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Harvard Cuts Back

Last year at about this time, Harvard’s endowment was $35 billion. In the first four months of the fiscal year, through October 2008, it lost $8 billion. Observers believe the losses may actually total $18 billion. Harvard relies on income from its endowment to cover about 35% of its budget.

Late last week, a memo from Harvard President Drew G. Faust put two and two together. The result: 275 layoffs. Harvard had already skipped raises for 9,000 faculty and non-union staff and shed 500 employees through a voluntary early retirement program. It wasn’t enough.

The reaction from union organizers at Harvard was predictable. Quoth one:

The fact that this is happening at Harvard, who is still sitting on a chest of billions and remains the richest university in the world, shows it is pursuing this incredibly narrow path of naked self interest. . . . They’re using this drop in the endowment as an excuse to justify really terrible cuts that will have a disastrous impact on the surrounding communities.

Ah yes, the narrow path of naked self interest, where the amount of money you have to spend affects the number of people you can afford to employ. That narrow, naked path. It’s the beaten path, which universities around the country, and, indeed, around the world have already traversed — Harvard having no good reason to avoid it.

I have a lot of friends in higher education, so, personally, this is a painful story. But it recalls my experience as a graduate student at Yale in the 1990s, when the farcical “Graduate Employees and Students Organization” made life thoroughly unpleasant for anyone who was not an academic Trotskyite.

GESO’s constantly reiterated line was that a) the capitalist system is unjust and built on sand foundations; b) the stock market and the endowment are going relentlessly upwards, so Yale should give us lots more money. The possibility that these two obsessions were mutually contradictory never appeared to occur to them. As with the union organizers at Harvard now, the university, GESO argued, had only one appropriate response to any situation: spend more money.

And that is precisely why Harvard is in this mess now. In 2000, Harvard’s budget was $1.9 billion. Last year, it was $3.5 billion. That’s an 80% increase in eight years. Instead of fixing the roof when the sun was shining, it spent and spent. And with personnel costs accounting for half the university’s budget, a good deal of the money went to swelling the ranks of staff. Naturally, those are the people who are taking it in the neck today.

In universities, as everywhere else, there are always more things worthwhile spending money on than there is money available. What I fear isn’t that higher education as such will suffer terribly as a result of this downturn — though a lot of individuals are going to pay a steep price for the popping bubble. What I fear is that universities will try to get by simply through scrimping, instead of by dropping nonessential programs and focusing on core competencies. That will only set them up to limp along for a while until the balloon begins another unsustainable inflation.

In universities as in government, efficiency-drives yield minimal gains. What’s needed here are not job cuts but rather amputations. Unfortunately, those usually involve firing faculty members, and if there’s one thing universities like Harvard hate more than losing $8 billion and firing staff, it’s caning faculty members. As soon as the faculty realizes that the dynamic has devolved into “them or us,” they will decide that the missing 275 were not so important after all.



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