"Disaccrediting” Capitalism

In a scene in Ayn Rand’s Atlas Shrugged, one of the bureaucratic cronies declares that all colleges and universities must serve “the public good” in order to gain control over higher education.

Wait, that didn’t actually happen. It’s true that Rand’s kleptocrats frequently justified their trampling on individual rights by declaring their policies were “for the public good.” It is also true that a regional accrediting agency ruled that all educational institutions must “serve the public” ahead of all other obligations, including those of shareholders. But Rand wrote her fictional tale of the evils of collectivism in 1955, while the North Central Association of Colleges and Schools made its all-too-real real declaration only a couple of months ago.

“We felt it was important to make a statement—that education is a public good,” said Sylvia Manning, president of North Central’s Higher Learning Commission (HLC), the nation’s leading accreditor of for-profit schools.

That ruling is awful in a variety of ways. It appears that Manning and North Central are opening another battlefront in the war on non-profits colleges—specifically aiming at industry giant University of Phoenix. Last year, Manning’s organization placed sanctions on Phoenix, not because it was providing a poor quality of education, but for administrative reasons. A “lack of autonomy” from the Apollo Group, Phoenix’s holding company, was the main reason.

The Obama administration had a go at the for-profit sector last year as well. The Department of Education tried to impose “gainful employment” standards on the for-profit sector to prevent students from leaving school with little hope of employment and high debt loads, while ignoring similar situations at the nation’s community colleges. The gainful employment standards were eventually struck down by a federal judge.

Manning’s HLC holds a sword over the head of Phoenix and other for-profits. If the HLC denies them accreditation, they can no longer receive federal subsidies—including the financial aid that is the lifeblood of many for-profit schools. In this way, the accrediting agencies’ enable the existing colleges—mainly public and established private non-profit schools—to act like a cartel. By placing efficiency-killing regulations on the for-profit schools that have been rapidly gaining market share, the agencies can minimize the threat of competition brought by for-profits and new private non-profit institutions.

But this new HLC statement is more than just another affirmation of the accrediting agencies’ heavy-handed authority. It is in fact a philosophical shot across the bow of capitalism itself, mandating that the profit motive be subordinated to the public good—even for an organization whose main purpose of existence is to provide a reasonable return on the investment of shareholders. It is questionable whether the HLC can constitutionally make such a ruling, and even more questionable whether it can take action on the declaration’s account. Barring a successful court challenge, however, the public good ruling could not only provide the sort of vague justification for the accrediting agencies to do almost anything, but provide a precedent for worse.


Posted by: Jay Schalin

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