The announcement of severe cuts across the whole sector and the proposed removal of state funding for the teaching of Humanities and Social Science subjects raise fundamental questions about the future development of the whole culture of learning and scholarship in the UK’s universities. It is very probable that, with the comparatively rapid withdrawal of almost one third of current HE funding for teaching – over just four years – the institutional landscape and the operational principles of the sector will have altered markedly by the middle of the current decade. The specific situation of British higher education cannot be separated from the general economic, political and social developments in the region. The austerity programme designed by the new coalition government to resolve the UK’s chronic fiscal crisis mirrors similar programmes in the other member states of the European Union, just as the systemic roots of economic collapse are common to all European and other OECD countries. The crisis within global financial services in September/ October 2008 and the subsequent contraction of global production and trade represented the most brutal endogenous shock that European capitalism has experienced in living memory; an even greater meltdown of global capitalism was only averted by the – for peacetime – greatest mobilisation of fiscal resources in modern economic history.
While the theme of European crisis management is the subject of a special issue of the Journal next March, it is nevertheless appropriate here to draw attention to the possible implications of this world-historical event for Europe as the primary focus of our interdisciplinary journal. Since the original launch of this Journal under the title Journal of Area Studies in 1980, the dominant paradigm of the political and economic elites of (western) European states has been that of neo-liberalism in one form or another, representing an explicit rejection of the previous Keynesian paradigm and displaying a strong preference for supply-side and monetarist policies. The contributions to the Journal have historically subjected this new orthodoxy implicitly or explicitly to close critical scrutiny and questioned many of its key theoretical assumptions, including the efficient market and the rational actor hypotheses. In particular, it has charted the systemic transition of the state socialist societies of central and eastern Europe and their absorption into the ideologically transformed post-Keynesian bloc of western European states, as well as the evolution of Europe’s other peripheries as the location of important political, social and economic changes.
One of the key socio-economic developments of the thirty years preceding the global crisis was the emergence of an intensified form of monetary accumulation which allowed financial institutions in particular to generate new forms of financial assets that relied not on the current or future sale of real goods and services as a guarantee of value, but on a multi-layered system of debt (leveraging) in which one layer could be sold on as an asset, purchased by a further layer. The hyper-leveraging on the part of investment banks and hedge funds meant above all that financial institutions – and not central banks – were creating new money; indeed Europe’s money supply consistently exceeded annual target volumes (usually potential GDP plus inflation); because this monetary accumulation was largely separate from the ‘real’ economy, the effect of these overshoots was confined initially to pushing up the price/ value of financial assets rather than of consumer goods. The contagion was spread to core economic activities through the aggressive marketing of consumer credit and property mortgages in the US and the UK in particular, including both equity-release schemes and sub-prime mortgages at variable rates of interest. The sub-prime schemes, like their purely financial counterparts, were predicated on the assumption of a constant appreciation of (property) asset values as security for both borrower and lender, as well as on the constant expansion of the money stock and the preparedness of other financial market actors to furnish the inter-bank markets with liquidity. The irrational expectations built into this, for capitalism, typical speculative bubble, were nevertheless driven to levels of intensity not even matched by 1928-9.
The size of the asset bubbles pre-programmed the extreme magnitude of the financial contraction in the autumn of 2008. In the modern global trading system, characterised by the fine-tuning of stocks and flows, banks and inter-bank markets provide the vital liquidity for national, regional and global transactions. The collapse of the inter-banking market in early October was equivalent to the cardiac arrest of the global political economy; without the provision by the state of $trillions of both fiscal resources and new central bank money, the self-destruction of finance capitalism would have been accelerated. Nevertheless, neither bank bail-outs nor counter-cyclical state stimuli in the major economies were able to prevent global trade contracting by 11 percent (12.7% in the advanced economies, 8.2% in emerging economies) and global production falling by 0.6 percent (advanced economies: -3.2%; euro area: -4.1%) in 2009. As a consequence, tens of millions of workers worldwide lost their jobs, industrial order books and investments shrank. The financial house of cards, constructed on the pyramid principle of uninterrupted, multi-layered money creation, collapsed, requiring the present taxpayers of the advanced states both to absorb the immediate shock and, along with future taxpayers, to salvage a sustainable system of production and trade.
The political challenge represented by this task has been made considerably more daunting, firstly because of the distinctive patterns of interdependent relationships established by a hegemonic network of global corporations, where the dominant control of strategic gateways – finance, fuels, basic materials, patents and information technology – pre-defined a stubbornly unequal distribution of power; secondly, because the era of liberalisation, which had generated this system of unequal interdependence, had also generated an unprecedented redistribution of income nationally and internationally away from wages and salaries towards capital; the IMF, in its 2007 Spring Report, produced figures which indicated that the share of wages and salaries in the national income of the advanced economies (qua functional distribution) had fallen by 6.8 percentage points between 1980 and 2005, and by a full 9.4 percentage points in Europe; the personal distribution of income also indicated rising Gini coefficients in the vast majority of European societies, i.e. widening disparities between richest and poorest households. Thus Europe and the advanced economies entered the 2009 global recession with more acute disparities of income and wealth than at the beginning of the 1980s with its severe stagflationary crises.
The fiscal legacy of the current crisis is undeniably severe, measured by the marked increase in both annual deficits and in the overall debt ratios of European states, but more importantly it has been perceived by Europe’s state leaders as sufficiently dramatic to seek the earliest possible opportunity to consolidate their budgetary positions through a set of national austerity programmes; some – in the Baltic States and in Hungary – were dictated by the Commission at the very beginning of the recession, some were subsequently imposed by the requirements of Eurozone’s Stabilisation Fund, some were chosen by national governments. If one looks at the austerity programmes of the German and the British states, it is unsafe to speculate about the underlying motives. It is not idle, however, to speculate about the medium- to long-term effects of such programmes, when they seek, as in the British case to reduce the expenditure of the country’s public sector by one quarter. The order of magnitude of this planned contraction is truly colossal. With British state expenditure at 51.4% of GDP in 2009 (OECD figures), a 25 percent reduction would mean reducing the ratio to 38.55% of GDP by 2014! It is worth noting, perhaps, that the state ratio under Margaret Thatcher and John Major fell by just 2.1 percentage points over eighteen years – when it was a specific pledge of both these Conservative administrations to ‘roll back the state’ and leave the allocation of social resources primarily to the market. 12.95 percentage points in four years looks ambitious, even measured by a Thatcherite yardstick.
In the context of all European states endeavouring to grow their way out of the recessionary hole via public de-leveraging and aggressive exporting, the ambition looks highly unconvincing in the short- and medium-term. In the context of a European development strategy – embodied in the Lisbon Agenda – of maintaining Europe’s comparative advantage by maximising the potential of ‘human capital’ via education and training, cuts in public education expenditure make little long-term economic sense, particularly when the British state remains committed to maintaining a nuclear weapons system which is fundamentally unusable, i.e. as incompatible with human survival as prescribing cyanide to all citizens. In the context of a British government agenda of ‘fairness’ in which equal opportunities plays a central role, the withdrawal of teaching support from Humanities and Social Sciences in English universities and the parallel removal of the ‘fee cap’ on undergraduate programmes, makes the role of ‘fairness’ rhetorical at best and hypocritical at worst. It arguably does not represent equality of opportunity, if students from poorer backgrounds are told that they will share an equally large post-education burden of debt with students from more affluent backgrounds, particularly at a time when the earnings premium from higher education looks as if it is dwindling. The maintenance of HEFCE-funding for pure and applied sciences and engineering may produce a justifiable diversion of school-leavers into these subjects, but the effective privatization of HE teaching in Humanities and Social Sciences will alter both the internal politics of British universities and the priorities for syllabus design, where programme viability is entirely dependent on student-funded fee-income. The situation of minority subjects, particularly in area studies and languages, looks particularly perilous in this context.
 The Deputy Prime Minister, Nick Clegg, stresses ‘equal chances’ in the leading set of policy statements from the UK Cabinet Office: http://www.cabinetoffice.gov.uk/newsroom/news_releases/2010/101015-fairness.aspx