party and increase the number of Senate Republicans during the midterm elections of 2010.   There, we saw a manifestation of a common problem that is repeated time and again in American politics.  When one party is perceived as not representing the interests of the people, working people simply change which party they vote for.  The thinking being that whichever party is not in power will somehow serve working people’s needs better than the other one.

However in the case of defense spending, the military budget was supported by both the Democratic and Republican parties in congress and our Democratic president.  While the defense budget does provide jobs for working people it also funds costly wars and expensive weapons programs.  And besides, the jobs that are created have been financed, at least in part, by working class tax dollars.  By and large, defense budgets serve the financial interests of armaments firms and military contractors not the needs of working people.  By voting for either party the American proletariat shows its acceptance of a party system and ideology that serves the interests not of its own class but that of the US-based international bourgeoisie.  Indeed, the Republican and Democratic parties have been able to convince enough members of the American working class that they are either legislating on their behalf or that voting for a more progressive third party is a wasted vote because third parties don’t have a chance to win.  The reality is that once the relationship between the US-based cosmopolitan bourgeoisie and the state becomes clear we will conclude that the only wasted vote is the one which is cast for the Democratic or Republican parties.

The Wars in Afghanistan and Iraq

It has been argued that the wars in Iraq and Afghanistan are but two fronts in the global “war on terror.”  The reality is something different.  The United States, under the direction of the Bush administration and supported by both houses of Congress invaded Iraq and Afghanistan for the sole purpose of gaining access to each country’s energy reserves. Afghanistan was invaded under the pretext of retribution toward the Taliban government for “harboring” Osama bin Laden for his role in the attacks on the US in September of 2001.  What had not been said was that as recently as 1999 every member of the Taliban government had been on the payroll of the United States government.[12]  Having recently discovered large natural gas reserves in the Caspian Sea, the US supported the Taliban government in hopes of building a pipeline from the Caspian Sea through Turkmenistan, Afghanistan, and Pakistan to the Arabian Sea for transportation of those reserves to international markets.   After the Taliban government proved incapable of stabilizing the country and the United States was attacked on September 11, the Bush administration had the justification it needed to remove the Taliban from power and install a former Unocal executive as president, Hamid Karzai.  The result, the pipeline from the Caspian Sea to the Arabian Sea was completed.

Iraq was invaded two years later with the intention of controlling that country’s oil reserves which rank second in volume to only those controlled by the Saudi Arabian government.  In the case of Iraq, the United States under the urging of the Bush administration invaded a sovereign country that had not been responsible for the death of one US citizen prior to the start of the war in March of 2003.  Yet, the war itself has been quite costly to the American people and the Iraqi people, alike.  More than 4,500 US soldiers have lost their lives during the war in Iraq.  Of those soldiers that have returned home, some one third has returned with a loss of their sense of emotional and psychological well-being (commonly known as Post-traumatic stress disorder or PTSD).  The Iraqi people, on the other hand, have seen the destruction of many of their homes, businesses, and places of worship as a result of the war.  More troubling still, according to the ORB (Opinion Research Business) polling agency, the US war on Iraq has led to the deaths of more than one million Iraqi citizens.  Nevertheless, the wars and occupations of Iraq and Afghanistan continue[13] with a price tag for Iraq alone, as previously mentioned, now estimated at some $3 trillion dollars;[14] a number that was nearly equal to our entire federal budget for fiscal year 2009 and more than our total national tax revenues for that same year.[15]

So, if neither the American nor Iraqi people have benefited from these wars, then who has?  The answer is clear – US-based international capital.   In fact, the opening of Iraqi oil fields to foreign investment as mandated by the Iraqi constitution has not led to a decrease but an increase in the price of oil in the United States.  In 2003, before the war in Iraq had begun, oil sold for $23 dollars a barrel on the world market yet by the summer of 2008 a barrel of oil had inflated to some $150 dollars – an increase of about 600%.  This does not mean that US firms are making large profits by exporting Iraqi oil; they are not in spite of US oil companies such as Exxon-Mobil being awarded “oil development” deals from the US-backed Iraqi government.  However, this has not prevented US oil firms from increasing the price of a gallon of gasoline, for a variety of reasons, in the United States which has resulted in record profits.  In fact, the largest annual profit by any company in the history of the United States was set by Exxon in 2008 when its end of the year profits totaled some $45 billion dollars.

Of course, contributing to the rising cost of oil are those investors who have moved their dollars from the failed housing market into the oil futures market.  Interestingly enough, some of the very corporations that drove the United States into economic recession have been some of the main oil speculators that have kept gasoline prices unnecessarily high, including Goldman Sachs, Lehman Brothers, JP Morgan Chase Bank and Citigroup, to name a few.  Even today with the US still in the middle of the “Great Recession” and struggling with more than 9% unemployment (and 18% underemployment), oil has remained expensive, selling at some $100 dollars per barrel – an increase of more than 300% from 2003.  Increased oil prices only benefit those who own the oil and not those dependent on the commodity who can least afford to weather its inflated price.

This is not to say that oil firms and speculators are the only multinational corporations that have benefited during the wars in Iraq and Afghanistan.  Far from it; the list would have to include private military firms such as TITAN, CACI and XE (formerly Blackwater USA) which have directly benefited from the wars.  To be sure, each company has signed contracts of more than a billion dollars for the provision of military services in Iraq and Afghanistan.  In addition, a number of firms such as Dick Cheney’s Halliburton Company and the engineering partnership Perini Corporation, which is led by Richard Blum who is the husband of California Senator Diane Feinstein, have “earned” billions of dollars in contracts which have been financed with public funds.  Of course no list would be complete without noting the major armament providers such as Boeing Corporation, Lockheed Martin and Northrop Grumann whose profit margins have all increased since the beginning of the wars in Afghanistan and Iraq.

Yet, how did the American working class react to the state’s argument for war against each country?  In both cases the majority of the American people supported the Bush administration and congressional calls for war.  Now that does not mean that we did not witness worldwide demonstrations against the war in Iraq whose numbers were unprecedented in human history.  The fact is we did.  However, when polled during the first 18 months of the US war in Iraq, the majority of the American people supported the invasion.[16]  Once the reasons for invading Iraq were shown to be false and public opinion had turned against the war it was already too late.  Besides, the state helped to neutralize any real resistance to the war in Iraq and Afghanistan by not instituting a draft but instead utilizing costly private contractors in each war and occupation.  In the case of Iraq, there were almost as many and possibly more private contractors – between 120,000 and 180,000 – than there were regular US military personnel during the height of the US invasion and occupation whose numbers did not exceed 150,000 troops.  Notably in terms of cost, private contractors make as much as $1000 dollars a day or nearly four times more than the average long-term or career soldier which has further added to the cost of each war.

As these wars consume more and more of our federal tax dollars and we see social spending reduced one would expect to see working people in the streets demanding that the wars come to an end as well as at least some threat from the American proletariat to distance itself from the two major parties if things don’t change.  However, we do not see people in the street working to end the wars nor any real movement away from the Democratic and Republican parties by the American working class.  Instead, the only thing that we have consistently witnessed from working people is their willingness to fight and die in Afghanistan and Iraq; a disturbing willingness that clearly demonstrates the existence of false consciousness within the American proletariat.

Importantly, we are currently witnessing the most significant class upheaval in the history of the United States coming from the so-called “Occupy Wall Street” movement.  Those members of the working class whom are apart of the Occupy Wall Street demonstrations are correctly focusing their class frustrations on the appropriate entity for their discontent – namely, the rich, and to some degree, the state which serves their interests.  However, if the movement does not become strategically violent or produce large numbers of people willing to vote for a progressive third party in the 2012 elections then the best that the American proletariat can expect to gain from the current demonstrations is moderate reforms from Washington D.C.  Indeed, if we look to a popular example from the “Arab Spring” then it may be possible to foresee what might be in store for the United States.   One of the most prominent nations to struggle for political and economic democracy in 2011 and 2012 has been Egypt.  Yet, what have peaceful demonstrations brought to that country?  Historically significant, the demonstrations in Egypt forced a much-disliked US-backed dictator, Hosni Mubarak, to step down.  However, his government has not been replaced by an equity-minded, pro-democratic administration.  Instead, after Mubarak was forced from power the Egyptian people were strapped with a government that is potentially less democratic and more brutal then the Mubarak regime – the Egyptian military.

Health Care Policy in the United States

Most people in the US support a single payer health care system. Yet, President Obama signed into law a mere revision of privatized health care coverage known as the Patient Protection and Affordable Care Act.  Nevertheless, today more than 45 million US citizens are still without health care coverage of any kind.  In fact, as is becoming widely known, the United States remains the only country in the western industrialized world that does not have universal health care coverage.  Yet notably, even a poor third world nation such as Cuba has universal health care for its citizens as well as any citizen which visits that country.  In addition, in the US we spent more money on health care, some $8,000 dollars per person in 2009 dollars, than any other country in the world.   Roughly half of which was paid for by the state (our tax dollars) and half of which was paid for by the private sector (individuals and corporations). Canada, which unlike the United States does have universal health coverage, spent only $4,500 dollars per person in 2009 dollars for universal health care coverage. Thus, almost all the money that is needed for universal health care coverage in the United States is already in our federal, state and local budgets.   With even slight cost-reductions for prescription medications, hospital stays, and doctor visits the US would have enough money in its public coffers to implement a universal health care system and eliminate needless private insurance companies, altogether.

However, if we think that universal health care coverage is coming to the United States anytime soon, we might want to think again.  With even a cursory look at the money that has been spent by the health care sector of the US-based international bourgeoisie to “influence” Washington D.C. we can expect, if current spending trends continue, to see many more years of privatized health care.  To be sure, in 2009 the health care industry paid out some $545 million dollars lobbying Congress and the president while American labor groups spent a mere $44 million dollars lobbying the same two branches of government; a ratio of more than 10 to 1.[17]  With that kind of money being spent by the US-based cosmopolitan bourgeoisie to lobby the federal government it is unlikely that the health care needs of the American proletariat will be met any time soon.

Yet, more troubling is the way in which the American working class has chosen to disburse its Political Action Committee (PAC) dollars.  To monetarily demonstrate the existence of false consciousness at the core of the American working class we find that labor PACs actually outspent health care industry PACs in their support of Democratic and Republican candidates.  Indeed, during the 2008 election cycle US labor groups donated some $66 million dollars through their PACs to all federal Democratic and Republican candidates[18] while the health care industry contributed only $49 million dollars.[19]  These are the same Democratic and Republican candidates who, on the whole, will not even consider proposing universal health care coverage to the United States Congress for deliberation.  In other words, the American proletariat is financially supporting national candidates who are openly working on behalf of the US-based international bourgeoisie’s interests and not on behalf of working people.

The political spending habits of the American working class and their reaction to President Obama’s health care bill have been largely consistent with acting inconsistent with their own class interests. In general, we have witnessed the American working class either support President Obama’s non-universal health care bill or blame him for getting the government too involved with the provision of health care services.  Some have unbelievably called President Obama a “socialist” or claimed that he is turning the United States into a European-stylized welfare state; not realizing that if either were true it would be a step in the right direction for working people.

With the issue of health care, as was the case with the military budget and the wars in Iraq and Afghanistan, we see the American proletariat largely supporting the political and economic ideology that is valued by the US-based international bourgeoisie which controls the state.  When this worldview is held-up by the state as a virtue and supported by the corporate-controlled media then it becomes difficult for competing viewpoints to influence with the same force the ideological perspective of the American proletariat.  Through its strong-hold on the state, the US-based cosmopolitan bourgeoisie can project its values onto the rest of US society with almost no serious contenders.  In the case of health care, the ideological position of the US-based international bourgeoisie is clear – privatized medicine, which benefits the rich and not working people, is best for everyone.

However, identifying the problem also leads to the provision of a solution.

Overcoming False Consciousness

If the US working class is to ever see genuine improvements in their lives then they must begin to act consistently with their own class interests.  To do so requires the American proletariat to overcome its false consciousness. Overcoming false consciousness for working people involves a multifaceted approach rooted in education.  First, it necessitates that those members of the American proletariat who have developed a working class consciousness actively participate in politics, unions, the media, and education.  This group must write about and discuss the political and economic value of socialist-democracy and the pitfalls of liberal-capitalism.  The attempts at spreading this working class ideology would invariably include an emphasis on the need to take control of the means of production as well as the political system in order for the American working class to fully control, shape and enhance their own lives.  If done so through professional journals, newspaper articles, television appearances, classrooms, unions and political campaigns then the overcoming of false consciousness will have begun.

However, intellectual activity is not enough to overcome false consciousness or to transition from a liberal capitalist society to that of a socialist state run by and for working people.  Working people must begin to run their own factories, farms, and places of business.  Indeed, those individuals who have already developed a working class consciousness must become a vital force in the economic system and a counter balance to private capital while providing a place to work for working people.  The worker-owned farm, factory, and work place must become a center of support for the American working class by providing child-care, warm meals, health care, educational materials, a reasonable amount of paid vacation, democratic control of the workplace itself and a modicum of social life if so desired.

This will not be possible merely through working class conscious individuals opening their own grocery store co-ops.  The American proletariat needs to control all of the means of production and the political system.  Doing so will require either the collapse of the capitalist economic system or the outright seizing by force of the political and economic system of the United States by the working class.  Failing to realize this basic fact will only result in failure.

Finally, the last aim of the American working class is not only to develop and participate from a newly aroused proletarian consciousness but to link its struggle with all working people through out the world.  For the American proletariat to completely overcome its false consciousness it needs to become fully aware of the international scope of its class position.  With out a doubt, if basic pieces of information became known to working people such as the fact that half of the world’s seven billion people live on $2 dollars or less a day then the actual size of its own class will become clear.  To be certain, when the American proletariat arrives at the final goal of its working class consciousness – international proletarianism – it will see both the mass of people standing beside it and the immense power of its own class.

Bibliography

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Gallup: Politics and Government. “Iraq: Gallup’s Pulse of Democracy: The War in             Iraq.” Gallup, 2008.  http://www.gallup.com/poll/1633/Iraq.aspx  (17 July 2008).

Lenin, V.I.  The State and Revolution.  Beijing, China: Foreign Languages Press, 1996.

Little, David. “False Consciousness.” Understanding Society, 2011. http://www-        personal.umd.umich.edu/~delittle/iess%20false%20consciousness%20V2.htm.  (26 July 2011).

Marcuse, Herbert. One-Dimensional Man.  Boston, MA: Beacon Press, 1964.

Marx and Engels Internet Archive. “Engels to Franz Mehring.” (2000).                                           http://www.marxists.org/archive/marx/works/1893/letters/93_07_14.htm  (30 December        2010).

Nkrumah, Kwame.  Axioms of Kwame Nkrumah.  London, UK: Thomas Nelson and Sons            LTD., 1967.

OpenSecrets.org: Center for Responsive Politics. “Health: PAC contributions to Federal   Candidates – 2008.” OpenSecrets.org: Center for Responsive Politics, 2009.        http://www.opensecrets.org/pacs/sector.php?cycle=2008&txt=H01 (26 March 2010).

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“Though lines of police on horses, and with dogs, charged the main street outside the police station to push rioters back, there were significant pockets of violence which they could not reach.”

–The New York Times, on the UK riots of August 2011

During the 2001 FTAA summit in Quebec City, one newspaper famously reported thatviolence erupted when protesters began throwing tear gas canisters back at the lines of riot police. When the authorities are perceived to have a monopoly on the legitimate use of force, “violence” is often used to denote illegitimate use of force—anything that interrupts or escapes their control. This makes the term something of afloating signifier, since it is also understood to mean “harm or threat that violates consent.”

This is further complicated by the ways our society is based on and permeated byharm or threat that violates consent. In this sense, isn’t it violent to live on colonized territory, destroying ecosystems through our daily consumption and benefitting from economic relations that are forced on others at gunpoint? Isn’t it violent for armed guards to keep food and land, once a commons shared by all, from those who need them? Is it more violent to resist the police who evict people from their homes, or to stand aside while people are made homeless? Is it more violent to throw tear gas canisters back at police, or to denounce those who throw them back as “violent,” giving police a free hand to do worse?

In this state of affairs, there is no such thing as nonviolence—the closest we can hope to come is to negate the harm or threat posed by the proponents of top-down violence. And when so many people are invested in the privileges this violence affords them, it’s naïve to think that we could defend ourselves and others among the dispossessed without violating the wishes of at least a few bankers and landlords. So instead of asking whether an action is violent, we might do better to ask simply: does it counteract power disparities, or reinforce them?

This is the fundamental anarchist question. We can ask it in every situation; every further question about values, tactics, and strategy proceeds from it. When the question can be framed thus, why would anyone want to drag the debate back to the dichotomy of violence and nonviolence?

The discourse of violence and nonviolence is attractive above all because it offers an easy way to claim the higher moral ground. This makes it seductive both for criticizing the state and for competing against other activists for influence. But in a hierarchical society, gaining the higher ground often reinforces hierarchy itself.

Legitimacy is one of the currencies that are unequally distributed in our society, through which its disparities are maintained. Defining people or actions as violent is a way of excluding them from legitimate discourse, of silencing and shutting out. This parallels and reinforces other forms of marginalization: a wealthy white person can act “nonviolently” in ways that would be seen as violent were a poor person of color to do the same thing. In an unequal society, the defining of “violence” is no more neutral than any other tool.

Defining people or actions as violent also has immediate consequences: it justifies the use of force against them. This has been an essential step in practically every campaign targeting communities of color, protest movements, and others on the wrong side of capitalism. If you’ve attended enough mobilizations, you know that it’s often possible to anticipate exactly how much violence the police will use against a demonstration by the way the story is presented on the news the night before. In this regard, pundits and even rival organizers can participate in policing alongside the police, determining who is a legitimate target by the way they frame the narrative.

On the one-year anniversary of the Egyptian uprising, the military lifted the Emergency Laws—“except in thug-related cases.” The popular upheaval of 2011 had forced the authorities to legitimize previously unacceptable forms of resistance, with Obama characterizing as “nonviolent” an uprising in which thousands had fought police and burned down police stations. In order to re-legitimize the legal apparatus of the dictatorship, it was necessary to create a new distinction between violent “thugs” and the rest of the population. Yet the substance of this distinction was never spelled out; in practice, “thug” is simply the word for a person targeted by the Emergency Laws. From the perspective of the authorities, ideally the infliction of violence itselfwould suffice to brand its victims as violent—i.e., as legitimate targets.[1]

So when a broad enough part of the population engages in resistance, the authorities have to redefine it as nonviolent, even if it would previously have been considered violent. Otherwise, the dichotomy between violence and legitimacy might erode—and without that dichotomy, it would be much harder to justify the use of force against those who threaten the status quo. By the same token, the more ground we cede in what we permit the authorities to define as violent, the more they will sweep into that category, and the greater risk all of us will face. One consequence of the past several decades of self-described nonviolent civil disobedience is that some people regard merely raising one’s voice as violent; this makes it possible to portray those who take even the most tentative steps to protect themselves against police violence as violent thugs.

“The individuals who linked arms and actively resisted, that in itself is an act of violence… linking arms in a human chain when ordered to step aside is not a nonviolent protest.”

-UC police captain Margo Bennett,
quoted in The San Francisco Chronicle,
justifying the use of force against students
at the University of California at Berkeley

The Master’s Tools: Delegitimization, Misrepresentation, and Division

Violent repression is only one side of the two-pronged strategy by which social movements are suppressed. For this repression to succeed, movements must be divided into legitimate and illegitimate, and the former convinced to disown the latter—usually in return for privileges or concessions. We can see this process up close in the efforts of professional journalists like Chris Hedges and Rebecca Solnit to demonize rivals in the Occupy movement.

In last year’s Throwing Out the Master’s Tools and Building a Better House: Thoughts on the Importance of Nonviolence in the Occupy Revolution,” Rebecca Solnit mixed together moral and strategic arguments against “violence,” hedging her bets with a sort of US exceptionalism: Zapatistas can carry guns and Egyptian rebels set buildings on fire, but let no one so much as burn a trash can in the US. At base, her argument was that only “people power” can achieve revolutionary social change—and that “people power” is necessarily nonviolent.

Solnit should know that the defining of violence isn’t neutral: in her article “The Myth of Seattle Violence,” she recounted her unsuccessful struggle to get the New York Times to stop representing the demonstrations against the 1999 WTO summit in Seattle as “violent.” In consistently emphasizing violence as her central category, Solnit is reinforcing the effectiveness of one of the tools that will inevitably be used against protesters—including her—whenever it serves the interests of the powerful.

Solnit reserves particular ire for those who endorse diversity of tactics as a way to preclude the aforementioned dividing of movements. Several paragraphs of “Throwing Out the Master’s Tools” were devoted to denouncing the CrimethInc. “Dear Occupiers” pamphlet: Solnit proclaimed it “a screed in justification of violence,” “empty machismo peppered with insults,” and stooped to ad hominem attacks on authors about whom she admittedly knew nothing.[2]

As anyone can readily ascertain, the majority of “Dear Occupiers” simply reviews the systemic problems with capitalism; the advocacy of diversity of tactics is limited to a couple subdued paragraphs. Why would an award-winning author represent this as a pro-violence screed?

Perhaps for the same reason that she joins the authorities in delegitimizing violence even when this equips them to delegitimize her own efforts: Solnit’s leverage in social movements and her privileges in capitalist society are both staked on the distinction between legitimate and illegitimate. If social movements ever cease to be managed from the top down—if they stop policing themselves—the Hedges and Solnits of the world will be out of a job literally as well as figuratively. That would explain why they perceive their worst enemies to be those who soberly advise against dividing movements into legitimate and illegitimate factions.

It’s hard to imagine Solnit would have represented “Dear Occupiers” the way she did if she expected her audience to read it. Given her readership, this is a fairly safe bet—Solnit is often published in the corporate media, while CrimethInc. literature is distributed only through grass-roots networks; in any case, she didn’t include a link. Chris Hedges took similar liberties in his notorious “The Cancer in Occupy,” a litany of outrageous generalizations about “black bloc anarchists.” It seems that both authors’ ultimate goal is silencing: Why would you want to hear what those people have to say? They’re violent thugs.

The title of Solnit’s article is a reference to Audre Lorde’s influential text, “The Master’s Tools Will Never Dismantle the Master’s House.” Lorde’s text was not an endorsement of nonviolence; even Derrick Jensen, whom Hedges quotes approvingly, has debunked such misuse of this quotation. Here, let it suffice to repeat that the most powerful of the master’s tools is not violence, but delegitimization and division—as Lorde emphasized in her text. To defend our movements against these, Lorde exhorted us:

“Difference must be not merely tolerated, but seen as a fund of necessary polarities between which our creativity can spark… Only within that interdependency of different strengths, acknowledged and equal, can the power to seek new ways of being in the world generate, as well as the courage and sustenance to act where there are no charters.”

If we are to survive, that means:

“…learning how to stand alone, unpopular and sometimes reviled, and how to make common cause with those others identified as outside the structures in order to define and seek a world in which we can all flourish… learning how to take our differences and make them strengths. For the master’s tools will never dismantle the master’s house.”

It is particularly shameless that Solnit would quote Lorde’s argument against silencing out of context in order to delegitimize and divide. But perhaps we should not be surprised when successful professionals sell out anonymous poor people: they have to defend their class interests, or else risk joining us. For the mechanisms that raise people to positions of influence within activist hierarchies and liberal media are not neutral, either; they reward docility, often coded as “nonviolence,” rendering invisible those whose efforts actually threaten capitalism and hierarchy.

The Lure of Legitimacy

When we want to be taken seriously, it’s tempting to claim legitimacy any way we can. But if we don’t want to reinforce the hierarchies of our society, we should be careful not to validate forms of legitimacy that perpetuate them.

It is easy to recognize how this works in some situations: when we evaluate people on the basis of their academic credentials, for example, this prioritizes abstract knowledge over lived experience, centralizing those who can get a fair shot in academia and marginalizing everyone else. In other cases, this occurs more subtly. We emphasize our status as community organizers, implying that those who lack the time or resources for such pursuits are less entitled to speak. We claim credibility as longtime locals, implicitly delegitimizing all who are not—including immigrants who have been forced to move to our neighborhoods because their communities have been wrecked by processes originating in ours. We justify our struggles on the basis of our roles within capitalist society—as students, workers, taxpayers, citizens—not realizing how much harder this can make it for the unemployed, homeless, and excluded to justify theirs.

We’re often surprised by the resulting blowback. Politicians discredit our comrades with the very vocabulary we popularized: “Those aren’t activists, they’re homeless people pretending to be activists.” “We’re not targeting communities of color, we’re protecting them from criminal activity.” Yet we prepared the way for this ourselves by affirming language that makes legitimacy conditional.

When we emphasize that our movements are and must be nonviolent, we’re doing the same thing. This creates an Other that is outside the protection of whatever legitimacy we win for ourselves—that is, in short, a legitimate target for violence. Anyone who pulls their comrades free from the police rather than waiting passively to be arrested—anyone who makes shields to protect themselves from rubber bullets rather than abandoning the streets to the police—anyone who is charged with assault on an officer for being assaulted by one: all these unfortunates are thrown to the wolves as the violent ones, the bad apples. Those who must wear masks even in legal actions because of their precarious employment or immigration status are denounced as cancer, betrayed in return for a few crumbs of legitimacy from the powers that be. We Good Citizens can afford to be perfectly transparent; we would never commit a crime or harbor a potential criminal in our midst.

And the Othering of violence smooths the way for the violence of Othering. The ones who bear the worst consequences of this are not the middle class brats pilloried in internet flame wars, but the same people on the wrong side of every other dividing line in capitalism: the poor, the marginalized, those who have no credentials, no institutions to stand up for them, no incentive to play the political games that are slanted in favor of the authorities and perhaps also a few jet-setting activists.

Simply delegitimizing violence can’t put an end to it. The disparities of this society couldn’t be maintained without it, and the desperate will always respond by acting out, especially when they sense that they’ve been abandoned to their fate. But this kind of delegitimization can create a gulf between the angry and the morally upright, the “irrational” and the rational, the violent and the social. We saw the consequences of this in the UK riots of August 2011, when many of the disenfranchised, despairing of bettering themselves through any legitimate means, hazarded a private war against property, the police, and the rest of society. Some of them had attempted to participate in previous popular movements, only to be stigmatized as hooligans; not surprisingly, their rebellion took an antisocial turn, resulting in five deaths and further alienating them from other sectors of the population.

The responsibility for this tragedy rests not only on the rebels themselves, nor on those who imposed the injustices from which they suffered, but also upon the activists who stigmatized them rather than joining in creating a movement that could channel their anger. If there is no connection between those who intend to transform society and those who suffer most within it, no common cause between the hopeful and the enraged, then when the latter rebel, the former will disown them, and the latter will be crushed along with all hope of real change. No effort to do away with hierarchy can succeed while excluding the disenfranchised, the Others.

What should be our basis for legitimacy, then, if not our commitment to legality, nonviolence, or any other standard that hangs our potential comrades out to dry? How do we explain what we’re doing and why we’re entitled to do it? We have to mint and circulate a currency of legitimacy that is not controlled by our rulers, that doesn’t create Others.

As anarchists, we hold that our desires and well-being and those of our fellow creatures are the only meaningful basis for action. Rather than classifying actions as violent or nonviolent, we focus on whether they extend or curtail freedom. Rather than insisting that we are nonviolent, we emphasize the necessity of interrupting the violence inherent in top-down rule. This might be inconvenient for those accustomed to seeking dialogue with the powerful, but it is unavoidable for everyone who truly wishes to abolish their power.

Conclusion: Back to Strategy

But how do we interrupt the violence of top-down rule? The partisans of nonviolence frame their argument in strategic as well as moral terms: violence alienates the masses, preventing us from building the “people power” we need to triumph.

There is a kernel of truth at the heart of this. If violence is understood as illegitimate use of force, their argument can be summarized as a tautology: delegitimized action is unpopular.

Indeed, those who take the legitimacy of capitalist society for granted are liable to see anyone who takes material steps to counteract its disparities as violent. The challenge facing us, then, is to legitimize concrete forms of resistance: not on the grounds that they are nonviolent, but on the grounds that they are liberating, that they fulfill real needs and desires.

This is not an easy matter. Even when we passionately believe in what we are doing, if it is not widely recognized as legitimate we tend to sputter when asked to explain ourselves. If only we could stay within the bounds prescribed for us within this system while we go about overthrowing it! The Occupy movement was characterized by attempts to do just that—citizens insisting on their right to occupy public parks on the basis of obscure legal loopholes, making tortuous justifications no more convincing to onlookers than to the authorities. People want to redress the injustices around them, but in a highly regulated and controlled society, there’s so little they feel entitled to do.

Solnit may be right that the emphasis on nonviolence was essential to the initial success of Occupy Wall Street: people want some assurance that they’re not going to have to leave their comfort zones, and that what they’re doing will make sense to everyone else. But it often happens that the preconditions for a movement become limitations that it must transcend: Occupy Oakland remained vibrant after other occupations died down because it embraced a diversity of tactics, not despite this. Likewise, if we really want to transform our society, we can’t remain forever within the narrow boundaries of what the authorities deem legitimate: we have to extend the range of what people feel entitled to do.

All the media coverage in the world won’t help us if we fail to create a situation in which people feel entitled to defend themselves and each other.

Legitimizing resistance, expanding what is acceptable, is not going to be popular at first—it never is, precisely because of the tautology set forth above. It takes consistent effort to shift the discourse: calmly facing outrage and recriminations, humbly emphasizing our own criteria for what is legitimate.

Whether we think this challenge is worthwhile depends on our long-term goals. As David Graeber has pointed out, conflicts over goals often masquerade as moral and strategic differences. Making nonviolence the central tenet of our movement makes good sense if our long-term goal is not to challenge the fundamental structure of our society, but to build a mass movement that can wield legitimacy as defined by the powerful—and that is prepared to police itself accordingly. But if we really want to transform our society, we have to transform the discourse of legitimacy, not just position ourselves well within it as it currently exists. If we focus only on the latter, we will find that terrain slipping constantly from beneath our feet, and that many of those with whom we need to find common cause can never share it with us.

It’s important to have strategic debates: shifting away from the discourse of nonviolence doesn’t mean we have to endorse every single broken window as a good idea.. But it only obstructs these debates when dogmatists insist that all who do not share their goals and assumptions—not to say their class interests!—have no strategic sense. It’s also not strategic to focus on delegitimizing each other’s efforts rather than coordinating to act together where we overlap. That’s the point of affirming a diversity of tactics: to build a movement that has space for all of us, yet leaves no space for domination and silencing—a “people power” that can both expand and intensify.

Further Reading

Debating Tactics: Remember to Ask, “What Works?”

Historicizing “Violence”: Thoughts on the Hedges/Graeber Debate

“Those who said that the Egyptian revolution was peaceful did not see the horrors that police visited upon us, nor did they see the resistance and even force that revolutionaries used against the police to defend their tentative occupations and spaces: by the government’s own admission, 99 police stations were put to the torch, thousands of police cars were destroyed, and all of the ruling party’s offices around Egypt were burned down. Barricades were erected, officers were beaten back and pelted with rocks even as they fired tear gas and live ammunition on us . . . if the state had given up immediately we would have been overjoyed, but as they sought to abuse us, beat us, kill us, we knew that there was no other option than to fight back.”

– Solidarity statement from Cairo to Occupy Wall Street, October 24, 2011

Wine and Cheese Reception 6:00-7:00 PM: Event 7:00-9:00 PM

 Arlene Francis Center for Spirit Art and Politics
99 6th St. Santa Rosa, CA

 Donation $10.00 at the Door

 Join us for reports and dialogue on this part year’s top censored stories and media analysis by Media Freedom Foundaton President Peter Phillips, Project Censored Director Mickey Huff, Associate Director Andy Roth, Abby Martin of Media Roots, Michale Levitin of the Occupy Wall Street Journal, Dennis Bernstein (poet and KPFA Flashpoint producer) Nora Barrows-Friedman (Electronic Intifada) and many more.

 Celebrate Project Censored’s latest book
Censored 2012: Sourcebook for the Media Revolution

Censored 2012 invloved over 100 professors and 250 students from 19 colleges and universities all over the world. Books can be purchased online at www.projectcensored.org or by coming to the event March 15th

The event will be streamed live online at http://NoLiesRadio.org

In an all day conference, February 10, 2012, some 120 authors, professors, and journalists, from dozens of Caribbean, American and African countries, met with Fidel Castro. Those attending were invited participants for the “Intellectual Encounters for Peace and the Preservation of the Environment” event at the Havana Convention Center. Topics discussed in the nine-hour session were world peace, environmentalism, neo-liberal capitalism, and the continuing importance of socialism.

Fidel Castro (age 85) urged those assembled to a moral duty to prevent the extinction of humankind and challenge the expanding predations of neo-liberal global capitalism. He expressed concern for the inevitable collapse of Wall Street and the international monetary system. Paper money is worthless without backing from gold or other assets, Castro asserted. Environmental destruction is classless in that eventually all will suffer—both the rich and the poor—if neo-liberal capitalism continues on its rampart global destruction, he professed.

Castro’s main message was clear. Cuban socialism is an international example of a humanitarian economy in the world. “We have over 80,000 doctors,” he said, and “we are currently training 830 Pakistani medical students and many others from around the world.”

Fidel Castro, reverently referred to as “Commandante” by many of those present, was flanked by the Cuban Minister of Culture, Abel Prieto, and the president of the Cuban Book Institute, Zuleika Romay. The participants in the encounter were invited guests to the 2012 International Cuban Book Fair that ran from February 10 to 19 in Havana.

The nine-hour session went from 1:00 PM until after 10:00 PM, with only two short coffee breaks. Fidel gave extended responses during the event, commenting on the presentations, asking questions, and recalling the history of the Cuban revolution and Cuba’s humanitarian efforts over the past fifty plus years. Some 40 people presented briefings on their concerns. The lies and propaganda of the corporate/capitalist media were important themes for the day. One participant remarked how the global corporate media seeks to create a monoculture of the mind inside the capitalist countries.

As an invited author for the International Cuban Book Fair, I was honored to participate in the discussions held with the “Commandante.” His energy is inspiring and his command of history and contemporary issues is phenomenal. Castro had serious health issues a few years back, but remains mentally alert. He walked with assistance from his bodyguards, but remained fully participatory in the nine-hour session.

Cuba is an international example of the potentialities of socialism, and an ongoing symbolic challenge to marketplace capitalism. In the United States there is a continuing propaganda drumbeat against the Cuban revolution. Castro is often described as a military dictator repressing his people and blocking freedoms in Cuba. But this description ignores some undisputed social advances under his leadership that could serve as an example of what a society can do when it turns its resources to humanitarian purposes.

Contemporary neo-liberal capitalism undercuts wages, unions and social welfare, which results in the expansion of poverty, hunger, and extreme inequality. Cuba is a demonstration that humanitarian socialism can work for the masses. Cuba is the number one organic farming country in the world. Cuba has full employment, zero starvation, and some of the best health care in the world. Cuba’s life expectancy is equal to the United States and education up through university is paid for by the state for all students.

As a media-reform advocate, participant and observer, I watched tens of thousands of young people arrive at the International Book Fair in the old Spanish fort overlooking downtown Havana. These are multi-generations of people who have never suffered media advertisements. Three University of Havana literature majors, with whom I spent a full day, laughed hysterically when I asked them if they wanted a McDonald’s Happy Meal. They represent a people who accept the equality of socialism and collective growth of human betterment, and will strongly defend their way of life if necessary. As literature majors they have completed three years of Latin, and are starting classical Greek. They have had courses in historical and modern Latin American and European literature, and art. Their university education costs them nothing, and the government provides all textbooks and living expenses.

After the collapse of the USSR, Cuba lost most of it subsidies form the socialist block of nations. The early 1990s were a difficult transition. This was when Cuba opened it doors to those who wanted to leave. Some 30,000 people choose to move to the United States. Yet, ten million people choose to stay and build the independent socialist country that Cuba is today. Several other South American countries, notably Venezuela and Ecuador, have taken note of Cuba’s successes and are moving in a similar direction seeking socialist equality.

Some in the US believe that when the senior Cuban leadership from the 1959 revolution passes away, US corporations and displaced Cubans abroad will waltz back into Havana to return capitalism to the island. It is very clear to me, and many contemporary observers, that multiple generations of socialist Cubans will never allow this to happen.

_______________________________________________________________________
Peter Phillips is a Professor of Sociology at Sonoma State University and President of Media Freedom Foundation/Project Censored. He co-edited with Mickey Huff Censored 2011, which was published in Spanish for the International Book Fair in Cuba. Mickey Huff is the director of Project Censored and editor of the recently published Censored 2012, which was presented to Fidel Castro February 10, 2012.

The for-profit university company, Educational Management Corporation (NASDAQ ticket name, EDMC) is one of those shady corporations that sell education over the counter like a commodity to unwitting students who either cannot get into traditional colleges or universities, or have been coaxed into the insidious ‘rabbit hole’ that is for-profit higher education.

A private consortium of private equity investors first acquired Education Management on June 1, 2006 in a in a leveraged buy-out transaction valued at approximately $3.4 billion. The leveraged buyout of EDMC was the largest buyout in the for-profit education sector to that point ((http://en.wikipedia.org/wiki/Education_Management_Corporation). EDMC “the operation”, then went public, launching an initial public offering (IPO) of 20,000,000 shares of its common stock on September 21, 2009. The principal investors in Education Management are Providence Equity Partners, Goldman Sachs Capital Partners and Leeds Equity Partners. They own 70% of all stocks in the company

EDMC is the second largest for-profit college company in the United States, after the Apollo Group, which owns the University of Phoenix. They operate 105 schools and they receive federal taxpayer funds — over ninety percent — to subsidize their operation. The company is based in Pittsburgh, Pennsylvania and until recently employed 20,000 people and had an enrollment of approximately 158,300 students as of its fall 2010 semester. That is until recently.

The company has been steadily barreling down hill, leaving the students in the lurch and the Department of Education holding the –for-profit subsidy bag’ while corporate CEO’s and Wall Street covet the profits.

Wall Street Board of Directors

The Board of Directors of EDMC reads like Bernie Madoff’s rolodex and begs the question, in our current corporate climate of greed, why anyone would think that investment vultures, hedge fund operators and traders on Wall Street could be responsible for public education? EDMC’s current board members are:
Mick J. Beekhuizen – he joined Goldman, Sachs & Co. in 2000 and has been a Managing Director in the Merchant Banking Division since 2010.
Samuel C. Cowley – he served as Executive Vice President, Business Development, General Counsel and Secretary of Matrixx Initiatives, Inc., a seller of over-the-counter healthcare products, from May 2008 until its sale in February 2011.
Adrian M. Jones — he joined Goldman, Sachs & Co. in 1994 and has been a Managing Director within the Principal Investment Area of its Merchant Banking Division since 2002, where he focuses on consumer-related and healthcare opportunities and is also a member of the Corporate Investment Committee of the Merchant Banking Division of Goldman, Sachs & Co.

Jeffrey T. Leeds — he is the co-founder of Leeds Equity Partners, LLC, a leading New York-based private equity firm focusing on the education, training and information services industries. Prior to co-founding Leeds Equity Partners, Mr. Leeds spent seven years specializing in mergers and acquisitions and corporate finance at Lazard Freres & Co.

John R. McKernan, Jr. – he is Chairman of the Board of Directors. Mr. McKernan served as our Executive Chairman from February 2007 to December 2008 and our Chief Executive Officer from September 2003 until February 2007

Leo F. Mullin is a retired as Chief Executive Officer of Delta Air Lines, Inc. in December 2003 and Chairman in April 2004, after having served as Chief Executive Officer of Delta Air Lines, Inc. since 1997 and Chairman since 1999.

Paul J. Salem – he is a Senior Managing Director and a co-founder of Providence Equity Partners. Prior to joining Providence Equity Partners in 1992, Mr. Salem worked for Morgan Stanley & Co. in corporate finance and mergers and acquisitions. Prior to that time, Mr. Salem spent four years with Prudential Investment Corporation, an affiliate of Prudential Insurance, where his responsibilities included leveraged buyout transactions and helping to establish Prudential’s European investment office.

Peter O. Wilde — he is a Managing Director of Providence Equity Partners. Prior to joining Providence Equity Partners in 2002, Mr. Wilde was a General Partner at BCI Partners, where he began his career in private equity investing in 1992.

Joseph R. Wright – he currently serves as Chairman of Seamobile/MTN Satellite Communications and is a director of Federal Signal Corporation, where he serves on the Compensation and Benefits Committee, and Cowen Group, Inc., where he serves on the Audit Committee (http://www.edmc.edu/about/Board.aspx).

Problems at corporate headquarters

Big problems for EDMC started back in August when the Department of Justice, in tandem with four states, filed a multi-billion-dollar fraud suit against the operation carefully alleging that EDMC was not eligible for the $11 billion in state and federal financial aid it took from the Department of Education from July 2003 through June 2011. The lawsuit concerns EDMC’s alleged failure to comply with government regulations, especially those surrounding the use and payment of ‘recruits’ at the colleges EDMC owns (http://www.nytimes.com/2011/08/09/education/09forprofit.html?_r=1).

The lawsuit declares that each year, Education Management has falsely certified that it was complying with the law, making it eligible to receive student financial aid in the form of Title IV funds, when in fact it has not. The crux of the carefully designed wording of the lawsuit clearly infers that the real allegation is criminal fraud —- the corporation is accused of having in the past and continues to defraud the federal government of billions of taxpayer funds while thumbing their noses at legal regulations.

This is not surprising for the expanding companies that offer on-line colleges and universities for-profit have shown little but disdain for regulations and regulators and nothing but glee at the profits they cut out of federal subsidies for their shareholders and investors. Last year the ‘industry’ pooled over $13 million to thwart new Department of Education regulations relative to the gainful employment provision.

The lawsuit still pending against EDMC was brought by two whistleblowers who were two former employees: Lynntoya Washington, an assistant director of admissions at the Art Institute of Pittsburgh Online Division, and Michael T. Mahoney, the director of training for the Online Higher Education Division. According to Harry Litman, a lawyer in Pittsburgh and former federal prosecutor who is one of those representing the two whistle-blowers whose 2007 complaints spurred the suit:

“The depth and breadth of the fraud laid out in the complaint are astonishing,” It spans the entire company — from the ground level in over 100 separate institutions up to the most senior management — and accounts for nearly all the revenues the company has realized since 2003 (ibid).

The government’s incentive compensation ban on payment to recruiters for the amount of students they enrolled in for-profit colleges was designed to stop these colleges and universities from signing up unqualified students in an effort to get their hands on student aid and loan money, which is how these for-profits operate. The False Claims Act is the basis for the federal and state government lawsuit. It provides for triple damages if the company is found engaging in tortuous actions such as fraud and misrepresentation and since the complaint stated all the government student aid to EDMC came from such tortuous claims, the corporation could be on the hook for as much as a whopping $33 billion. The suit has not been settled and is still winding its way through the courts.

Meanwhile, the ‘operation’ is crumbling. On January 26, 2012, after persistent rumors, EDMC released the following announcement:
“Education Management Corporation (EDMC) announced staffing reductions today at its Online Higher Education operations across multiple positions, departments and locations in Arizona and Pennsylvania which will affect fewer than 2% of its 20,000 employees. These changes will be effective February 10, 2012 and are not anticipated to have any impact on students. As disclosed to employees this past Tuesday, EDMC Online Higher Education engaged in a review and evaluation of its operations in order to identify efficiencies and direct resources in ways designed to ensure high quality outcomes remain a top priority for students. Determinations were based on the current and anticipated future needs of the organization with particular attention paid to current positions that may be redundant, or that could be managed elsewhere” (http://www.pittsburghcitypaper.ws/SlagHeap/archives/2012/01/26/edmc-insiders-report-layoffs-underway).

One of two-laid off workers who worked in ‘admissions’ said that she had “half a mind” to call students she’d recently recruited “and tell them not to bother” (ibid).
She might as well for it looks like EDMC is simply another sad case of fraud and misrepresentation that pock marks the for-profit predatory corporate higher educational sector. Of course it is taxpayers and students who lose — as well as some investors.

One of those investors is Change to Win, a coalition of labor unions founded in 2005 whose central mission is, in the words of their website, “to unite the 50 million American workers who work in industries that cannot be outsourced or shipped overseas into strong unions that can win them a place in the American middle class — where their jobs provide good wages, decent working conditions and a voice on the job” (http://www.changetowin.org/about).

This not only means representing workers at he bargaining table and assuring that wages and working conditions are just, but it also means managing the $1.4 trillion dollar pension plan for members, an exceedingly tough job in the midst of rampant corporate fraud.

Change to Win sends a letter to EDMC
The Change to Win (CTW) pension fund holds 66,000 shares of EDMC or one half of one percent of the company’s stock. Though they do not hold a large amount of stock, this makes Change to Win a small but formidable shareholder.
In a letter anonymously received from Change to Win investment group, dated January 20, 2012 and directed and sent to Leo P. Mullin, the Chairman of the Audit Committee for Education Management Company, Change to Win expresses some very grave concerns and sets out some upsetting facts and reasons to support them.
To begin with, Change to Win sets out three areas of displeasure with the company:
1. The fact that the company is not nor has it provided the federal government with a letter of credit. EDMC is legally responsible to post such a letter with the federal government by law but it hasn’t;
2. The civil suit filed by the Department of Justice specifically names CEO Todd S. Nelson as a respondent, and Nelson was the same person who ran the Apollo Group where similar allegations of recruiter incentive pay were lodged when Todd was then CEO;
3. Now that substantial changes have been made in regulations as of July of 2011 that require substantially expanded disclosure of costs to students, and which require for-profit institutions to meet certain minimum targets for its graduates’ debt service payments relative to income, Change to Win is not convinced that under the current Board that governs the corporation, these rules will be complied with.

To begin with, unlike most for-profit corporations who have a debt and leverage ratio from as low as $0, for Capella University and DeVry, to the mid- $80 million held by Strayer and Apollo Group, to the $2 million and $150 million that Career Education Co. and ITT Educational Services hold respectively, EDMC has a debt and leverage rate of $1.496.1 million or close to $1.5 billion dollars! The company is not simply broke; it is broke and mired in debt. Yet the company refuses to post any letter of credit as required by the government.

Secondly, EDMC has been steadily relying on government subsidies in the form of Title IV funds for most of its operational profits. In 2008 the company received 70.2% of its operational revenue from the government with the amount steadily increasing to 81.3% in 2009, 88.5% in 2010 and a whopping 90.3% in 2011 with the .3% taking it over the government threshold of no more than 90% allowance from federal funds. The company is clearly in violation of the 90/10 rule which regulates how much federal dollars a for-profit corporation can take from taxpayers.
Change to Win states in its letter to EDMC that:
“Increased reliance on Title IV aid as a source of revenue brings with it increased exposure to compliance risk” (the letter)

The letter goes on to further note:
“Yet, we see no indication that EDMC has in place a plan to address its persistent failure to meet minimum standard in Financial Responsibility composite score (this is a score the government uses to judge if a company is eligible to receive Title IV funds) (the letter)

Currently, for-profit institutions are also prohibited from participating in Title IV programs unless they meet one of the following three criteria which are part of the new gainful employment regulations promulgated in 2011 by the Department of Education:
35% of former students are paying down debt
Typical graduate’s annual loan payment does not exceed 30% of discretionary income
Typical graduate’s annual loan payment does not exceed 12% of total income
As Change to Win notes in its letter, the company, according to its most recent 10K filing with the SEC, does not even know whether it is currently in compliance with new regulations (the letter)

Finally, as the letter goes on to state, in March 2003 a qui tam suit (Whistleblower suit) was lodged against the Apollo Group that runs the Phoenix University. The suit alleged recruitment fraud at the colleges owned by Apollo. The suit was eventually settled out of court for $78.5 million dollars (with a non-disclosure clause). The CEO of the Apollo Group at the time of the lawsuit was Todd Nelson, the current CEO of the EDMC operation. As the letter indicates:
“For the second time in nine years , a company of which Mr. Nelson is CEO is alleged to have violated the longstanding ban on incentive payments for recruits, with shareholders facing the prospect of substantial financial as well as reputational costs” (the letter ).

The letter finally closes by stating:
“The combination of the longstanding failure to adjust it capital structure to meet The Department of Education’s Responsibility test, the federal and state civil action challenging recruitment practices, and the new disclosure and gainful employment regulations creates a circumstance where inadequate Board oversight could have disproportionately bad consequences for shareholders” (the letter ).

A spokesperson for Change to Win Investment Group interviewed about the letter to EDMC by phone stated that Change to Win is demanding a change in the governing board of directors. The spokesperson also mentioned the letter is the first step in assuring that the pension fund for Change to Win members is protected when it comes to EDMC stock. He/she would not comment if a lawsuit might be pending, but it would not be surprising given the poor state of the company.

What we do know is that EDMC is a failing company hovering on the brink of bankruptcy. It seems unable to follow federal laws, rules and guidelines it does not like and therefore opens itself up to lawsuits in the worst interest of its shareholders and the students it purportedly serves. The operation also seems to employ a CEO who is alleged to be a serial violator of federal laws governing incentive pay for recruitment jockeys, salespeople who reel students into the for-profit school like they were fish. Somehow the presence of a ‘usual suspect’ does not seem so unusual.
In San Francisco the city attorney’s office is investigating student recruiting practices and job placement reporting at the EDMC Art Institute of California in San Francisco and seven other Art Institute campuses across the state. In an U.S. Securities and Exchange Commission filing this week, Education Management said the company received a letter in December 2011 from the city attorney of San Francisco seeking information regarding student recruitment and indebtedness at The Art Institutes (http://www.huffingtonpost.com/2012/02/10/art-institute-california-san-francisco_n_1269336.html).

I spoke to a high ranking member of Change to Win investment group and asked him frankly why CTW did not divest their holdings from the company as was done in the 1980’s with South Africa. After all, divestiture would let these companies know their practices were less than savory; they are either illegal or border on illegal. He responded by telling me that in the case of Change to Win, the amount of stock was so diminutive, less than ½ of one percent, that it would make no difference. He stated that Change to Win thought they could fight for members’ rights by taking the company to task head on and forcing changes in its governing structure and fiduciary responsibilities. As of this writing, Change to Win has received no response from EDMC.

Certainly the amount of stock held by Change to Win is low and by itself would not have the desired effect that divestiture had in the 1980’s in the fight against the apartheid regime in South Africa, but with apartheid alive and well in America’s New Jim Crow, especially as seen in the percentages of minorities and people of color who attend such for-profits as EDMC, a divestiture movement on behalf of pension funds against all of these for-profit traded companies on Wall Street might not be a bad idea. There is no reckoning with them; they exist to suck federal monies right out of the government and they do so while moaning about the size and cost of the federal government. How they get away with this is simple: the public is not sufficiently educated to think critically about civic concerns and they certainly will not be as long as these schools leverage students for money while delivering a commodified education.

As with all for-profit colleges, for the students enrolling and paying these institutions whether they receive an education is really up to a roll of the dice. Students never know if the schools are accredited, if the institutions are solvent or hovering on the precipice of bankruptcy, what they charge for actual tuition and fees, if the credits received are transferable to other colleges and a host of other unknowns.
The best thing to do is stay away from predatory institutions like EDMC. The struggle is to support and assure that public institutions of higher learning receive the public funds they need to serve students’ needs. This means mobilizing to stop public education budget cuts that set the table for nefarious organizations like EDMC to operate and exploit working class students, especially students of color.
A note: Change to Win affiliate SEIU recently sponsored a ‘webinar’ on for-profit colleges and universities. It should have been required viewing for potential recruits and members of the paid for Congress.

For more information as to what SEIU is doing to fight for-profit education and educate members and the public as to their predatory status please visit www.ForProfitU.org.
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Danny Weil is part of the ‘Public Intellectual Project” at Truthout (http://www.truth-out.org/public-intellectual-danny-weil/1319673742) and a writer for Project Censored and Daily Censored. He received the Project Censored “Most Censored” News Stories of 2009-10 award for his article: “Neoliberalism, Charter Schools and the Chicago Model / Obama and Duncan’s Education Policy: Like Bush’s, Only Worse,” published by Counterpunch, August 24, 2009. Dr. Weil has published more than seven books on education in the past 20 years. You can also read much more about the for-profit, predatory colleges in his writings found at Counterpunch.com, Truthout, Dailycensored.com, dissidentvoice.com and Project Censored.com where he has covered the issue of the privatization of education for years. He can be reached at weilunion@aol.com. His new book, an encyclopedia on charter schools, entitled: “Charter School Movement: History, Politics, Policies, Economics and Effectiveness,” 641 pages, was published in August of 2009 by Grey House Publishing, New York, and provides a scathing look at the privatization of education through charter schools.

Im tired of the war drums calling our brothas in reaching to recruit our children…”I do say my child I’m here to stop a beating heart today”
How much longer do we stand for the nonsense and contribute to the master plan to destroy our ancestors in the motherland

Always expecting a parade to corner our streets to show off the bloody hands of what was drawn to pull over once again a bloody sheet

Why shall we praise those who have embraced senseless killings since slave days

How many times are we going to be tricked by the propaganda of those in power warning us to stay within our own borders

Remember and don’t forget that those who we let cross over is now in the race against the witch hunt that our president now embrace

We are always fooled by the message that change will come different agenda but yet the same beat of the drum

When is it likely that we will be victorious in all the rights that were set before us to allow us to govern with our own voices

Or imagine this…taking from the military killas and drug dealas to invest back into the school so that we are certain that mama doesn’t raise a fool

Even a possibility that we can cause the military to give back our unpolluted environment stop the burning of gas from jets and scarring the land in which it treads

That’s it…I cant take it much longer…this is what I will do…

No my children… for you know not what you do…your heart will stay beating today

I will take that damn drum and throw it away

I will protest at every parade to remind everyone of what we are praising on that day

No longer be tricked by propaganda because knowledge is my power

Im stopping the witch hunt there is another underground railroad here at bay

I will use my voice to make sure I practice my rights to be heard in how I should best be governed

I will not contribute to the military killas and drug dealas and invest in my local schools because this mama isnt and raises no fools

Help to save our environment take it back from them because this isnt what democracy looks like….Im ringing the message loud… this isn’t what democracy looks like!
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Danielle ILene Bennett: I’m a 2011 non-traditional graduate of St. Cloud State University in St. Cloud, MN with a major in Women’s Studies and a double minor in African American Studies and Human Relations. I grew up a military brat in Yorktown, VA and started college later in my early twenties in St. Cloud, MN supporting war. I thought that nothing would ever deter me from the ideologies in which my family instilled within me. I took an intensive Human Relations course that made me think critically about what war really meant. It touched me so deeply that I began to realize it’s many truths about who benefited and who didn’t. I found out that the many who didn’t far exceeded the ones who did. I started utilizing more tools and resources that allowed me to find the truth instead of relying on mainstream media. I began looking more towards alternative news sources that would tell me what I wasn’t being told. I began reflecting on what war meant to me and how it impacted families and this poem is what I came up with.

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