The growing Occupy Wall Street (OWS) movement has focused national attention on the financial industry’s power over American politics and policy. But it doesn’t end there — Wall Street also has extensive influence over the U.S. higher education system, especially at universities like Stanford.
Three years after the financial industry nearly caused a second Great Depression, our nation’s top universities remain the primary training and recruiting grounds for these same reckless institutions. This is antithetical to the civic mission and responsibility of higher education, and it is time for the academic community to seriously address this problem.
The financial industry’s influence over higher education is deep and multifaceted, including student choice over majors and career tracks, career development resources, faculty and course offerings, and student culture and political activism. In 2010, even after the economic crisis, the financial services industry drew a full 20 percent of Harvard graduates and over 15 percent of Stanford and MIT graduates. This represented the highest portion of any industry except consulting, and about three times more than previous generations.
As the financial industry’s profits have increasingly come from complex financial products, like the collateralized debt obligations (CDOs) that ignited the 2008 financial meltdown, its demand has steadily grown for graduates with technical degrees. In 2006, the securities and commodity exchange sector employed a larger portion of scientists and engineers than semiconductor manufacturing, pharmaceuticals and telecommunications.
The result has been a major reallocation of top talent into financial sector jobs, many of which are “socially useless,” as the chairman of the United Kingdom’s Financial Services Authority put it. This over-allocation reduces the supply of productive entrepreneurs and researchers and damages entrepreneurial capitalism, according to a recent Kauffman Foundation report. Many of these finance jobs contribute to volatile and counter-productive financial speculation. Indeed, Wall Street’s activities are largely dominated by speculative security trading and arbitrage instead of investment in new businesses. In 2010, 63 percent of Goldman Sachs’ revenue came from trading, compared to only 13 percent from corporate finance.
Why are graduates flocking to Wall Street? Beyond the simple allure of high salaries, investment banks and hedge funds have designed an aggressive, sophisticated and well-funded recruitment system, which often takes advantage of student’s job insecurity. Moreover, elite university culture somehow still upholds finance as a “prestigious” and “savvy” career track.
But university administrations are also responsible. At best, they have passively allowed the largest banks to dominate student recruitment; at worst, they have enthusiastically promoted these companies and encouraged students to enter finance. To this day, career development offices accept donations from the wealthiest banks in exchange for special recruitment access. For example, until recently, Stanford’s Career Development Center featured Goldman Sachs as a “Gold Partner,” despite the company being under federal investigation for criminal trading practices.
The higher education community needs to begin a serious discussion about how to ensure checks and balances against finance, and prepare more students for socially productive careers in public service, entrepreneurship and scientific research. Some recent trends have been positive, like loan forgiveness for law school graduates entering public service. Universities should consider similar incentives for undergraduates, designing proactive, long-term strategies to encourage alternative career tracks.
Let us be clear: pursuing a job on Wall Street isn’t evil, and it goes without saying that we need a strong and efficient financial sector. But our generation cannot afford to continue shipping our best and brightest off to Wall Street. The United States and the world face enormous challenges in our lifetimes — from climate change to global poverty — and we need our top talent focused on solving these problems. America’s university system is one of our most prized national assets, benefiting from taxpayer support and providing invaluable public goods in the way of knowledge and human capital. It should stop serving as the vocational training center for reckless banks and hedge funds.
This process will be difficult for many of us with friends and colleagues in finance. But those of us privileged enough to attend top universities should have the courage and responsibility to recognize the hard truth: an academic community that actively supports the same financial institutions whose rampant greed caused untold national hardship is a community on the brink of moral bankruptcy.
TERYN NORRIS ‘12
Truman Scholar
ELI POLLAK ‘12
Mayfield Fellow
Contact [email protected] for comments.