Education in the Age of Financialization

1. Education in the Age of Financialization Michael A. Peters University of Waikato University of Illinois 2013

2. Neoliberalism and finance capitalism The shadow economy

3. Neoliberalism and finance capitalism • The rise of neoliberalism is explained by the growing role and power of finance in the political economy of capitalism • "...neoliberalism is the expression of the desire of a class of capitalist owners and the institutions in which their power is concentrated, which we collectively call 'finance,' to restore ... the class's revenues and power...” -- Dumenil and Levy (2004, 1-2) • Financialization is result of neoliberal restructuring but has deeper roots -- David M. Kotz (2008)

4. Finance Capitalism • Not just quantitative expansion but change in nature of financial institutions that jettisoned its traditional loan-making functions to pursue the creation and sale of its own financial instruments • Neoliberalism, beginning 1980 in US, encourage a shift from state-regulated capitalism to deregulated neoliberal capitalism

5. Financialisation is a systematic transformation of capitalism • the massive expansion of the financial sector where finance companies have taken over from banks as major financial institutions and banks have moved away from old commercial banking practices to operate directly in capital markets as investment bankers; • large previously non-financial multinational corporations have acquired new financial capacities to operate and gain leverage as investors in financial markets; • domestic households have become players in financial markets (the ascendancy of shareholder capitalism) taking on debt and managing assets; • in general, this change represents the dominance of financial markets and institutions over a relative declining production of the traditional industrial, productive or real economy • Financialisation is a cultural change in ideology about unregulated markets that infuses all policies

6. New Forms of Capitalism Cultural, algorithmic, symbolic, bioinformational, educational

7. New forms of Capitalism • ‘Cybernetic capitalism’ is a term we use in order to distinguish a group of theories, or, better, positions, on the Left that attempt to theorize the nature of the new capitalism under neoliberalism. These are "models" that can be characterized by associated literatures. • Informational capitalism • Cultural capitalism • Cognitive capitalism • Finance capitalism • Biocapitalism • Educational capitalism

8. 1. Informational capitalism The nature of information/knowledge ‘Informational’, ‘Digital’, ‘Virtual’, ‘Cyber’, ‘Fast’, ‘High-tech’ Castells, Shiller, Morris-Suzuki, Schmiede, Fuchs • Informational capitalism: Castells sees informationalism as a new technological mode of development characterized by “information generation, processing, and transmission” that have become “the fundamental sources of productivity and power” (Castells 2000: 21). Morris-Suzuki (1997) and Schmiede (2006a, b) have used this term and Christian Fuchs (2007) also writes of an informational capitalism of self-regulation. • Digital capitalism: Dan Schiller and Robert McChesney employ a traditional Marxist political economy applied out of communication theory to questions of ownership of global communications: “networks are directly generalizing the social and cultural range of the capitalist economy as never before” (Schiller 2000: xiv). See also Peter Glotz, (1999). • Cyber-Capitalism:Dyer Witheford, N. Cyber-Marx. Cycles and Circuits of Struggle in high Technology Capitalism (1999)

9. 1. Informational capitalism • Knowledge Capitalism: Michael A. Peters & Tina Besley, Building Knowledge Cultures: Education and Development in the Age of Knowledge Capitalism (2006); Sheila Slaughter & Gary Rhoades, Academic Capitalism and the New Economy (2004). Fast capitalism: Ben Agger (1989; 2004) – Also see the journal website of the same title. • Virtual capitalism: the “combination of marketing and the new information technology will enable certain firms to obtain higher profit margins and larger market shares, and will thereby promote greater concentration and centralization of capital” (Dawson & Foster, 1998, p. 63). • High-tech capitalism (Haug 2003), or informatic capitalism (Fitzpatrick 2002) – to focus on the computer as a guiding technology that transformed the productive forces of capitalism and has enabled a globalized economy.

10. 2. Cultural capitalismThe change of culture ‘new culture’, ‘knowing capitalism’, ‘new spirit’, ‘cultural economy’ • New culture of capitalism: This strand emerges from work in the ‘new geography’ and sociology and is epitomized by Richard Sennett’s (2007) The Culture of New Capitalism. • Knowing Capitalism – Epitomized by Nigel Thrift’s (2006) Knowing Capitalism. • The New Spirit of Capitalism, Boltanski, L. and E. Chiapello (2005) • Cultural economy, Michael Pryke and Paul du Gay (2002)

11. 3. Cognitive CapitalismImmaterial Labor , ‘Cognitive capitalism’, ‘affective capitalism’’ • Cognitive Capitalism – ‘Affective Labour is a key feature of the new mode of cognitive capitalism based on immaterial labour. It is a key aspect of a strategy based on autonomous peer production. - Yann Moulier Boutang Le capitalisme cognitif : La Nouvelle Grande Transformation, (2007); - Vercellone C. (ed), Capitalismo cognitivo, (2006); - De Angelis, M. and D. Harvie (2006) ‘Cognitive Capitalism and the Rat Race: How capital measures ideas and affects in UK higher education’

12. 3. Cognitive capitalism • Immaterial Labor: Based on Deleuze and Guattari’s Anti-Oedipus: Schizophrenia and Capitalism (1999); Negri & Hardt (2000: 290) argue that contemporary society is an Empire that is characterized by a singular global logic of capitalist domination that is based on immaterial labour. • With the concept of immaterial labour Negri and Hardt introduce ideas of information society discourse into their Marxist account of contemporary capitalism. Immaterial labour would be labour “that creates immaterial products, such as knowledge, information, communication, a relationship, or an emotional response” (Hardt/Negri 2005: 108; cf. also 2000: 280-303), or services, cultural products, knowledge (Hardt/Negri 2000: 290). • Affective Capitalism - Massumi, B. (n.d.) ‘The Future Birth of the Affective Fact’; Immaterial and affective labor, Emma Dowling, Rodrigo Nunes and Ben Trott (Ephemera, 2007); Juan Martín Prada, ‘Economies of affectivity’ and Michael Hardt ‘Affective Labor’ Semio-capitalism - Precarious Rhapsody. Semio-capitalism and the Pathologies of the Post-Alpha Generation, Franco Bernadi (forthcoming)

13. 4. Finance Capitalism ‘Financialization’ • Rudolf Hilferding, Finance Capital. A Study of the Latest Phase of Capitalist Development. Ed. Tom Bottomore (Routledge & Kegan Paul, London, 1981) • Hilferding's Finance Capital (Das Finanzkapital, Vienna: 1910) was "the seminal Marxist analysis of the transformation of competitive and pluralistic 'liberal capitalism' into monopolistic 'finance capital'" Rudolf Hilferding

14. Rudolph Hilferding Finance Capital: A Study of the Latest Phase of Capitalist DevelopmentChapter 25, The proletariat and imperialism. http://www.marxists.org/archive/hilferding/1910/finkap/ch25.htm • "The socializing function of finance capital facilitates enormously the task of overcoming capitalism. Once finance capital has brought the most importance branches of production under its control, it is enough for society, through its conscious executive organ – the state conquered by the working class – to seize finance capital in order to gain immediate control of these branches of production.”

15. “Contradictions of Finance Capitalism”Richard Peet, Monthly Review, 63, 2011 • “Over the last thirty years, capital has abstracted upwards, from production to finance; its sphere of operations has expanded outwards, to every nook and cranny of the globe; the speed of its movement has increased, to milliseconds; and its control has extended to include ‘everything.’ We now live in the era of global finance capitalism.” • “Financialization has involved increasingly exotic forms of financial instruments and the growth of a shadow-banking system, off the balance sheets of the banks. The repeal of the Glass-Steagall Act in 1999 symbolized the almost complete deregulation of a financial sector that has become complex, opaque, and ungovernable.”

16. 5. Biocapitalism & Biopolitics"bioinformationalism" • Biocapitalism: Based lososely on Foucault’s work on governmentality and biopower, and Deleuze & Guattari’s Anti-Oedipus: Schizophrenia and Capitalism (1999); • Rajan, K.S. Biocapital: The Constitution of Postgenomic Life (2006); • Eric Cohen (2006) “Biotechnology and the Spirit of Capitalism” • http://www.thenewatlantis.com/publications/biotechnology-and-the-spirit-of-capitalism

17. “Bio-informational capitalism”June 2012 vol. 110 no. 1 98-111 • This essay builds on the literatures on ‘biocapitalism’ and ‘informationalism’ (or ‘informational capitalism’) to develop the concept of ‘bio-informational capitalism’ in order to articulate an emergent form of capitalism that is self-renewing in the sense that it can change and renew the material basis for life and capital as well as program itself. • Bio-informational capitalism applies and develops aspects of the new biology to informatics to create new organic forms of computing and self-reproducing memory that in turn has become the basis of bioinformatics. • The paper begins with a review of the successes of the ‘new biology’, focusing on Craig Venter’s digitizing of biology and, as he remarks, the creation of new life from the digital universe. The paper then provides a brief account of bioinformatics before brokering and discussing the term ‘bioinformational capitalism’.

18. Algorithmic Capitalismhttp://truth-out.org/news/item/8887-algorithmic-capitalism-and-educational-futures-informationalism-and-the-googlization-of-knowledge • “Algorithmic capitalism and its dominance of the market increasingly across all asset classes has truly arrived. • It is an aspect of informationalism (informational capitalism) or "cybernetic capitalism," a term that recognizes more precisely the cybernetic systems similarities among various sectors of the post-industrial capitalist economy in its third phase of development - from mercantilism, industrialism to cybernetics - linking the growth of the multinational info-utilities (e.g., Goggle, Microsoft, Amazon) and their spectacular growth in the last twenty years, with developments in biocapitalism and the informatization of biology, and fundamental changes taking place with algorithmic trading and the development of so-called financialization.” • "Algorithmic Capitalism and Educational Futures: Informationalism and the Googlization of Knowledge"

19. Algorithmic Trading and Cloud Capitalism - May 6, 2010 • "At 2:32 p.m., against this backdrop of unusually high volatility and thinning liquidity, a large fundamental5 trader (a mutual fund complex) initiated a sell program to sell a total of 75,000 E- Mini contracts (valued at approximately $4.1 billion) as a hedge to an existing equity position (p. 2). The report indicates that liquidity crises ensued because a large trader used an automated execution algorithm ('Sell Algorithm') that was programmed to trade large volume (E-Mini contracts) with regard only to volume rather than price or time and the Sell Algorithm was executed rapidly in the period of twenty minutes resulting in one the three largest single-day price movements in the history of the stock market. Under the heading 'Lesson Learned' the Report suggests that 'under stressed market conditions, the automated execution of a large sell order can trigger extreme price movements, especially if the automated execution algorithm does not take prices into account. Moreover, the interaction between automated execution programs and algorithmic trading strategies can quickly erode liquidity and result in disorderly markets.'"

20. 6. New Forms of Educational Capitalism • Privatization, corporatization and commericalization of education with emulation of private sector management and global education as tradeable services (WTO; TRIPPS). • Informatization & the postmodernization of education, the cultural archive & production/consumption of knowledge. • Investment in human capital, key competencies and generic skills (since the 1960s, after Gary Becker's (1964) Human Capital. • Emergence of the entrepreneurial self with investments at critical points in the education career cycle - "responsibilization" • Distributed knowledge systems lessen costs of sharing of intellectual capital (research), academic publishing (dissemination), courseware (instruction). • Emergence of global online ‘borderless education’, rise of corporate virtual education providers, and online courses for public universities.

21. New Forms of Educational Capitalism (2) • Growth of charter schools, UK academies, home-schooling, informal and 24/7 professional education. • Emergence of the paradigm of social production (Benkler, 2006) where co-production & co-creation characterizes ‘active learner-consumers’ and ‘citizen-consumers.’ • Design principle best illustrated through maxim that ‘architecture is politics’ and communication systems are a complex three tiers of content, code and infrastructure where each level might be controlled and owned or free. • Convergence of open source, open access and open education. • Radical interpenetration of public and private educational spaces and increasing dependency on technological fix.

22. Some Further Explorations of these themes (1) • Peters, M.A. & Reveley, J. "Retrofitting Drucker: Knowledge Work Under Cognitive Capitalism", Culture & Organization, 2012: iFirst, 1-17 • Peters, M.A. "Manifesto for Education in the Age of Cognitive Capitalism: Freedom, Creativity and Culture", Economics, Management, and Financial Markets,6(1), 2011, pp. 63–92. • Peters, M.A. "Bioinformational capitalism", Thesis Eleven, 110, 2012: 98-111. • Peters, M.A. "Three Forms of the Knowledge Economy: Learning, creativity and openness", Economics, Management and Financial Markets, 5(4), 2011: 63-92. • Peters, M.A. & Venkatesan, P. "Biocapitalism and the Politics of Life", Geopolitics, History and International Relations, 2011, 2(2).

23. Some Further Explorations of these themes (2) • Peters, M.A. & Venkatesan, P. "Bioeconomy and the Third Industrial Revolution in the Age of Synthetic Life," Contemporary Readings in Law and Social Justice, 2011, 2(2). • Peters, M.A. and Bulut, E. (Eds.) Cognitive Capitalism, Education and the Question of Digital Labor. New York, Peter Lang, 2011. • Peters, M.A. Neoliberalism and After? Education, Social Policy and the Crisis of Capitalism. New York, Peter Lang, 2011. • Peters, M.A., Britez, R. & Bulut, E. Cybernetic Capitalism, Informationalism, and Cognitive Labor, Geopolitics, History and International Relations, 1 (2), 2010: 11-40. • Peters,M.A. Educational, Science and Knowledge Capitalism. New York, Peter Lang, 2013

24. Cognitive Capitalism, Education and Digital LaborEdited Michael A. Peters & Ergin Bulut (2011) • “Algorithmic Capitalism and Educational Futures: Informationalism and the Googlization of Knowledge” • “Educational futures require a global transnational public investment in infrastructures that stand against both the monopolization and privatization of knowledge and education.”

25. TruthOutTruthout works to spark action by revealing systemic injustice and providing a platform for transformative ideas, through in-depth investigative reporting and critical analysis. • Speed, Power and the Physics of Finance Capitalism • Will Global Financialization and the Eurozone Debt Crisis Defeat European Cosmopolitan Democracy? • In a Risk Society, Is Consumption Our Only Tool to Influence Our World? • Breaking Open the Digital Commons to Fight Corporate Capitalism • Greening the Knowledge Economy: A Critique of Neoliberalism • Knowledge Capitalism and the "Academic Spring" • Freedom, Openness and Creativity in the Digital Economy • Knowledge Work Under Cognitive Capitalism • Why Equality Matters

26. Dimensions of Finance Capitalism Securitization and Derivatives

27. Financial and real wealthMcKinsey Global Institutehttp://regulation.revues.org/docannexe/image/7729/img-1.jpg McKinsey Global Institute

28. $1.2 Quadrillion Derivatives Market Dwarfs World GDP (2010) • One of the biggest risks to the world's financial health is the $1.2 quadrillion derivatives market. It's complex, it's unregulated, and it ought to be of concern to world leaders that its notional value is 20 times the size of the world economy. • But traders rule the roost -- and as much as risk managers and regulators might want to limit that risk, they lack the power or knowledge to do so. • A quadrillion is a big number: 1,000 times a trillion. • Yet according to one of the world's leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University, $1.2 quadrillion is the so-called notional value of the worldwide derivatives market. • To put that in perspective, the world's annual gross domestic product is between $50 trillion and $60 trillion.

29. Videos • http://www.youtube.com/watch?v=Q4b_Dt1Mq-k Real News - $1,200 Trillion Derivatives Market Dwarfs World GDP • http://www.youtube.com/watch?v=Aq-FSI9x6fo LIFE HIDDEN TRUTH 2013 GLOBAL FINANCIAL CRISIS • http://www.youtube.com/watch?v=bx_LWm6_6tA The Crisis of Credit Visualized - HD

30. WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse, April 13, 2011 “In the fall of 2008, America suffered a devastating economic collapse. Once valuable securities lost most or all of their value, debt markets froze, stock markets plunged, and storied financial firms went under. Millions of Americans lost their jobs; millions of families lost their homes; and good businesses shut down. These events cast the United States into an economic recession so deep that the country has yet to fully recover.” • High Risk Lending • Regulatory Failure • Inflated Credit Ratings •  Investment Bank Abuses US Senate

31. Housing Bubble Housing Bubble

32. Globalisation of finance • Some scholars suggest that neoliberalism and globalization are themselves expressions of finance, closely tied to the development of derivatives markets and the evolution of an international financial system where the international rentiers have managed to significantly increase their share of national income often on the basis of systematic fraud, corruption and widespread criminalisation of financial practices.   The current financial crisis is a systemic crisis of the entire capitalistic system based on interconnected global financial markets.

33. Global interconnectedness of finance • There is a clear sense that the new technologies and the financial instruments and techniques they have made possible, have strengthened interdependencies between markets and market participants, both within and across national boundaries. As a result, a disturbance in one market segment or one country is likely to be transmitted more rapidly throughout the world economy than was evident in previous eras (Greenspan, 1998, p. 244).

34. Financialization of public sphere • This is a fundamental shift that represents the financialization of the reproductive sphere of life itself. Under this regime the monopolization and privatization of knowledge and education has proceeded rapidly. One of the effects of financialisation and the economic crisis has been to popularize a debate on budget cuts and "austerity politics" across the board for public services provided at the state level with massive cuts to education in all aspects, attacks on collective bargaining, and the sacking of thousands of teachers.

35. Charlie Rose Interviews Charles Ferguson on his documentary 'Inside Job’

36. Origins of “Credit Crunch” (RBNZ) • In 2007-08 the United States, followed by the rest of the world, experienced a ‘credit crunch’ that, by late 2008, had developed into the worst worldwide economic crisis since the Second World War. Although New Zealand was in a relatively good position, with a healthy banking system and sound economic fundamentals, the country still entered a prolonged recession • Financial markets – places where loans and investments could be traded as a commodity – became highly sophisticated and expanded in depth during the last decades of the twentieth century. By this time they were computerised and linked world-wide, meaning that any incident or event could be swiftly transmitted internationally.

37. (2) • By mid-2007 it had become clear that the full value of many of these loans was not recoverable. Loss of confidence in sub-prime mortgages in the United States triggered a wave of doubt regarding many of the loans, creating dysfunction through the whole financial system. Terms like ‘toxic debt’ became commonplace, and countries such as Iceland experienced very severe difficulties • From mid-2008 the Bank also initiated sharp reductions in the Official Cash Rate (OCR), the rate that anchors interest rates for New Zealand. This had been sitting at slightly over 8 percent, but by early 2009 had dropped to around 2.5 percent, a very rapid rate of easing of interest rates compared to normal standards

38. Marazzi, C. (2010) The Violence of Financial Capitalism trans. K. Lebedeva. New York: Semiotext(e). • This global crisis is a new type of crisis, “it is the capitalist way of transferring to the economic order the social and potentially political dimension, the dimension of the resistances ripened during the phase leading up to the cycle” (85). It is the first systemic and global crisis of neo-liberal financial capitalism that began with the crisis of the Fordist model of accumulation and the consequent deregulation of the banking system during the 1970s.

39. Financialization of Education Student debt, charter schools, investment university

40. The Chain of Charter Schools Charter schools

41. UK "Freedom" Academies • http://www.youtube.com/watch?v=yMl2q-lfzvE • Michael Gove invites all schools to apply to become academies • http://www.youtube.com/watch?v=X8wNCMTisc0 • Sponsored Academies in the UK - A Form of Education Public Private Partnership • http://www.youtube.com/watch?v=E145YmDDJec&list=PL0EA60F5417D47E52 • Academies Funding part 1, from 2013 • http://www.youtube.com/watch?v=k2uiGwaRojE • Michael Gove on UK education policy (12May13)

42. Michael Gove unveils sweeping school reforms • Education white paper will shake up league tables, transform teacher training and recruitment and 'shorten and simplify' rules for removing incompetent teachers • http://www.guardian.co.uk/education/2010/nov/24/michael-gove-sweeping-school-reforms • The education secretary,Michael Gove, has outlined plans to transformteacher training and recruitment, shake up school league tables to focus more on children's performance in academic subjects, and make it easier for headteachers to remove poor teachers and exclude disruptive children. • In aschools white paper published today ministers said government funding would cease for graduates who did not have at least a 2:2 degree from September 2012, while the government would explore paying off the student loans of graduates in shortage subjects who wished to enterteaching.

43. For Michael Gove, the Pol Pot of education, every year is Year Zero • Matthew Norman, http://www.independent.co.uk • http://www.independent.co.uk/voices/comment/matthew-norman-for-michael-gove-the-pol-pot-of-education-every-year-is-year-zero-8683331.html • All intensive research unearths, in fact, is a pair of trifling putative tweaks to the system. One is lengthening the school day and shortening the holidays, to bring education into line with working life. The other, revealed by this newspaper yesterday, is to outsource the running of schools to profit-making businesses. • In the utopian future that is Goveworld, the two might dovetail exquisitely. The nation’s 11-year-olds would reach their desks at 6.30am and put in two hours of Call Centre Studies, handling complaints about faulty satellite dishes from angry account holders in Mumbai, before conventional lessons begin. This has obvious appeal. Apart from the financial benefits to the venture capitalists who have superceded the board of governors, this would prepare children for the shifting balance of economic power in the world they will inherit.

44. Everything you need to know about the student borrowing bubble in 17 charts.By Matt Phillipshttp://qz.com/78889/student-borrowing-bubble-in-17-charts/$1 trillion in students loans outsanding, mortgagaes are the only form of debt Americans have more of Student loans

45. College Cost Inflation in US

46. Unemployment of BAs

47. The Market for Student Loans Fig 1

48. Private Student Loan in Billions Student Loans

49. Danny Weil on student debthttp://www.dailycensored.com/student-loans-the-financialized-economy-of-indentured-servitude/ • “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.” • “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”. 

50. (2) • 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.