Nick Schwellenbach: The Global Sell-out of Higher Education. WTO and the University of Texas

Nick Schwellenbach: The Global Sell-out of Higher Education. WTO and the University of Texas
Nick Schwellenbach is a history senior at UT-Austin and works with the activist group UT Watch
Z Magazine Online, November 2003 Volume 16 Number 11

On September 8 and 9, 2003, two days prior to the World Trade Organization’s (WTO) meeting in Cancun, Mexico, students from around the globe converged on the Universidad Nacional Autonomous de Mexico (UNAM) to discuss the impacts of the WTO and other neoliberal policies on higher education. These students gathered to organize resistance to privatization of their education, deregulation, increases of tuition, and slashed university services and to defend popular and accessible education for all. 

In 1994 the World Trade Organization was formed out of the last round of GATT (General Agreement on Trade and Tariffs). Both the WTO and its predecessor are global rules-based institutions where member countries negotiate trade agreements. It was not until the WTO was created that services were covered under a multilateral agreement. Until that point, trade agreements existed to reduce tariffs and non-tariff trade barriers for goods that were produced in one place and sold in another. Some services, such as transportation and financial services, have historically been traded, but others such as healthcare and education, have generally been exempted or seen as too localized to be traded. With NAFTA serving as a precedent, select countries within the WTO are now targeting those sectors. 

One of the WTO current agreements is General Agreement on Trade in Services (GATS). GATS covers every conceivable kind of service with few exceptions. One exception found in Article I (3) excludes “services supplied in the exercise of governmental authority.” In other words, only services provided solely by a government, using only government funding, could receive exemption. Yet since most places have some private universities and, at least part of public university funding comes from private money, the exemption is impossible to make for public education. The framers of GATS are acutely aware of the fact that no bright line exists between public and private sectors. Kurt Larsen, of the Organization for Economic Cooperation and Development in Paris, says of the distinction, “It’s something that is not very clear,” because “trade people don’t want that to be very clear” (International Herald Tribune, 2/18/03). As a result, such rules can be defined or manipulated to eliminate such exemptions. 

The motive behind the ambiguous language can be traced back to the interests that are actively promoting neoliberal policies and those that have the most to gain from those policy implications. The European Commission describes GATS as “first and foremost an instrument for the benefit of business,” not as an agreement for the benefit of the quality of education for the public. 

GATS applies to services in two ways. The first is called the National Treatment Principal whereby there is a general set of obligations that apply to all WTO member countries. Essentially, this principal means that there should be no favoritism for a national provider as opposed to a foreign one. If implemented and applied to higher education, the U.S. could not favor a state public university over a foreign private school. If a state subsidized its public university then it would either have to subsidize the private school as well or it must eliminate state support of education altogether. The role of the state is no longer to ensure the common asset of education, but to facilitate its auctioning off to foreign multinationals. The elimination of state subsidization is unlikely though—even the WTO is not certain as to “whether higher education can be profitable for private investors without public subsidies.” Thus, a scenario could develop where states privatize public universities and subsidizing both private and once public universities, thereby simultaneously socializing costs and privatizing profits and control. 

Member countries are allowed to choose which sectors of education they want opened up to international competition. To this extent, GATS is a bottom up agreement as opposed to a top-down imposed agreement, like NAFTA or the proposed FTAA, but there are provisions for allowing continued negotiations on opening up sectors and liberalization. The implication is that countries are supposed to open up progressively more sectors to GATS. Some countries and corporations believe the current system is operating too slowly and they support a top-down agreement to accelerate the process. In either case countries are “locked-in” and cannot go back on their commitments. 

GATS has the power to penalize nations by reversing laws and regulations that do not abide by the agreement, thereby depriving nations of their sovereignty to legislate in the public interest. “Final authority will rest with the GATS Disputes Panel to determine whether a law or regulation is, in the memo’s language, ‘more burdensome than necessary’” (The Observer, 4/15/2001). 

The Global Alliance for Transnational Education (GATE), an organization of private for-profit education providers, has already produced a list of barriers in education for the WTO. Some of these barriers to trade include state subsidies to education, investment limits by foreign entities, education requirements, and any form of local, state or national standards. If these “barriers” are eliminated then the public delivery of education could be undermined through the reduction of state support for public education and the transference of public subsidies to private entities. 

Attacks on social spending, although corporate subsidies appear to have received a de facto exemption, are nothing new and neoliberal policies have been on the offensive since the 1970s. The rhetoric of budget crises is a common theme both giving rise to and reinforcing these policies. Like a vicious cycle, neoliberalism attacks social services and their funding as a way to restore corporate profits, meanwhile crippling those services in order to rationalize their privatization. An increasing proportion of the costs are shifted to the public, disproportionately the middle and lower classes, which pays more for the same service of declining quality through individual payments for students, tuition, etc. This is has been happening to the universities as they become more privatized and entrepreneurial. 

UT as a Case Study 

According to a 2002 University of Texas study, “In 1970 tuition was $50 for any in-state student enrolled in any college or school for any number of credit hours and total fees were $54 for anyone enrolled at the University. In the fall semester of 2002, you won’t get a 12-hour course load for less than $2,300.” 

In spring 2003, Texas’s 78th legislature deregulated the power to determine tuition in the University of Texas system, transferring the power to set tuition from its own hands to that of university governing boards; tuition caps were also to be removed. Tuition is more than likely to increase at a much faster pace than before when deregulation comes into effect in spring 2004. Along with the tuition increases of the last 30 years, what is happening is summarized by Luis Navarro, “as a conversion of a constitutionally guaranteed citizen’s right [for a free public education] into a class privilege combined with the ‘option’ of ‘public assistance and charity’ [i.e., student loans]”(NACLA, January/February 2000). These increases in tuition and the power to set rates as a profit-making business are complemented by the change in perception of public education from being a public good (education as having a social role) to being a private one (an investment in one’s future). 

The UT administration increasingly views students as “consumers of university services.” This description fails in terms of usefulness to students who are struggling with increased school workloads and second and third jobs. With the rise of mass higher education in the 1950s, governments’ intentions were clear—universities were to be the training grounds for a productive intellectual workforce. 

The model of a university as primarily a site for intellectual exploration has been discarded in favor of a factory model. Students are workers in the university, working on unwaged schoolwork—the disciplining and socializing processes necessary to prepare them for the next 40 years of sitting in a cubicle. Without this additional dimension in the analysis of students it is difficult to explain efforts by universities to graduate students faster. UT’s social role of providing intellectual labor in Texas became apparent when a university committee’s interim report recommended five-year graduation limits (the Daily Texan, 9/9/03). Tuition deregu- lation may play a role in achieving faster graduation rates. 

These increases in tuition not only become necessary for the low government subsidy, high tuition neoliberal model of higher education, but also work to increase workload and speed up student and faculty workloads. In the “Highlights of the 78th Legislature” report for the UT Board of Regents, one of tuition deregulation’s listed benefits was increased “enrollment management”—using financial leverage on students to intensify their course loads, push them into taking certain classes and disciplines, and maximize the efficiency of university resources (i.e., redirecting educational resources to those areas with the greatest commercial payoff). 

Faced with GATS and its effect of an accelerated process of the privatization of public universities, tuition is poised to skyrocket. Other changes are possible as well. Academic freedom has been increasingly on the chopping block as programs will be judged on profitability. “Unprofitable” disciplines have experienced a rapid shift towards increasing reliance on graduate students and part-time untenured faculty “freed” from the protections of academic freedom. Programs and classes that are in demand by corporations and the military have become well funded, while others will endure austerity and possible elimination. Such programs already suffer under the weight of “national security” and intellectual property restrictions (being facilitated by the TRIPS agreement in the WTO). A corporate agenda will further reign over the university, to the detriment of public (and individual) needs and desires. 

The transformation of university research is an excellent example. In 1982, the Bayh-Dole Act, which allowed universities to obtain licenses to inventions financed by government support, passed the U.S. Congress. Since then patents granted to universities have radically increased. Yves Engler wrote in Z Magazine that for the year 2000, universities were granted “3,273 patents; 269 were granted in 1979.” They are using these patents to make money—“universities collected $1.1 billion in royalties from [the] 13,000 patents they hold” (Boston Globe, 4/28/2003). But this development is not the treasure trove it may seem to be. The money going in to fund the research is much, much greater than the returns. According to an Austin-American Statesman article, July 6, 2003, “Universities [across the nation] spent $27.6 billion on research in 2001.” In effect, publicly-funded higher education serves as an indirect subsidy for corporate research for which the fruits can be privately reaped—the public funds and produces the research, but doesn’t own it. Taxpayers and students pay to have their fat sold back to them.

UT is no exception to this trend. From the same Statesman article, UT “earned more than $4 million from its licensing fees” in 2002. While plenty of tax money goes to support such research by paying for researcher salaries, new buildings, equipment, and other supports, none of the licensing fees goes into general revenue for the university. In the same article, of that tech transfer revenue, “half is shared with the professors who create the ideas and half is kept by Nichols’s office [the UT Office of Technology Transfer]. By law, all royalties must be used to further technology transfer.” UT and universities are turning more and more to technology transfer as a way to generate revenue, while funding for education continues to languish.  

When universities spin off companies or license technology to private corporations from research financed through public funding, they use public financial capital to prop up private beneficiaries. “Roughly two-thirds of the nation’s academic institutions hold stock in start-up companies that sponsor research performed at the same institution” (Wall Street Journal, 1/22/2003). The University of Texas System has gained increased flexibility in controlling its own financial capital that enables it to do this. The creation of the University of Texas Investment Management Company (UTIMCO) in 1996 was a first for a public university; it’s a private company with control over public funds. UTIMCO invests in venture capital to support new university spin-offs through investments in funds such as Austin Ventures, if not through direct investment. 

David Noble, science historian and critic of these policies, says, “Universities are getting out of the education business like U.S. Steel got out of the steel business,” (Newsday, 10/8/89). What little the state does provide is increasingly geared towards commercializable research, since administrators are under the mistaken assumption that it will generate more funding for education. With state subsidies being attacked by austerity and agreements such as GATS, these trends will only increase. 

In the case of outright privatization, which is the aim of GATS, UT may become a kind of corporate logo. It is already trademarked with draconian consequences for student groups who attempt to use UT in their name or use the longhorn logo. UT may go multinational if it becomes a private institution, since it will have nothing holding it down in Texas. 

This might not be so far fetched. Although higher education has a hard time physically moving its capital around (except for distance learning), according to Robert Ovetz, a professor of Globalization and Ecology at the New College of California, “It can move financial and human capital to countries, which have been forced to privatize their education systems and take them over the way Bechtel failed to do with a municipal water system in Bolivia in the late 1990s.” 

The stage has already been set for UT to expand abroad in the same way, swallowing up foreign systems of higher education. A bill passed during the 78th Legislature, SB 1652 (omnibus deregulation), gave UT the authority to own, operate, and manage facilities outside Texas. If countries open up their education systems under GATS, then potentially UT could move in and take over foreign education if it thought it would be profitable. 

On September 8, 2003, the UT Board of Regents met with the U.S. ambassador to Mexico, Antonio Garza, on matters relating to education and healthcare. As the largest provider of both in Texas, UT would be positioned to manage, operate, and own institutions of higher education and healthcare in Mexico. GATS would set the stage for such a takeover. 


These developments do not go unopposed. An international campaign led by GATSWatch aims to “take education out of GATS” by carving it out of the agreement the same way national security has been. Students around the world have done analysis and education detailing how neoliberal globalization is affecting them and others. These processes that threaten public education are operating at a global level and students will need to organize, operate, and challenge them globally as well. 

Perhaps on a deeper level, students will need to organize against these policies by also constructing a university based around their needs and desires. Instead of being passive cogs manipulated by outside forces, they will need to see themselves as central to the operating of this machine, UT Inc.