Transatlantic Moves to the Market: The United States and the European Union

Sheila Slaughter and Brendan Cantwell

Moving beyond its original goal to “make Europe the strongest knowledge-based economy in the world,” the European Commission (EC) has now pledged to create an ‘‘Innovation Union’’ that will ‘‘unleash Europe’s innovative capabilities, improving educational outcomes and the quality and outputs of education institutions, and exploiting the economic and societal benefits of a digital society’’ (European Commission 2010, p. 10). Given that the European Union (EU) sees the United States (US) as its primary competitor in the “smart economy,” it is useful to analyze and compare the ways in which EU and US research universities are moving toward the market, a pre-condition for competition in knowledge-based economies. We are using the theory of academic capitalism (Slaughter and Rhoades 2004) to explore and compare US and EU trajectories (for further details on our work in this area, see Slaughter and Cantwell 2012).

US and EU Moves Toward the Market

Understanding movement toward the marketplace in the US and the EU requires attention to three dimensions: intermediating organizations, interstitial organizations, and expanded managerial capacity.

Intermediating Organizations

In neoliberal states, intermediating nongovernmental organizations (NGOs) span public, nonprofit and for-profit organizations, working across them to shape policy and soften and redraw boundaries, reconfiguring these spaces so they are more amenable to the market. In the US, beginning in the late 1970s, such intermediating organizations proliferated and included the Carnegie Commission on Science, Technology and Government (1993), the Council on Competitiveness (1996), and Committee on Science, Engineering, and Public Policy (1993, 1995), the Belfer Center for Science and International Affairs, the Brookings Institution, and the American Enterprise Institute. Notably, the Business-Higher Education Forum deliberately brought together CEOs from industry and academe to craft policy narratives that specified the way tertiary education should contribute to competitiveness. For the forum and its sister organizations, the proper work of government was to create a ‘‘climate for competitiveness’’ (Business-Higher Education Forum 1986), and they each worked on multiple levels to achieve that goal, blurring the boundaries between research, educational and industrial policies (Slaughter 1990).  University presidents and faculty participated in the work of all of these policy organizations. In short, many intermediating NGOs at the federal, state and local level promoted competitiveness and human capital as a way to hold the US position in the global order (Slaughter and Rhoades 1996, 2004, 2005).

The EU competitiveness trajectory exhibited some similarities with the US trajectory. Beginning in the 1980s, groups of European political and business elites began to lobby and operate within European institutions in order to enact neoliberal polices and establish a discourse on European global competitiveness (Bieler and Morton 2001; van Apeldoorn 2000). More recently, the European Union held the first meeting of a newly created Higher Education-Business Forum in 2008 to bring together university administrators, European Commissioners, representatives from chambers of commerce, and business executives, to network and coordinate activities to help Europe’s educational institutions better serve the smart economy (Europa 2008).

EC experts’ committees are another increasingly employed form of intermediating organization. The expert committees are constituted by the commission which bring together experts from the private, public and nonprofit sectors, and can be permanent or temporary (Gornitzka and Sevrdrup 2008). These groups are concentrated around knowledge economy policy areas, intermediating among public, nonprofit and private sectors and EU and national levels of government, promoting policies that follow a competitiveness enterprise program that links universities, research, and corporations, creating the smart economy.

In Europe and the U.S., the professionals who staff intermediating organizations circulate among the various sectors carrying discourse, narratives, and ideologies. Some represent corporate elites, while others are based largely in professional organizations with less direct linkages to the economy, as is the case with the EC’s expert committees and the National Academy of Sciences in the US. Although diverse, participants in intermediating organizations represent high-ranking segments of society and see advantages from rearranging the traditional, distinct sectors of state, nonprofits and for-profits to create new opportunities configured in a neoliberal frame.

Interstitial Organizations

Groups within universities often intersect intermediating organizations and the opportunities they provide through interstitial organizations, which then become bearers of the narratives and discourses of human capital and competitiveness. Interstitial organizations emerge from the interstices of existing organizations within the university (Mann 1986), often focusing on research commercialization or technology transfer. Following the passage of the BayhDole Act in 1980 in the US, research universities there established technology transfer offices and supported the process of patenting research discoveries and developing spin-off companies. Technology transfer offices were often staffed by scientists, engineers and lawyers initially lodged in more traditional units, as were the managers of university sponsored business incubators and research parks that followed. These units enjoyed substantial state and institutional investment and their purpose was to produce patentable intellectual property and innovative technologies, generating revenues from university science and technology and building the economy.

In the US, interstitial organizations emerged spontaneously from within universities to intersect with emerging opportunities, but in the EU, states and universities frequently worked together to develop intersecting structures through which innovation and commercialization might occur. There, knowledge transfer units (similar to technology transfer offices in the US) were created and began to develop a dense web of networks across a number of European countries. These networks supported “the transfer of best practice across members, to develop training support and international connections, to influence national and European policy, and to collect data on the performance of its members” (Geuna and Muscio 2009, p. 101). Over time, the European Commission Frameworks programs encouraged university and national efforts to stimulate knowledge transfer by providing ‘‘systematic procedure[s]’’ for setting R&D and technology transfer agendas, policies, and infrastructure.

Beginning with the Third Framework from 1991 to 1994 research, technology and development policy has been placed at the forefront of European innovation and competition. The Seventh Framework and Lisbon agreements amount to a more concerted effort to establish a European Research Area (ERA) in which trans-EU university/industry collaboration and innovation are central to the commission’s stated goal of making the EU the most competitive innovation region in the world (Breschi and Cusmano 2004). The commission incented the development of technology transfer organizations and also promoted a normative agenda through for a, resulting in recommendations and policy guidelines for how universities should handle intellectual property, technology transfer, and collaborative research including recommendations to establish ‘‘professional’’ technology transfer services and set intellectual property and patent policies.

Across both Europe and the U.S., these interstitial organizations create new careers and a host of new rewards. Because these opportunities emerge interstitially, they often build on or relate to activities that were core to the organizations and offices out of which they grew. However, interstitial organizations act like switching devices, channeling energy, effort and revenues to new entrepreneurial circuits of knowledge, and recruiting energies of faculty and nonacademic professionals within universities to academic capitalist knowledge/learning regimes.

Expanded Managerial Capacity

At the same time that interstitial organizations emerged from the interstices of traditional organizations such as departments, centers, and institutes, the managerial structures of universities were changing rapidly to enable universities to conform with and participate in shaping relations with neoliberal states. Although there are great differences in management modes among and between universities in the US and EU, there is a general trend towards increased corporate-like governance of higher education through three interrelated processes, each relating to expanded managerial capacity: interstitial organizations are being institutionalized, new managers are shifting the human resources profile within higher education institutions, and managers are increasingly acting to monitor, incent and discipline the increasing and highly differentiated numbers of faculty and nonacademic professionals in tertiary education work force.

In the US, expansion of managerial capacity is presided over by boards of trustees or regents working closely with “executive management” (presidents, chancellors, provosts, vice-presidents). These governing boards, whether public or private, are designed to provide universities some autonomy while managing the institutions and their endowments. Many board members are CEOs of prominent corporations (Pusser et al. 2006). Historically, these trustees or regents had fiduciary responsibility, which meant they were held legally to a very high standard of trust in 1998, the Supreme Court declared that trustees of institutions of higher learning would be held to the same (and lower) standard of conduct as trustees of corporations (Kavanaugh 2010), a reform that was in keeping with broader changes in the neoliberal state and that helped make universities a space supporting increased marketization, including establishing claims on faculty intellectual property and recruitment of full-fees paying overseas students.

Trustees often delegate to university executive managers, who in turn have utilized successions of management systems that are similar to New Public Management (NPM), which stressed marketization of state and supranational agencies, including national university systems, to improve economy and efficiency (Deem 2001, 2004; Deem et al. 2008, Bruno 2009). Generally, these management systems privilege management authority over decisions by faculty collegiums, asserting the rights of managers to assess, reward, and regulate academic work. In parallel, a sequential flow of management fads have entered US higher education in response to progressive pressure to increase ‘‘effectiveness’’ and ‘‘efficiency’’ (Birnbaum 2000; Bruno 2009). Like NPM, these fads give administrators the right to define and assess the value of academic work, and draw academic work into customer, or ‘‘stakeholder’’ accountability patterns.

US university managers have changed the human resources profile of universities so they resemble the human resources profile of ‘‘smart’’ economy corporations. Colleges and universities are increasingly moving away from a human resources profile of relatively large numbers of full-time permanent faculty who make decisions through vehicles like faculty senates to a managerial model comprised of increasing numbers of contingent faculty and researchers managed by growing numbers of non-academic professionals and managers (Schuster and Finkelstein 2006). Thirty-five years ago, 75% of faculty were tenurable and only 25% were adjunct or contingent or non-track; today those trends are reversed (Bousquet 2008). In 1987, for all institutions of higher education, part-timers were approximately 52% of full-time faculty. In 2007, with a 58% increase in part-timers, they are approximately 97% of full-time faculty. In other words, there are almost as many part-time as full-time faculty (National Center for Educational Statistics 2009).

However, US university human resources profiles differ from corporate profiles in an important respect. US universities have greatly expanded the number of nonacademic professionals, so their management structures are far from lean. Tertiary institutions in the US now have more non-academic professionals than faculty members. In fall 2007, at the national postsecondary level, professional staff (nonacademic professionals) without faculty status constituted a greater share (53%) of full-time professional employees than faculty members (47%). These non-academic professionals make approximately the same salaries as faculty, and like faculty, the salaries are highly differentiated (Knapp et al. 2008).

Many European countries are seeking to give universities more autonomy and create stronger executive management, with the goal of making universities more competitive in excellence indicators, more attractive for international student mobility, better able to prepare students for work in the knowledge economy, thus promoting economic development, and better positioned in new funding streams (European University Association 2009). Eliminating employee civil service status facilitates expanded autonomy, for example, as does establishing ‘‘satellite’’ legal entities (similar to US universities’ ‘‘arms-length’’ foundations and boards) that can engage in a wide variety of market transactions. European universities are also beginning to shift toward ‘‘CEO type leaders’’ with executive management groups that exercise enhanced decision-making power. Increasingly, boards include external ‘‘stakeholders,’’ who sometimes take a full role in decision making (Estermann and Nokkala 2009).

Some European universities have gone further. Finland, for example has initiated reforms that terminate universities’ status as state organizations and professors’ status as civil servants (Välimaa 2011). Other European nations—Denmark, Sweden—are considering autonomy similar to Finland’s. However, many faculty and students are protesting these changes.

As European executive institutional managers have focused on market opportunities, full-time faculty numbers have decreased relative to the numbers of contingent faculty (Ackers and Gill 2005; Rhoades and Sporn 2002; Eurostat Eurostat 2010a, b) and studies from individual countries suggest that numbers of non-academic professionals are also increasing. For example, in Norway the number of nonacademic middle management professionals has increased substantially (Gornitzka and Larsen 2004).

At the EC level, national efforts toward competition and ‘‘excellence’’ are promoted through ‘‘soft law’’ and efforts to use social technologies such as framework implementation and various rating systems as well as grants competitions to steer national systems in the directions outlined above. System-wide university management is now able to act in public, non-profit, and for-profit venues, deploying activities among these sectors for strategic advantage.

Similar patterns hold in the US. For example, relatively ‘‘autonomous’’ universities can often borrow in private bond markets for building loans and direct their students toward student aid loans from private corporations, while nonprofits like Harvard or Yale can draw on the resources of the state to guarantee bonds, receive aid for their students from state and federal governments, and of course compete for federal research funds, all without paying taxes. Similarly, both public and nonprofit universities can create arms-length appendages, both nonprofit and forprofit, to facilitate external ties and generate revenue. Both public and non-profit universities have endowments to which private citizens and corporations can make donations, greatly reducing their income tax. As the Finnish case demonstrates, European universities are moving in these same directions (Välimaa 2011).

In short, universities are increasingly managed as neoliberal institutions. As NGOs with industrial interconnections, universities have access to public funds that can be used to generate commercializable knowledge. Public support for universities can act as inverse redistribution when public funds are channeled through universities in the service of commercial interests.

Implications and Conclusion

The US and EU are following very different paths to bring higher education closer to the market. The US move to the market was incremental and frequently led by a wide variety of NGOs, often with strong ties to the for-profit sector and participation by segments of universities prior to federal legislation or mandates. This lengthy, unplanned process has made American research universities the most heavily marketized in the world. The EC is reverse engineering Anglo American models to reconstruct governance technologies for uniquely European contexts that embed competition in nation/ state initiatives. Although the discourse surrounding university marketization promises growth of high-paying jobs and prosperity, evidence to date suggests very uneven results for both the US and EU.

The implications of these transatlantic moves are many, and to be fully understood require situated case studies that tease out consequences. Nonetheless, our analysis is suggestive of three broad implications for states, intuitions, and academic disciplines.

Endless competition in academic outputs, with consequent ratcheting-up of rhetoric, costs, and governance technologies, is a likely outcome of policies that place universities at center of national competition to be the top smart economy. Given that there is no finish line, competitors are compelled to maintain a drive to excellence. And resources are needed to keep the throttle down. High expenditures can be rationalized by the need to maintain excellence and global competitiveness. In the US, a result is high debt burdens among workers and questionable long-term economy impacts (Chaker 2009). In Europe, the commission has generated new streams of funding, yet calls to EU nations to increase the share of GDP for higher education have not been fully met. Substantially increasing government higher education expenditures seems unlikely given the fiscal restraints many EU countries are experiencing, and it is unclear to what extent students and their families will tolerate increased tuition fees.

Uneven development is a hallmark of the neoliberal economic organization. The US has experienced growing income inequality since the 1980s (Saez 2009), and the gap between the rich and poor in European countries appears to have been expanding since the 1990s (Harjes 2007). Academic moves to the market are also associated with patterns of uneven development. Individual institutions and academics, as well as individual fields of study, have entered new circuits of knowledge and tapped into new funding streams, but others have been left behind. At the institutional level this gap is most apparent in the US with the growing inequality of resources and faculty salaries between well-to-do nonprofit universities (which receive substantial public support) and public universities (Alexander 2000). In the EU, institutional stratification is occurring through differential state funding structures including performance-based funding models that over the longer term may concentrate resources in relatively few institutions (Geuna and Martin 2003).

Uneven development will perhaps be most apparent between fields. Applied science and engineering and some social sciences with market applicability will likely continue to receive support and status, while other social sciences, the arts and humanities will languish. Research funding patterns in both the EU and US demonstrate that this pattern of uneven development between disciplines and within universities is well underway—faculty in innovative STEM fields on average make substantially more than faculty in the fine arts and/or humanities. The decline of the arts, humanities, and social sciences appears to be clearly associated with moving towards the market. The arts, humanities, and social sciences are historically the fields that offered social critique, including critiques of neoliberalism and the academic capitalist knowledge/ learning regime.

Increased exposure to market failure is another likely implication of the market moves we have described. Exposure to market failure can be understood in at least three ways. First, increased managerial capacity, targeted funding streams, and exclusive knowledge circuits, all nested within narratives that extol the value of science and engineering in knowledge economies, have led to heightened investment and managerial focus on a limited array of academic pursuits. Moreover, these few and privileged academic activities are increasingly reliant on private markets through industry-academy collaborations, commercialized knowledge, and spin-off firm development. If the markets connected to these activities—biotechnology, energy, information technology, for example—were to collapse like the dot-com industry in the 2000s, many universities may be exposed to limited returns on their investments and erosion of legitimacy, with few other assets to fall back upon.

Second, there is no guarantee that efforts to compete in academic enterprise will be successful, either in traditional academic measures such as publication output, or in market measures including patent and technology transfer income. As institutions increasingly concentrate their efforts in a narrow array of academic markets, the chances of any individual competitor to experience success would appear to decline. We suspect that a likely outcome of moves to the market is those institutions already most successful in knowledge economies will extend their advantage over institutions less well positioned to compete. Substantial investment in market activities is a losing proposition for many universities.

Third, the neoliberal state and deregulated market economy may pose the largest risk of market failure for universities. As long as the economy was expanding, universities were able to compete for increased funds for innovation, but the large bank and corporate failures that set off the deep market crisis of 2009 have slowed universities.

The boom and bust cycles of neoliberal capitalism have clearly contributed to the financial calamity. Despite the market rhetoric, public funds (whether from regional, local, federal or supranational state agencies) provide the greatest revenue source for research universities. Ironically, those institutions may have to tap their largest clientele—undergraduate students—with prices close to the real cost of higher education to keep meeting classes.

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This article draws upon recent work by McBee Professor Sheila Slaughter and former IHE postdoctoral associate is the first occupant of the McBee Professorship of Higher Education and during the last fifteen years she has focused on topics such as intellectual property and statutes, commercialization of academic science and technology, market mechanisms in higher education, and academic capitalism. Dr. Slaughter has worked with the European Universities Project, HeDDA - the European association of research centres, institutes and groups with expertise in higher education research, the Salzburg Seminar, and various groups in Mexico and Argentina on issues related to marketization and commercialization of science and curricula. She was named an Erasmus Mundi Fellow in 2009 by HeDDA, which is funded by the European Union.  In 2012, she was honored by being named an AERA Fellow.

Brendan Cantwell, currently assistant professor at Michigan State University.