That’s James Surowiecki. He may not look like much— or rather, he looks a lot like what he is: a great business and finance writer who has made a living reporting on malfeasance and corruption in the corporate world. He’s now a staff writer for the New Yorker and this week he wrote a column on the boondoggle that is the big business of student loans, a “scandal” that appears less like a scandal than mere business as usual—which of course is the real scandal. The story has garnered a lot of press but Surowiecki’s short piece is one of the best things produced on it yet, mainly for the way he frames the topic.
“Why are we stuck with this corrupt and inefficient system?” he asks. “In part, it’s ideology: the dominance of what you might call the privatization mystique—the idea that anything the government can do, the private sector can do better.”
Republicans have been pounding this theme relentlessly since Reagan ran and won on his anti-big government platform in the go-go power-tie eighties. Then as now, it’s all words. The Gipper spent taxpayer money like a music-video gangsta, running up debt guiltlessly. George W Bush is the worst yet. Ask him and he’ll tell you all about how he loves the market and how he hates the inefficiencies of government spending. It’s a script. His actions suggest that what he hates is certain kinds of government spending—the kind that goes to social services and schools and so forth—but that he loves government spending that bypasses the market altogether and goes without competition straight into the accounts of specially anointed private contractors— good actors such as Halliburton and Blackwater and apparently good ole Sallie Mae, your likely educational sponsor and post-graduation moneylender from hell.
Surowiecki writes: “Bush’s 2007 budget shows that it’s four times as expensive for the government to subsidize and guarantee student loans as for it to issue those loans itself… The student loan market isn’t a free market in any meaningful sense of the term, because the government effectively determines prices, insures against losses, and subsidizes volume. In this environment, most of the ‘competition’ is really just squabbling over how to split up the spoils. Economists call this behavior—when a company seeks to manipulate economic conditions rather than actually create value—’rent seeking.’ It’s common in areas where the fetish for privatization has taken hold, such as the outsourcing of of homeland security to private contractors and the boom in private Medicare insurers.”
He then gives a damning example of how the ballyhooed market really works its magic: “Since the mid-1990s, the federal government has offered direct loans, making it unnecessary for students to go through private lenders. The loans are significantly cheaper for the government, but, from the start of this program, private lenders have done all they could to limit its reach. They’ve worked to keep the Education Department from offering discounts and rebates to borrowers; they’ve lobbied against interest-rate cuts; and they’ve offered colleges millions of dollars to drop out of the direct-loan program. The lenders can afford to engage in these shenanigans because of the billions of dollars the government gives them every year. In effect, taxpayers have been subsidizing their own competition.”
Question(s) for the Republican candidates: “Do you believe the market is the best solution to providing lean and efficient government? Of course you do. So how do you explain that for the past thirty years the market has so consistently failed to provide taxpayers with good service while increasing the cost of that service? Don’t you agree that the ‘magic of the market’ can be relied on not primarily to benefit taxpayer-citizens but to benefit corporations and their shareholders? Don’t you agree that that is the essence of contemporary capitalism?”