Beyond Economics and Ecology

Science, Technology,

The Radical Thought of Ivan Illich

An introduction I wrote to the book.

After Illich: an Introduction

The ecological and economic crises have passed. The word ‘crisis’ derives from the Greek krisis, which referred to that moment in the course of an illness when it decisively turns towards either health, as when a fever breaks into a sweat, or death, as when the pulse fatally weakens. Crisis marks the moment beyond the fork in the road, when the road not taken fades into the distance.

 

The economic crisis is behind us because ‘full employment’ is no longer thought to be achievable, whether in advanced or emerging economies. Billions worldwide are unemployed. Millions more are underemployed or belong to the class of the “working poor” whose wages do little to lift them from misery. The ecological crisis is in the past as well in that the physical environment surrounding humans has turned inhospitable to many. Disappeared forests, privatized lands, paved streets, and foul airs are but some of the features of the degraded land on which few can subsist.

 

Even as they dimly recognize it, many react to this state of affairs with a mix of resistance, anger, and fear. From Puerta del Sol in Madrid to Zuccotti Park in New York City, young and old have agitated for work. Hundreds of thousands eagerly seek low wages jobs available only to a tiny fraction. Desperate to obtain employment, many students borrow money to pay for the privilege of working as interns. On Earth Day 2012, although millions of people assembled from Melbourne to Maui to protest intensifying environmental degradation, research funds now pile up for geo-engineering on a planetary scale. Proposed schemes include stirring the oceans to absorb more carbon, as if seawater were simply tea in a giant cup. In towns and counties across central Pennsylvania, citizens accept poisoned aquifers and waterways as necessary consequences of ‘clean’ natural gas.

 

Forty years ago, Ivan Illich (1926-2002) foresaw the coming crises. He argued that the industrialized societies of the mid-twentieth century, including communist Russia and capitalist USA, were already burdened by too much employment and too much energy. Explaining that habituation to employment frustrates and destroys self-reliance, and that the increasing power of machines deepens dependence on them, Illich warned against those whose misunderstanding of ‘crisis’ would perversely bring on what they sought to avoid. Even though this is precisely what they have wrought, politicians and scientists continue to stubbornly insist that the ‘economic crisis’ is simply a matter of not enough jobs and that the ‘ecological crisis’ is a matter of not enough clean energy. ‘Not enough jobs’ channels attention to creating more employment by expanding the economy, just as ‘not enough clean energy’ confines debate to getting more of it through techniques that reduce carbon emissions. This persistent fixation on more employment and more energy has now found expression in dreams of a so-called ‘green economy,’ which in one stroke will somehow wipe out unemployment and renew the environment. It’s a fixation that blinds us, Illich noted decades ago, to recognizing the thresholds beyond which useless humans will be forced to occupy uninhabitable environments.

 

Doubtless, the fear and anxiety of a jobless life is palpable to the intern who must pay to work in a job. So are the incomprehension and anger of the family become homeless because displaced by a hurricane. But millions of others, who may be luckier, feel trapped between the pincers of shrinking paychecks and the rising costs of gas, heating oil, and food. For the many who must bear it, however, this feeling of vulnerability and precariousness need not lead to paralyzing despair. Instead, forced by their circumstances to acknowledge that widespread unemployment and a ravaged environment are likely here to stay, they may, with a wisdom and humor, rediscover way of living well. Precisely because good jobs and clean energy are now thought scarce, it is more than ever possible to begin the task of rethinking our attachments to ‘employment’ and ‘energy.’

 

Selected from Illich’s many essays, pamphlets, and drafts, the four items reprinted here remain vitally important to that task. Though written between 1973 and 1983, they retain an urgent relevance to those who must inhabit a world without secure employment or supportive environments. ‘Employment is good’, ‘economic growth is necessary’, ‘technical innovations liberate,’ –these were unquestioned assumptions when Illich was writing these essays. They continue to maintain their grip on the collective imagination, although less tightly. Critical reconsideration becomes all the more difficult when an assumption has been left unquestioned long enough to be taken for a certainty and to even congeal into perception. Unlike many of his time and later, Illich’s thought is radical in the sense of going to the roots of modern perceptions. These unsettling and disturbing pages are therefore likely to be useful now to those who seek to find a way, for whatever reason, beyond economics and ecology.

 

But the reader must exercise forbearance. First, these essays carry the mark of the confrontations Illich engaged in at the time. During the late 1960s through the early 1980s, Illich spoke to packed houses from San Francisco to Sri Lanka, was feted by politicians such as Indira Gandhi and Pierre Trudeau, engaged intellectually with the likes of Michel Foucault and Erich Fromm, and became a fierce and outspoken, if still obedient critic of the Roman Catholic Church which had once viewed him as a favorite son. Second, his thinking cannot be filtered through the political categories of left/right or progressive/conservative. They are unhelpful to fully appreciate a thinker who critiques both the market economy and the welfare state; who takes issue with the economic presuppositions held by both capitalist and socialist regimes; and who questions the supposed virtues of both ‘family values’ and working women. Third, and perhaps most important, his texts seem easy to read because he wore his considerable learning lightly. Their smooth surfaces belie finely wrought conceptual distinctions that support densely packed arguments. If they are to fully enjoy these sometimes polemical, sometimes humorous, but always sparingly crafted pieces of prose, readers who think they have read a text on skimming it will have to slow down and savor Illich’s words.

 

Each of the four essays reprinted here was written for a specific occasion and together comprise only the smallest selection from a larger corpus questioning commodity and energy-intensive economies. The essays are presented thematically instead of chronologically to offer a better view of the sweep of Illich’s argument. In the first two, “War against Subsistence” and “Shadow Work,” Illich reveals both the ruins on which the economy is built and the blindness of economics which cannot but fail to see it. The second two essays, “Energy and Equity” and “The Social Construction of Energy,” unearth the nineteenth century invention and subsequent consequences of ‘energy’ thought of as the unseen cause of all ‘work’ whether done by steam engines, humans, or trees. The science of ecology relies on this assumption and, as Illich explained, unwittingly fuels the addiction to energy. The close dance of energy consumption and economic growth is characteristic of not just industrially geared societies. After all, energy consumption steadily increases even in so-called post-industrial societies, fueling the fortunes of Google and Apple no less than Wal-Mart.

 

Historians have marked the transition from agrarian to industrial society by that phenomenon called the enclosure of the commons, seen vividly in Great Britain but elsewhere as well. The commons referred to the fields, fens, wastelands, and woods to which access was free to all for pasturing livestock, planting crops, foraging for fuel wood, and gleaning leftover grain. Well into the eighteenth century, commoners comprised a substantial proportion of the British population and derived the greater portion of their sustenance from the commons instead of the market. From the mid-seventeenth century, but particularly over the hundred years until 1850, thousands of Enclosure Acts legalized enclosures that forced commoners to become landless peasants with no independent means of subsistence. Now fully dependent on paid work, they became the working class.

 

Privatizing the commons meant transforming land that was open to general use into an economic resource. Since scarce resources require legal and police protections, Illich insisted on not confusing the commons with public property. The latter no less than private property, is protected by the police, as for example are public parks and ‘free speech zones.’ In contrast, mutual aid, custom, and customary rights among kin and interdependent households characterized use of the commons. The life in common was not devoid of market relations, as for example when working occasionally or purchasing salt. But as Illich noted in his essay on “Useful Unemployment and its Professional Enemies” “all through history, the best measure for bad times was the percentage of food eaten that had to be purchased.” Commoning gave those who relied on it a floor against destitution. It is the vital importance given to provisioning over profiteering that accounts for such common customs as limits to the hoarding of grains during times of dearth. As the historians E.P Thompson and J.M. Neeson have explained at length, a moral economy encases and fetters the market economy when dependence on the market is balanced by the independence of self-subsistence.

 

However, Illich argued, the enclosure of the commons was but one chapter in a longer history of the war against subsistence. Indeed, it may not even be industrial products that best exemplify the separation of people from their ability to subsist. Instead, he suggested, ‘the service economy’ offers a more prototypical example for the separation of what economists call ‘production’ from ‘consumption.’ As Illich argued in “Vernacular Values,” in the same year that Columbus accidentally discovered the New World, Elio Antonio de Nebrija petitioned Queen Isabella of Spain to adopt “a tool to colonize the language spoken by her own subjects….” From Catalonia to Andalusia, the Iberian peninsula of the fifteenth century was home to a profusion of vernaculars forged in the kiln of everyday trade, prayer, and love. Columbus, who spoke several languages and wrote in a couple more that he could not speak, is a perfect example of how adept people can be without taught language skills. But Nebrija intended his Castilian grammar book and accompanying dictionary as tools to separate people from their untutored ability to speak. He intended for taught standardized language to discipline peoples’ tongues in the interest of imperial power.

 

What was for Nebrija a stratagem of empire has by now become a need. In contemporary India, everyday speech is taught speech, whether it is the Hindi spoken at the store, the Tamil chattered at home, or the Boston English used to answer 1-800 help lines on behalf of Citibank. Speech is no longer uttered in the course of daily life but results from the consumption of a scarce commodity acquired from language instructors. For Illich, it is the modern professions that function as the most potent propagandists of human needs, whether for schools or for hospitals. Indeed, in his essay on the “Disabling Professions,” he argued that the construction of humans as needy beings was one of the most pernicious consequences of economic society. In the guise of experts, professionals discriminate against people by imputing a lack, an inability, or a need. They then mask such discrimination by justifying it as doing a service, prompted by their care. This expertly managed belief that humans are beings in need of services from certified professionals has deep roots beginning in the eighth century. As Illich elaborated in “Taught Mother Tongue,” it was then that priests became pastors by defining their “own services as needs of human nature” and by linking salvation to the obligatory consumption of those services.

 

Illich proposed to resuscitate the word “vernacular” in its historical reference to what is “homemade, homegrown and homebred,” as a more fitting term than “subsistence,” “human economies,” or “informal sectors,” to refer to what people do for themselves, whether that is singing, cultivating crops, building homes, or playing. In the sense he gives the word, the vernacular denotes non-market activities, those not captured by the logic of exchange, without thereby implying a “privatized activity…a hobby or an irrational and primitive procedure.”  

 

The separation of people from vernacular practices delivers them to a regime of scarcity. A dependence on scarce goods and services can be maintained by force, as with zoning laws prohibiting backyard or rooftop chicken coops. Compulsory schooling, like most other expert and professionally defined services, commands dependence by imputing legally sanctioned needs. But institutionalizing envy can also propel dependence on commodities. As Illich argued in Gender, traditional cultures recognized invidious comparison as destructive of social relations and devised symbolic forms such as the ‘evil eye’ to suppress it. But modern economies are organized to mask envy as a way to better disseminate it. ‘Keeping up with the Joneses’ or ‘bettering one’s condition’ are slogans that rhetorically blunt what the pastor Bernard Mandeville in 1714 baldly stated as the formula for economic growth: private vices, public benefits.

 

Despite the contrary assertion of standard economics textbooks, Illich thus argues that modern economies do not solve the problem of scarcity. Instead, the economy is better understood as a machine for the production of scarcity, whether through force, need, or envy. The destruction of the vernacular is both cause and consequence of the economy, and, the resulting subject of the economy is possessive, invidious, and needy. Economic ideologists of all stripes, including socialists and capitalists, are convinced of a human need for education and electricity. Their shared conviction reveals them as agents united in the ongoing war against the vernacular, advertised as the virtuous and uplifting cycle of work and consumption.  

 

Throughout the Middle Ages, wage labor was considered a mark of the miserable and thought to be a fate worse than beggary. By the sixteenth century, labor was ennobled and dignified as work by the likes of Martin Luther and John Calvin. By the seventeenth century, those who stood to profit from it argued that work was a natural cure for poverty, which was seen as being caused by laziness or indolence. Conveniently, the assumption-turned-perception of work as natural overlooks that it is the very dependence on wages that modernizes poverty. As Illich pointed out, the modernized poor are those who are prevented from living outside the economy and yet are forced to occupy its bottom rungs.

 

But, argued Illich, the thoroughgoing dependence on cash is only the visible tip of an even deeper injustice. A society organized around putting people to work will necessarily create “shadow work,” which Illich defined as the unpaid toil needed to make commodities and services fully useful. If one has to buy eggs because one cannot keep chickens, then the effort of going to the market, finding a parking spot, and returning home comprises frustrating shadow work. One is engaged in shadow work when doing one’s homework because one is compelled to attend school, or when surfing the Internet to get information on one’s medical options. The hours lost in commuting to make oneself useful to an employer is shadow work necessary to ‘make a living.’

 

Illich found the paradigm of shadow work in housework. Unlike commoners, workers in the modern economy typically do not consume directly the fruits of their labor. Until the early nineteenth century this forced separation of production from consumption fueled protracted protests, many led by women. Illich argued that these protests were quelled, in part, by glorifying the confinement of women to their houses. ‘The fairer sex’ rhetorically ennobled the enclosure of women as housewives whose unpaid toil exemplifies the historically new sphere of shadow work. The house as the site of unpaid reproduction is the necessary shadow cast by the workplace as the space of paid production. The creation of unpaid work as a requirement that other work be paid, suggested to Illich that the subject of economics was also genderless. The economy is fundamentally sexist, he argued, because it recognizes the human only in its capacity to produce and reproduce. Even if women are drawn into the workforce and men are encouraged to help with childrearing, most of the unpaid toil is overwhelmingly borne by women. More generally, he speculated that the economy would collapse if all the shadow work required for its functioning were to be paid for. How much would Facebook be worth if its users were paid for their efforts to produce content and consume advertisements?

 

Shadow work remains hidden partly because it is sentimentalized. The defense of ‘family values’ sentimentalizes sexist oppression by maintaining the fantasy that the modern house continues immemorial tradition, whereas the demand that housework be paid only exposes the paradoxical freedom sought in dependence on wage-work. Shadow work does not foster vernacular modes of living nor does it nourish the realm of autonomous being-together. Instead, it supports and deepens the dependence on a life given to employment, even when there are fewer jobs available. Parents devote countless hours to their children’s homework to ‘upgrade the human capital’ that schooling delivers to the workplace. Illich noted that sentimentalizing such shadow work as ‘quality time’ is the kind of dishonesty needed to live with the iniquities inherent in commodity-intensive markets.

 

Forty years ago, Illich suggested self-service would be the species of shadow work that would likely expand faster than wage labor. That may have come to pass, when computer- prompted busywork such as online banking and deleting spam is added to the time spent on home improvement projects, life-long learning, and unpaid internships. He also argued, in “Energy and Equity” that the continued growth of energy-intensive social arrangements would destroy more than just the physical habitat of men and women. In hindsight, his tightly argued warning and plea point to the road not taken as the crises gathered. It may however still offer hope to those now caught in the vise of endemic underemployment and a ravaged environment.

 

The widespread belief that economic growth comes at the cost of ecological despoliation overlooks the more decisive and prior destruction of the socio-cultural milieu of a people; the vernacular. For this reason Illich wrote in “Silence is a Commons” that the most virulent kind of ecological degradation occurs with “the transformation of the environment from a commons to a productive resource.” It is not just that land then becomes real estate, viewed from a distance rather than trodden underfoot. Rather, economic values proliferate by engulfing the variegated ways of living in common, a kind of destruction reflected sharply in the steady vanishing of languages. While waste and pollution caused by economic growth describe environmental degradation, Illich recommended the term “disvalue” to name the denigration and destruction of the social environments necessary to propel that growth.

 

Not so long ago, services and commodities swirled only around the margins of everyday life. Today they are everywhere. For most of human history, tools were shaped to the natural abilities of their users. Today people function as appendages of their tools, which set the rhythm and pace of their lives. Whether they are cars or high-tech hospitals, when the quantity of commodities and services exceed a certain threshold of intensity, they exclude non-market alternatives and therefore impose what Illich called a radical monopoly. Paved streets for cars and rails for trains demand the Earth be reshaped to fit.

 

But to this environment degradation must be added three kinds of frustration that results from the radical monopoly of energy-intensive commodities. Too many cars on the road spark ‘road rage,’ as does too much education produces incurious teens. Both are examples of a frustrating subversion that Illich named technical counterproductivity. Speedy cars push bicycles and pedestrians off the streets just as too many emails and television shows overwhelm face-to-face conversations. This displacement of vernacular activity by economic artifacts he called structural counterproductivity. Just as consumers of too many passenger-miles believe they can move only when they are sitting on a moving seat, so the buyers of too many student credits believe they can learn only what they are taught. The self-perception of both expresses the cultural counterproductivity that result from the repeated use of packaged goods, just as myths are engendered by ritualized behaviors. That the ecological and economic problems are still understood in terms of scarcity, whether of clean energy or well-paid jobs, reveals how deeply self-perception has been shaped by the overuse and suffocating presence of commodity intensive markets and energy intensive technologies.

 

Economics and ecology cannot comprehend the vernacular, Illich argues in the “Social Construction of Energy,” because they mystify a social construction as a natural phenomenon. From its very beginnings, the science of ecology imbibed the assumption of scarcity and imputed it to the whole of nature. Bees and trees, whales and bacteria –all species are seen as locked in a battle over scarce nutrients, for instance.  In documenting the twists and turns that scientists took during the nineteenth century to construct ‘energy’ as the invisible and indestructible source of all ‘work,’ Illich shows how both work and energy, when used in everyday language, makes a scientific construction appear to be a natural phenomena. Whether aggregated as population or proletariat, individuals are understood en masse as a source of labor power to be worked. In the same timeframe, the universe or Nature itself came to be understood economically as an energy generator with the potential for work. Illich suggests the entwined assumptions that nature works and that work is natural masquerade as certainties that now keep propped up a world built for energy-intensive employment.

 

To Illich, the differences between economics and ecology were less significant than the presumptions they shared.  The economist wants to replace people with cheaper, more efficient machines. The ecologist wants to get rid of cars and replace them with energy saving bicycles. However, neither suspects that machines and people are incomparable, except as objects of science. For the scientist, ‘work’ is done and ‘energy’ is consumed by a steam engine, a rat, a data center, and a pedestrian. And as ecologists and economists now form an alliance to tout the so-called ‘green economy,’ they subject the economy of commodities to the greater economy of energy. They tighten the noose of scarce resources without contributing to freedom from dependence on jobs and joules. As Illich noted many years ago, “radical monopoly would accompany high-speed traffic even if motors were powered by sunshine and vehicles spun of air.”

 

The radical monopolization of vernacular life has now made it almost impossible to live without high-energy inputs, outside the cycle of work and consumption, beyond the grip of scarcity. Yet by the force of circumstance, this is the situation that many must now contend with as wage work dries up and shadow work grows. To protect the means of provisioning for themselves, commoners once agitated not for minimum wages but for a ceiling on the profits derived from enclosing the commons. They did not want a handout but instead insisted on the liberty to fend for themselves. Similarly, Illich argues that the speed of motor-powered vehicles on common streets be limited so as not to hinder the natural mobility of people on foot or bicycle. Such proposals are unlikely to make much of an impression on energy addicts and workaholics.

 

But they may intrigue others wanting to kick bad habits. However, if, above all, the task of living differently entails the task of thinking differently, then one must first escape the illusions fostered by such pop-scientific terms as ‘work’ and ‘energy.’ To help with this, Illich favored thinking with concepts rooted in bodily experience. In contrast, transportation scientists have no concepts to distinguish biking under one’s own power from being freighted in a bus. For them, both are comparable methods of locomotion. Social scientists define ‘poverty’ by the quantity of income. So understood, ‘poverty’ does not contrast the misery of those who are dependent on cash with the self-sufficiency of those who do not need it. Illich insisted on conceptual clarity rooted in felt perception as an antidote to the indiscriminating constructs of scientific thought.

 

These remarks do not summarize the four essays by Illich. Instead, they are invitations to rediscover a thinker who saw deeply into fundamental questions. Illich’s texts demand and reward close attention. In that effort, three misunderstandings should be avoided. First, only the inattentive reader will conclude that Illich was against technology per se. Such a reader must have misunderstood an argument built on defending, for example, bicycles, libraries, aspirin, and books, all of which may use high-tech materials and industrial methods of production. A second and related confusion is to believe that Illich argued for the complete abolition of scarce commodities and services, whether computers or medicine: he simply insisted on discerning the quanta of commodities needed to expand the range of autarkic action, the proportion of power tools that would not destroy the use of one’s hands. Third, one should guard against the idea that because he diagnosed the present from the vantage point of history, Illich was also calling for a return to the past. Instead, as he stated in “The Three Dimensions of Public Choice,” “such a choice does not exist,” and such “aspirations …would be sentimental and destructive.” If he cautioned there is no way back, Illich also refused the seductions of futurists. These visionaries of freedom now promise redemption through a ‘low carbon full employment’ future. Forty years ago, Illich saw into that future and recognized there the tightening shackles of wages geared to watts.

 

Readers who share that recognition may be now prompted to laugh at the ardor of their attachment to false promises. That laughter may also liberate, in those who desire it, new efforts to invent and imagine ways of living that are truly free. To them, debates still tethered by expanding markets and powerful machines are irrelevant. They realize that the noisy discussions between proponents of ‘regulated’ instead of ‘free’ markets leave unquestioned the rule of scarce resources. They also see the confining grip of techno-science in claims that ‘sustainable technologies’ will cure technologically caused damages. Moreover, those searching and inventing styles of living relatively free from the rule of economic value and techno-science are not doctrinaire. They know that the vernacular stubbornly persists in the interstices of contemporary life and lies orthogonally to commodity-intensive markets and energy-intensive machines. They stitch together, as in a patchwork quilt, modes of life oriented by the homemade, homegrown, and homebred. They adroitly sidestep the charge of hypocrisy when leveled by those who disparage and repress vernacular ways. They leave purity of intent to the priests, definitional exactness to the academics, and despair to the intellectuals. Now freed of illusory attachments, they are too engaged in figuring out the shape of a sweeter, more beautiful life amidst the ruins bequeathed to them.

 

Valentina Borremans graciously gave me the permission to republish these essays. Catheryn Kilgarriff of Marion Boyars not only keeps all of Illich’s books in print but also has been generous in her accommodation of missed deadlines. I am pleased to acknowledge John Verity’s editorial suggestions that spurred me to rewrite this text. Carl Mitcham’s suggestions helped polish it to the finish it now possesses. I remain grateful for the nourishing patience of Samar Farage. None of them is responsible for the remaining errors and infelicities.  

 

Sajay Samuel

May 2013

 

 

A Perverse Machine

Uncategorized
As one who has benefited from higher education in America, I find it particularly galling to accept what this essay so ably documents: that the US higher education industry produces legions of indentured citizens. Kevin Merlini and Eric Reale are recent graduates of the master’s of accounting program at the Pennsylvania State University. They present a chilling diagnosis of how institutions of higher learning contribute to impoverishing the lives of many who pass through their doors. Yet, they also offer a powerful remedy to lighten the burden of student loans.
Some truths are almost unpalatable for their bitterness. For far too many Americans, a college degree has not put them on the road to riches. Perversely, it has weighed them down in a bog of debt. Unlike car loans, which are attached to property, student loans are tethered to the person. Unlike credit card debts, which can be written off in bankruptcy, student loans are almost impossible to erase. Neither disability nor poverty stays that bill collector’s hand. A college education is touted as the passport to the American Dream. For the many Americans who are saddled with student debts that persist unto death, that dream has turned into a nightmare.
The facts are clear enough. Total student debt has tripled over the last decade, exceeding a trillion dollars as of 2014. About 40 million Americans now carry educational debt, which, excluding home mortgages, is the largest component of household indebtedness. Nationwide, both the number of borrowers and the average amount they borrow have mushroomed. In fact, the number of Americans burdened by loans for education has increased in every age group, as has the average debt and the number of people who cannot make their payments. Some 11 million Americans are weighed down by student debt exceeding $25,000, and close to 7 million cannot afford to make their payments. At Penn State, in 2012, three out of every four students graduated carrying some student debt—$35,000 on average. If these numbers seem abstract and unreal, they underlie the grotesque necessity that has driven Penn State students to start the Lion Pantry, a food bank to help fellow students who cannot afford to eat.
Student debt is the consequence of the relation between two factors: the high tuition costs borne by students, and their inability to pay off the loans taken out to cover those costs. These are two jaws of a trap that when shut captures a student in debt. The authors crisply summarize the reasons why the cost of education borne by students has increased so dramatically and why their ability to repay these loans has weakened so drastically.
Students bear an increasing share of tuition costs for many reasons. However, the authors identify the availability of student loans as the catalyst for both increasing tuition costs and the share of those costs placed on students. In the post-war years, higher education was encouraged as the civilian arm of war, and the first federal student loan program, which began in 1958, was fittingly called the National Defense Student Loan Program. Based on the assumption that the cost of education would remain relatively stable, it was thought that student loans would help more Americans attend college. Paradoxically, the open spigot of student loans increased the size of the tub to be filled. Universities, both not-for-profit and profit-seeking, began increasing tuition costs. The cost of attending college has risen dramatically in recent decades at a rate exceeded perhaps only by that of healthcare costs. Universities taking advantage of the ample supply of student loans have primarily fueled this explosive growth. Moreover, access to student loans has also allowed states to reduce their financial support for institutions of higher learning. Thus, student loans did get more Americans to college—but only at the price of unprecedented debt.
Yet, students who took on such large loans would not be trapped in debt if they were earning enough income to pay them off. It is this aspect of the findings reported in this essay that shocked me. I had naively assumed, as many do, that a college education is a passport to economic well-being. However, for many, it may be an extremely unwise investment—an invitation to indigence.  
Much is made of the fact that college graduates’ lifetime earnings exceed those of people with only a high-school diploma. This so-called college wage premium, which by some measures exceeds 50% on average, has been widely touted as the reason to encourage all Americans to attend college. But as with all such numbers, much is cloaked by this statistical average. For more than a decade now, the earnings of both men and women with college degrees have actually decreased. Consequently, college graduates earn more than high school graduates do because the latter’s wages have fallen even more than those of the former. Perhaps the college premium should be renamed the “high-school discount.”
    Moreover, not everyone who attends college graduates. For the nearly 45% of those who start college but drop out—for mostly financial reasons—there is not much of a wage premium. In fact, over the last decade, more than a third of college dropouts earned less than the median income of high-school graduates. Even for those who do obtain a college degree, their choice of major and of school markedly affects their income. For instance, a student majoring in accounting at Penn State can expect to earn significantly more than a student majoring in education from the University of Phoenix.
More disturbing still is the extent of underemployment among college graduates. As the number of college graduates in the labor pool disproportionately increases relative to the number of jobs that require a college degree, many college-educated adults find themselves underemployed. In 2010, almost half of the some 42 million working college graduates in the US had jobs that did not require a college degree. Perhaps as a consequence of being underemployed, a fifth of male college graduates earned less in 2011 than the median earnings of their counterparts with a high-school diploma only. Female college graduates were a bit better paid than their high school counterparts, but not by much. Long-term trends suggest that almost a third of all college graduates will remain underemployed. Indeed, the expected mismatch in the coming decade between the number of college graduates and the available jobs needing their knowledge and skills is worrisomely large. In the period of 2012–2022, about 19 million new college graduates will have to compete for 3 million new jobs requiring a college degree. Already, there are more unemployed job seekers than job openings in almost every occupational category, and low-paying low-skilled work is the fastest-growing source of employment for youth. Many sober observers of the US labor market fear that recent trends portend a population permanently unemployed and underemployed.
    Thus, the two jaws of the debt trap snap shut—and stay shut. On the one hand, all students bear more of the rising per-student tuition fees. On the other hand, many of them face relatively unrewarding job prospects. More and more Americans are herded into college on the promise of upward mobility. But this is a cruel joke for the many millions of college graduates who remain trapped in low-paying jobs while carrying debts that cannot be canceled except in death. For these Americans, the higher education enterprise has become a factory that produces indentured citizens. What’s worse is that the indentured students are blamed for their predicament. Politicians, pundits, and professors hold debt-ridden students responsible for believing what they were told, i.e., that by buying the product called a “college degree” they could partake of a glittering future of highly paid, or at least sufficiently paid, employment. In contrast, the young authors of the essay published here refuse the cruel cynicism of blaming those who have trusted the promises of their betrayers.
The proposal presented here is neither sentimental nor impractical. The authors do not demand that higher education be free for all. Nor do they propose that a version of the Biblical jubilee—the mass expunging of all debts—be applied to student debts. Nor, indeed, do they ask that student loans be treated like all other debts, i.e., extinguished when circumstances force a person into bankruptcy. Instead, they only seek to lessen the burden of student debts. To do so, they consider the three factors driving student debt: the rising cost of tuition, the modes of financing debt, and the employment prospects for college graduates. The authors account for all three factors and the interplay between them. Thus, their proposal advances the discussion beyond many recent proposals, in which only one or another of these three factors is considered.
    Their proposal is built on a central insight. They recognize that a student directly consumes perhaps less than 10% of all the resources used to deliver a credit-hour of instruction. When John or Mary eats a hamburger, each consumes this item exclusively. In contrast, when John and Mary sit in the same classroom, they share the services provided by faculty, staff, and facilities. John’s use of the classroom does not prevent Mary from using it too. Some accounting procedure is needed to distribute the faculty, staff, and facility costs to determine the individual cost of educating Mary and the individual cost of educating John. What appears a simple enough matter nevertheless has important consequences that universities appear to ignore when pricing credit-hours. The standard method of dividing all university costs by the number of credit-hours in order to derive the cost per credit-hour is both simplistic and wrong. Most universities use just such an accounting method in determining tuition fees. They charge the same price per credit-hour, though some do opportunistically find ways to tack a few dollars onto the most popular or lucrative majors. Consider again John who chooses to major in drama and theatre arts. Mary chooses electrical engineering. Each pays the same amount for the college credits they buy, which suggests that the cost of the resources each will consume is the same. But that is surely wrong. Electrical engineering students use expensive lab equipment and are taught by highly paid faculty. Drama students do not need labs or any other kind of comparably expensive facilities, nor are the faculty who teach them paid nearly as much as engineering faculty are. Thus, electrical engineering students consume far more institutional resources than do students studying drama. When each of our two students pays the same for tuition, the student majoring in theatre is effectively subsidizing the electrical engineering student’s education. By implication, it is likely that students majoring in the social sciences and the humanities are subsidizing students majoring in business, engineering, and other technical fields. If graduates in the subsidized major earn more than graduates in the subsidizing major—for example, if electrical engineers earn more than theatre actors—then such circumstances only compound the unwarranted advantages of the subsidy. There are well-known accounting procedures taught at universities across the country that would construct a more accurate assessment of the resources consumed by students according to major. It is ironic that universities do not apply to themselves what they teach others to do.
There is a second aspect to understanding that an overwhelming proportion of the costs of higher education are not spent for specific students or even for a specific major. A significant portion of the total costs of running a university is spent on behalf of all the students, as for example the salary of the university president and the maintenance of general infrastructure. It may seem reasonable to divide such expenses equally among all credit-hours on the assumption that each student accounts for these expenses equally and/or derives equal benefit from them. But it is, in fact, more reasonable to allocate these non-specific shared resources by some measure of the benefits they confer. Allocating such resources in proportion to the income graduates in each major can reasonably be expected to earn takes employers’ offers of wages as a better metric of the value contributed by shared resources to any given student. And, it is here, that Kevin and Eric find the hinge of their argument: They accept that the sole purpose of education is employment; therefore, the benefit of education is best measured by the income earned as a result of that education. That Bill Gates is a college dropout or that Peter Theil of PayPal pays students to drop out of college are exceptions that prove the rule. The vast majority of employers still use degrees to sort and value the human capital they employ. Accordingly, the non-specific resources incurred for the benefit of all students are appropriately allocated to majors in the ratio of the projected earnings of students according to their major. If John, the theatre major, can be expected to earn only half of what Mary, the electrical engineer, is expected to earn, then he should pay only half as much of the president’s salary as Mary does. If such proven accounting procedures were implemented, much-needed light would be shed on the heated debates on the relative economic merits of STEM (Science, Technology, Engineering, and Medicine) majors against, say, humanities or social sciences majors.
    Proceeding from their argument that higher education costs be linked to expected earnings, the authors then generalize the point. University managers, they argue, are the proper locus of responsibility for maintaining control over tuition costs. The faculty, and even less the students, have little say in the big decisions—the buildings constructed, the number of personnel hired, the alliances entered into—that decisively influence the cost structure of higher education. It is the university managers, much like corporate executives, who make the strategic decisions that drive the costs of higher education. At least in principle, corporations control costs because they cannot keep increasing the prices of their products and services. But the prestige that comes from purchasing a college degree, the supposed access to employment that purchase allows, and the ready availability of education loans, keep up the steady clamor of students trying to get in through the university gates. Assured of the demand for its services, the higher education industry remorselessly increases the cost of its services. University administrators, these authors argue, must be given reasons to keep costs in check.
Instead of relying on moral suasion or the good will of university managers, the authors argue that tuition costs should be pegged to a given percentage of the employment income a college graduate is expected to earn. For instance, 20% of employment income for 20 years could be established as the economic benefit conferred by a college degree. The precise choice of numbers is a political decision, and the authors’ example is only illustrative of their argument. Nothing in their argument prevents selecting figures such that even investors could get a reasonable rate of return on the loan. All their argument requires is (1) that the total cost to John of his college degree in drama and theatre be the same percentage of his expected income as is the case for Mary, and (2) that the total cost to John of his college degree in drama and theatre not include a subsidy to Mary for hers in electrical engineering. Both would thereby earn what the market deems fit for their particular knowledge and skills and neither would pay a financial penalty for his/her choice of major. University managers would be responsible for controlling costs. When the cost of a major exceeds an appropriate share of the income earned because of it, or includes a subsidy for a different major, university administrators must find ways to rein in costs. It bears repeating that most of the costs of higher education are not controllable by the students though borne by them.
The practical aspects of implementing this proposal are doubtless many. Of course, the devil lies in the details. However, neither institutionalized sloth nor reflexive defense of the status quo ought to prevent its serious consideration. In their simple, though far from simplistic, model, Kevin and Eric show that the difference between the majors with the highest and lowest earnings is significant at more than 300%. Electrical engineers make more than three times what drama and theatre majors earn. Yet, both pay about the same amount for a four-year college degree. Neither logic nor habit can defend the proposition that one person pay the same as another for receiving a third of the service.
Whatever objections may be raised against it, this proposal is unlikely to incite the usual critics. Neither the free-market maven nor the liberal humanist will find much to contest. The proposal exploits the so-called discipline of competitive markets by requiring that tuition costs for college reflect its economic value as measured by employment income. On the other hand, the proposal stipulates that the cost of every major be the same percentage of expected earnings. Therefore, if implemented, the proposal would lower the artificial financial hurdles now imposed on such majors as anthropology and philosophy. Much ink has been spilled in attempts to defend a liberal education on the assumption that it is not economically viable. It may well be discovered that such defensiveness is unneeded once universities correctly measure the relative employment-based costs of majors.
As many youth have painfully learned from the recent presidential elections, the one thing worse than a grim situation is the dashed hope that it can be changed. The debt-ridden experiences of a generation of young and middle-aged Americans have punctured their faith in the American Dream. Should this proposal be implemented, the number of years spent paying student loans—and the number of Americans facing indenture—would drop significantly. A college education could once again open the doors to economic well-being. I am heartened by the brilliant work of these two young scholars because it stirs the red-hot embers of hope. ​

Income-based pricing of College Degrees

Uncategorized

Penn State University has the third highest in-state tuition in the country. Some 60% of its graduates carry a student debt of almost $37,000, which is well above the national debt average. The university food bank called the Lion Pantry remains a grotesque reminder that some Penn State students cannot afford to eat properly. Every year, for half a century, the cost to attend Penn State University has increased. But this academic year marked a turning point. Ignoring the recommendation of the finance committee, President Eric Barron announced a freeze on in-state tuition at Penn State. With this action he did more than ease the financial burden that college education imposes on many Pennsylvanians.  His decision also reveals where the effective locus of responsibility lies in lifting the more than trillion-dollar yoke of student debts.

This Presidential election season has spurred a flurry of political proposals to address the problem. For example, Bernie Sanders wants to make public colleges free by taxing Wall Street. Hilary Clinton proposes to reduce the interest rates on student loans. By pegging loan payments to the income they earn, President Obama has made it easier for indebted students to repay their loans. Each of these arguably reasonable proposals only addresses the ability to pay. But, student debts are the result of two interrelated factors—the cost of tuition and the ability to pay it off. In recent decades, tuition costs have increased at rates exceeded by only that of healthcare costs. Unfortunately, none of these proposals contain effective measures to control the cost of higher-education.

Elizabeth Warren’s plan requiring colleges to share the risk of students defaulting on their loans is a notable exception. However, even this attempt to align the incentives of colleges with that of student interests does not go far enough. Colleges can simply raise the tuition to cover their expected share of defaulted loans. Warren is right in thinking that holding colleges accountable for the service they offer is the linchpin of any solution to mushrooming student debts. And, as Eric Barron’s executive action shows, university administrators are the ones who decisively control tuition costs. Neither students nor faculty, much less government bureaucrats, decide on the nature and size of expenditures incurred in a university.

A lasting solution to the problem of mounting student debts will not be found unless both rising tuition costs and the relative inability to pay for them are dealt with simultaneously. After all, even if college education were free to the student, few would argue that tuition should continue increasing. Moreover, any such solution must enroll the singular capacity of university administrators to control costs.

In order to effectively end the crushing burden of student debts on Americans, college degrees should be priced as a function of the income they generate.  Unlike Obama’s income contingent repayment plans, such income-based pricing of college degrees will impose a ceiling on tuition prices, thereby dramatically reducing the likelihood of unpayable student debt. Moreover, university administrators facing a maximum they can charge for a given college major will have to find innovative ways to control costs.

Courageous administrators could implement income-based pricing of college education by spearheading the creation of a dataset containing, at least, the following audited information. First, EdU discloses the graduation rates, kinds of jobs held, and average earnings for every major it offers. Second, federal government and relevant public data are summarized documenting the mismatch between the demand for and supply of college grads in different occupations. Third, though experience surely outweighs the value of a college credential, economic data is used to specify the years of a career over which the benefits of a college degree can be expected to last. Fourth, a baseline is chosen for the amount of annual discretionary income to be set aside for repaying student loans. The Department of Education recommends 15%.

With such trustworthy data, perhaps prepared and maintained by a consortium of accounting firms, it would be a fairly simple matter for college administrators to manage educational resources efficiently and for students to choose wisely. The precise numbers and factors used above could be debated. But the principle should hold. Assume Susie wants to get a degree in biology. She finds its total cost at EdU, adjusted for its graduation rates. A few clicks later, she discovers the income she could make over a high-school degree, adjusted for placement rates. If the tuition exceeds 15% of her expected additional income over the portion of her career the benefits of her college degree will last, then EdU is overcharging for its biology major.

Regardless of who pays for it, with income-based pricing of college degrees, buyers know which colleges and majors don’t offer value for their education dollar. More importantly, college administrators have a benchmark against which to manage the cost of higher education. They should prefer reining in costs to having to explain why the college degrees they confer are not worth the price. There are two other consequences of income-based pricing of college degrees. First, it does not deepen the already unconscionable levels of economic inequality in America. Both rich and poor can obtain a college degree that is cost-effective. Secondly, it does not deepen the existing discrimination against the humanities and other non-technical fields of study. In pursuing cost-effectiveness, administrators would discover that the humanities subsidize the technical fields. Anecdotal evidence suggests an engineering major consumes nine times the educational resources that a philosophy major does, though both pay roughly the same price for their degrees. The conventional wisdom that the STEM (science, technology, engineering, medicine) fields provide the best educational value for money would have to be fundamentally rethought. Crucially though, income-based pricing of college degrees would free Americans from the fear of financial ruin to pursue whichever area of study that stimulates their intelligence and ignites their passion.

​​

CCA: A NEW PATHWAY FOR ACCOUNTING MAJORS

Uncategorized
“I am a second-class citizen!” exclaimed one of the brightest students in my introductory managerial accounting course four years ago. I vowed to help take action to change that perception. To a great extent, the new Corporate Control and Analysis (CCA) Certificate Program in the Department of Accounting at Pennsylvania State University should help. Starting this month as we begin our fall semester, the first cohort of senior accounting majors at Penn State selected for this program will carve a new academic path geared toward accounting careers in industry, consulting, and advisory services.


THE PROBLEM
One answer to why this student felt like a second-class citizen emerged from the Undergraduate Curriculum Committee, which in August 2012 was tasked with reexamining the accounting curriculum. Soon into the Committee’s deliberations, it became obvious that Penn State was underserving a majority of its accounting students. The school has a well-established and intensely selective master of accounting (MAcc) program that meets the 150-credit-hour requirement for the CPA (Certified Public Accountant) license in Pennsylvania. Offered in two formats, the MAcc program caters to only about a third of the annual graduating class because of capacity constraints. Students enrolled in the MAcc program benefit from the cohort effect, occupy a fast track to internships and jobs, and enjoy the privilege of national and regional public accounting firms frequently courting them. One measure of the MAcc program’s success at Penn State is that almost all students receive job offers before they graduate.

The situation isn’t as rosy for the remaining two-thirds of the accounting majors. Many bright, motivated, and technically sound students face an uphill battle in getting noticed by the public accounting firms competing for talent since they are focusing their attention on MAcc students.

Left largely to their own devices to obtain internships and job offers, many non-MAcc accounting majors have internalized the symbolic effects of the group to which they are assigned. The combination of envy and self-doubt that comes from being classified in a lesser status can become a self-fulfilling prophecy. The profession’s intention to raise the barriers to entry by requiring 150 hours of classroom instruction has worked only too well. It has encouraged the existence of two classes of accounting majors at Penn State—MAcc students and everyone else—which fuels the sentiment of being second-class. But is this a necessary outcome? Must accounting programs discriminate between those tagged for careers in public accounting and those swimming upstream trying to get in?

Conversations with recruiters and alumni from the private sector provided a sharper image of why they were fishing for talent in finance and not accounting waters. Spurred on by the increasing importance of risk management, internal controls, and strategic cost management, global manufacturers like PPG Industries, niche consulting firms like MorganFranklin Consulting, and Wall Street firms like Goldman Sachs were a few of the many companies that expressed a strong interest in hiring accounting majors. Yet they felt they couldn’t compete effectively for that talent. More than one corporate recruiter spoke of accounting majors who had received internships but then went for opportunities in public accounting when it came time to seek full-time employment.

Accounting students identified accounting with public accounting so much that they didn’t know that many accounting careers weren’t geared to audit and tax work and that an accountant doesn’t have to be a CPA. Moreover, instead of rigorously evaluating all possible career paths, many accounting students believe that starting in public accounting is an indispensable stepping stone. They are unaware that thousands of accountants in corporate America have rewarding careers in private industry without having worked in public accounting first.

Perhaps it was the historical dominance of public accounting in accounting programs that explained the lack of awareness and misperception of students about the possibilities of and pent-up demand for accounting graduates outside the confines of tax and audit work in public accounting firms. Yet further investigation of hiring needs among the Big 4 and regional public accounting firms that recruit heavily at Penn State suggested otherwise. Advisory and related consulting services are a growth sector in the public accounting industry. The profession has begun to hire from diverse majors, including information sciences, sociology, and health administration.

While still important, audit and tax services under the aegis of a CPA license are no longer a necessity for a career in even a public accounting firm. Global firms like Ernst & Young and Deloitte and smaller ones like Aronson LLC and Baker Tilly have repeatedly affirmed their need for non-CPA accounting graduates. Indeed, it was PricewaterhouseCoopers that funded the nascent efforts to define and establish the Corporate Control and Analysis Program at Penn State aimed at such nontraditional but emerging accounting careers.

THE SOLUTION
This analysis of the potential market for accounting majors revealed a white space for curricular innovations. Both the corporate sector and the accounting profession wanted to hire accounting majors who weren’t keen on auditing and tax. Not all accounting students were aware of such opportunities, and, even if they were, they thought it was less financially rewarding than the usual CPA-bound career. Many didn’t know that most accounting graduates who start their careers in public accounting move to industry within three to five years and that the overwhelming majority of accountants work outside that profession.

Thus the fault lay with the program structure at Penn State. Not enough attention had been devoted to informing students about non-CPA-track accounting career opportunities. At Penn State, and presumably in many other accounting programs across the country, there isn’t a well-developed career pathway for accounting majors whose interests lie outside being CPA-licensed tax and audit practitioners.

The Corporate Control and Analysis Certificate Program is such a pathway. It generates a supply of interested and capable candidates to meet the demand from industry and from advisory and consulting services for accounting graduates. A relatively systematic examination of peer institutions didn’t suggest many models we could emulate. Consequently, we engaged in a balanced scorecard exercise spanning three semesters to help define the mission, competing interests, and process elements needed for success. An academic program’s success hinges on the mutual satisfaction of employers and potential employees.

Designing the CCA as a certificate program, which is officially recognized on student transcripts, not only signals the suitability of its graduates to the corporate finance/accounting, advisory, and consulting job markets but also affirms their distinctive academic preparation. Also, requiring the program to not exceed the standard four-year credit load of 120 hours complies with internal administrative demands and avoids adding to the overall educational costs of a college degree, a matter of some importance in the age of exploding student debt.

Most significantly, using the balanced scorecard exercise allowed us to identify three pillars of excellence that would serve as guideposts for execution. We selected every program element and continue to select each one if and only if it serves to improve the accounting skills of students (technical competence pillar), nourish their spirit of inquiry (intellectual curiosity pillar), or enhance their capacity to deal with others (social dexterity pillar). (See “Keeping Score and Staying on Track” on page 35.)

Technical Competence

The CCA Program at Penn State builds on the already excellent academic coursework demanded of all accounting majors. After mapping the content of the CMA® (Certified Management Accountant) exam to the curriculum, we introduced subtle modifications to the list of required courses and continue to engage in a judicious alteration of the content of specific courses. These changes have allowed us to peg the CMA exam to the base of the required CCA coursework. Accordingly, the motivated CCA candidate could graduate having passed both parts of the CMA exam in addition to having earned the CCA certificate and the bachelor of science degree in accounting. In addition, all CCA graduates must obtain an approved internship, which is intended to help clarify their career choices. Finally, we strongly encourage CCA candidates to complete a series of online training modules in Excel-based financial modeling, quantitative data analysis, and mathematics for business. Through these measures, the CCA graduate should be able to convincingly prove his or her technical competence to interested employers.

Intellectual Curiosity

There has been much talk about the challenges of teaching Millennials. A number of recruiters spoke of the need to inculcate in students the benefits of going beyond the narrow specifications of what is explicitly stated or required. All too often, accounting instruction reinforces the habit of procedural thinking—of seeking and executing step-by-step directions to obtain correct answers. This algorithmic thinking is slated for obsolescence by computers.

To nourish in students the spirit of constant inquiry and lifelong learning to deal with the fast-paced changes of contemporary business, the program relies on the CCA Student Club and related IMA® (Institute of Management Accountants) student chapter to expose CCA candidates to a broad menu of activities. Club members participate in IMA-based case competitions, prepare industry and company biographies, build bibliographies on emerging trends and topics, go on field visits to factories and offices, and attend seminars conducted by professionals on a wide range of topics.

Social Dexterity

Accounting graduates can establish the foundations for good judgment by cultivating curiosity and develop the ability of sound analysis by honing their technical competence, but that isn’t enough. Social dexterity is equally important to being effective communicators and leaders.

Consider a seemingly trivial example. I still recall my confusion and discomfort some years ago when I was on a conference call for the first time with a group of human resources personnel from Verizon. There were long pauses, and people were speaking over each other, entirely because I wasn’t prepared for the protocols of conference calling. Repeated practice can teach such skills, which students should be exposed to before they enter the workplace. To this end, the CCA Program includes a required semester-long course in presentation and communication skills.

Additionally, the CCA Student Club organizes events for CCA candidates to meet and interact with working professionals, engage in teaming exercises, participate in dinners that teach etiquette, and learn the best practices for making conference calls effectively and using social media. Moreover, given the many international students enrolled in the accounting program at Penn State, the Club has begun to think of ways it can foster cross-cultural knowledge and sensitivities.

In these ways, the CCA Program develops in students the professional and personable comportment in attire, speech, and manners that’s crucial to successful careers in accounting.

PAY ATTENTION TO DETAILS
The best-laid plans can go awry if they aren’t well-executed. Crafting a vision is relatively easy compared to the sustained attention to myriad details that’s required when implementing a plan. Faculty members usually aren’t versed in management. Trained to research and teach, which are largely solo activities, they’re typically unprepared to manage, identify the interests of different constituencies, balance competing interests, and bargain and trade for what is feasible instead of dogmatically holding onto what is ideal. Perhaps it’s good for faculty to step into a management role. The experience can be useful in enlivening what they have learned from books with a dose of realism.

Two elements are crucial to the success of a new academic program. First, the objective or mission must be well-defined. Once the mission is shaped by inputs from different constituencies, such as recruiters and students, the program must have a clearly specified objective. In the inevitable negotiations that stress-test every detail of the proposed program, you’ll be asked to modify or even give up one or the other of what was planned. A clearly specified objective prevents the loss of your main objective.

The second element crucial to success is to identify and, where possible, partner with every group directly and indirectly affected by the program. In a large university such as Penn State, there are many groups, each with its own interests and agendas. Though “failure is not an option” is a useful attitude to have when trying to introduce change, “learning from one’s mistakes” is an even better adage to follow in such circumstances.

It takes time and effort to learn what other affected parties want and to see your program from their perspective. You shouldn’t ignore these constituencies since, like most things, a new program is a collective endeavor that relies on all participants. The humility needed to listen also allows you to engage constructively with others, which often causes them to want to contribute to your success.



CHALLENGES AND LESSONS
About four years will have elapsed since the first proposal for the program was conceived until the first CCA class (selected seniors who start the CCA Program this month) graduates in May 2016. All too often, the relatively slow and repetitive cycles of proposals and approvals going through numerous committees can be frustrating and even make us want to give up on the project. To justify impatience, some people may trot out the usual suspects—red tape, turf protectors, and empire builders. No organization, and certainly no large organization, moves at the speed we’d all like. For all the talk of agile corporations, there is at least one good reason that organizational change embodies that old Latin proverb, “make haste, slowly,” so well. As the former controller of Bayer Corporation once told me, “The reason organizations sometimes move cautiously is because a mistake can cost millions of dollars.”

A new academic program diverts resources from other uses, establishes new fixed costs, and, perhaps most important, requires people to change settled ways of thinking. New perceptions and expectations take time to form and displace old ways of thinking. Questions and concerns sprout up all the way up and down the organization. Does the introduction of a certificate program hasten the university toward being a certificate mill? Does establishing a CCA Program further fracture the accounting program into even more finely discriminating classes? Does the use of the phrase “financial management” misassign to accounting what properly belongs to finance? Such questions require time to weigh and resolve. It’s better to assume that counterparties bear no malice or ill will when they pose hard questions. Such an assumption forces us to have the patience and perseverance needed to induce well-thought-out changes in organizational practices.

Yet no amount of fair hearings and dogged commitment can make a project succeed without the help of others within the organization. First is tone at the top. The energetic support of academic leaders, typically the heads of departments, plays a vital role. Effective leaders clearly articulate the long-term strategic vision, step in when necessary to solve a problem, and continuously maintain the pressure to move forward. Only under such a protective aegis can new initiatives take root.

No less critical is the administrative staff’s institutional knowledge. These staff members help identify past efforts that have succeeded or failed as well as necessary administrative procedures. They even offer a deep read into the minds of the student body. In every university, there are divisions devoted to career services, academic club activities, student development, and curriculum design. Partnering with these segments is crucial to setting up a new program on a strong foundation.

Yet all facilitators haven’t been university personnel. Three constituencies outside the university have been equally vital to establishing the CCA Program at Penn State—recruiters, alumni, and IMA. Informal and formal surveys among recruiters not only confirmed their interest in a CCA-type accounting graduate but also helped refine the curriculum. Getting them to speak about internships and jobs through frequent campus visits was vital to start the process of informing and convincing accounting students of the range of career opportunities available.

Penn State boasts committed alumni who represent a staggeringly broad swath of industries. It’s both encouraging and gratifying to see how quickly alumni are willing to serve as champions of a cause they believe in, whether this takes the form of campus visits, identifying funding opportunities, or opening avenues to increase internships and job offers to the students.

IMA has been central to raising the CCA Program’s credibility. For those who pass the CMA exam and fulfill the criteria, the globally recognized CMA certification constitutes an independent attestation of the technical competence of the CCA graduate. The advantage of a student being able to sit for and pass the exam by the time of graduation sends a powerful message to the employer. IMA also helped set up a student chapter, provides discounts on exam fees and memberships, and holds a highly regarded annual Student Leadership Conference that Penn State students have begun to attend regularly.

Perhaps most useful to raising students’ awareness about accounting careers in industry, IMA representatives have visited the campus on numerous occasions. From chapter presidents to the director of educational partnerships, many IMA leaders have made the trek to inform, educate, and persuade potential CCA candidates. There was a time when Penn State had the highest number of CMA exam passers. Attaining that distinction again would be one measure of the CCA Program’s success.

But the proof of the pudding lies in the eating of it. Certificate programs, the CMA exams, Excel training, and conference call practice aren’t worth much if students don’t find rewarding careers. All the support and encouragement from partners inside and outside the university will have been wasted if recruiters from industry, advisory, and consulting don’t consider the CCA Program a preferred hiring source. The measureable mission of the CCA Program at Penn State is to rank among the top two schools by relevant recruiters and to have 98% of its graduates obtain job offers before they graduate. These measures don’t fully reveal what the program is really about. When we reach these goals, far fewer accounting students will feel that they are second-class. The CCA Program at Penn State is devoted to that unwavering promise.


Originally published on SFMagazine

Another Brick in the Wall

Uncategorized
Invited by the Center for Democratic Deliberation at Penn State, Evegeny Morozov spoke on “An Internet for the 21 st century” to the small audience gathered in Forster Auditorium. Per usual, despite the blandishments of extra credit, barely a tenth of one percent of Penn state students attended the lecture, though the speaker was well-known and the topic of the first moment. 


Mr. Morozov spent most of his hour-long talk emphasizing the fact that Google (and other private corporations) profits from the data created by its users. He convincingly argued that the ever-increasing troves of data such companies as Google owns forge very high walls that bar or deter entry. Few competitors can hope to match the effectiveness with which Google can personalize its ads and sales pitches. No wonder that the exit strategy envisioned by most start-ups is to be bought off by a Google or Facebook!! The so-called “internet of things” will only make the already big corporations bigger argued Morozov, the walls of data from which they rule rising unassailably higher still. Google’s tag line is “Do no evil.” Mr. Morozov talk reminds us that in its voracious acquisition and storage of data, its tag line should actually be understood as what Google does not intend. Or, perhaps more charitably, that “do no evil” is an ironic reference to how facts can make propaganda out of good intentions. Thus Mr. Morozov argued for an Internet of the 21 st century in which personal data is owned by individuals but not saleable by anyone. 


The earnest discussion that followed his talk focused on the question of the relative merits of government versus private ownership of data. Perhaps this is a reflex of us Americans who are so deeply schooled in the supposed struggle between big bad government and the minions of free enterprise. A more sterile discussion cannot be imagined in the post-Snowden age. At the margin it does matter, of course. There is a difference between Google using the data it owns on you to profit from your eyeballs as it were, and the government using the data it owns on you to put you in jail. But the routine and eager capitulation by the likes of Google and AT&T to government demands for data makes a mockery of the debate between private and government ownership of data. Moreover, the fixation on government v corporation misses Morozov’s point: he wants personal data to be owned by neither corporations nor the government.


Ivan Illich, whose writings Mr. Morozov knows, already warned years ago that the so-called ‘postmodern,’ ‘post-industrial,’ or ‘sharing’ economy would take the precise form that it does. Consider Facebook or Google who profit from data. But they don’t pay for the production and consumption of this profit making resource. You write an email and then consume the ad that is displayed on the side of your screen. You engage in shadow work (this is Illich’s term) as both producer and consumer. The company profits because you get zilch for your efforts. Now, who gets to keep the resulting profit, whether it is Google or you, occupies much bandwidth among the twittering class. But that is irrelevant to the point Morozov 2 insightfully wanted to make. He spoke of the datafication of life, of how ordinary life is being captured in a cloud like layer of data made possible by the information architecture of sensors and satellites and screens. The datafication of life produces the conditions for surveillance, whether for the purposes of profits or patriotism. Monetizing the data for individuals would fuel the worst kind of surveillance, which is auto-surveillance or reflexive self-monitoring. It is to avoid this internalizing of the surveillance now conducted by corporations and governments that Morozov wants the data to be owned by individuals but not saleable by them. In the world according to Morozov, personal data would be inalienable personal property. But this seems a decidedly inferior solution to the threat that datafication poses for democracy. If datafication is the source of the threat then surely that and not its resulting ownership is the problem to be addressed. 


Mr. Morozov contrasted Uber and the city of Helsinki, in explaining how data ownership without sale can be beneficial to a more vibrant public life. Apparently, in Helsinki, citizens can see who and how many want to travel along a given route and send for a minivan paying a lot less than a individual cab, as in the Uber-world. But perhaps, Mr. Morozov could re-read his Illich, who with a colleague-Jean Robert- once wrote a short piece titled Auto-Stop. In it, he suggested a model of sharing that is neither private nor public and does not necessarily contribute to increasing datafication. In Beirut, as in many other cities east of Europe, you can flag down a passing taxi (but this could also be a private car) and hop in even though it has other passengers. You pay a fixed fee and you go the distance you want. You hop in and out at the discretion of the driver.


Auto-stop is not a private taxi service as Uber, not a spontaneously app generated public bus service as in Helsinki, not even a bike-sharing scheme sponsored by Citbank and its credit cards. No data is produced that outlives the time of life as and when it is lived, no permanent clouds hang over and follow the activities of all citizens, which is the hallmark of the surveillance society. That sounds pretty democratic to me. 


Sajay Samuel 
State College, PA 
March 21, 2015