The Matrix refinanced: Changing a human being into revenueBy
Jeff Bryant’s alarming post at Salon details some of the financial services sector’s inventive, new schemes for funding education. Wall Street already saw K-12 schools as “the last honeypot,” a steady, recession-proof, government-guaranteed stream of public tax dollars just waiting to be tapped by charter schools. It first had to convince states to increase competition – meaning eliminating teachers and other public employees standing between investors and their money.
One could argue that the right’s small government, low taxes mantra always had as its goal eliminating the “creeping socialism” of government providing education and other public services on a not-for-profit basis. (What, no middle-man markup?) “Starving the beast” was never about the size of government, but about eliminating public-sector competitors and making sure the right people take a percentage of vital services funded at taxpayer expense.
Since the collapse of the housing market, the giant pool of money is looking for other places to invest. So it’s out with the NINA loans and the CDOs and in with the SLABS, CABS, PPPs, and ISAs. Jeff Bryant writes:
It’s not hard to see the allure of SLABS [student loan asset-backed securities]. Student loans seem to be an endless stream of revenue as colleges and universities continue to increase tuition, economic conditions and employment transience feed the unemployed back into continuing education, and political leaders urge everyone to attend college. The income stream is nearly guaranteed to pay off because the loans are next to impossible to discharge in bankruptcy.
A Huffington Post article by Chris Kirkham states, SLABS offer “seemingly unlimited growth potential at virtually zero risk. The burden of college loan repayment falls entirely on students’ backs, shielding corporations from the consequences of default.”
Remember when mortgage-backed securities were a guaranteed, sure thing? There’s much more here: ‘capital appreciation bonds’ (CABs) for financing public schools, “public-private partnerships (P3s) where developers provide capital to build schools they then lease to universities (as happens with K-12 charters). Don’t get me started on P3s.
The ultimate solution in the private edu-debt sphere emerged recently when conservative ex-governor of Indiana, now president of Purdue University, Mitch Daniels proposed to the U.S. Congress that, “Instead of taking out a traditional college loan, students would have the option of finding an investor – possibly a Purdue alum – to finance their degree in exchange for a share of their future income.”
If you read that and said out loud, “indentured servitude,” so did I. Daniels’ first swing at these Income Share Arrangements (ISAs) whiffed, Bryant explains. But?
But like what so often happens, quirky proposals from conservatives that appear like blips on the outer edge of the crazy radar, actually have a huge think tank machinery behind them. As a report from an Indiana news outlet explains, the financial vehicles Daniels alluded to are what’s known in the biz as Income Share Arrangements (ISAs). The reporter sourced the concept of ISAs to 1955 and University of Chicago economist Milton Friedman, the god of right-wing privatization advocates.
Beth Akers, a fellow with centrist think tank Brookings, has argued ISAs should “play a role” in financing student loan debt. She posits that the central problem with higher education is there is “almost no incentive” for students to choose schools and courses of study that pay off down the road in terms of lucrative salaries. A broad market for ISAs could change that by enabling students to “collateralize their financing with future earnings, just as home buyers collateralize their mortgage with the house itself.”
Except here, humans themselves are the collateral. This financial Matrix bypasses all the intermediate messiness of productive capitalism. Why should “job creators” bother with the inefficiency of trading in actual products and services when, by plugging them into a matrix of derivatives, you can change a human being into revenue?
Cue Laurence Fishburne. I didn’t give the Wachowskis enough credit.
(Cross-posted from Hullabaloo.)