What are the effects of the financial crisis on American elite universities that have invested their foundation assets on the capital markets? And what does America's scientific establishment expect from new US president Barack Obama? An interview.
© Udo BorchertForschung & Lehre: The president of Harvard University, Drew Faust, is expecting the loss of 30 percent of the university's foundation assets by the end of the business year due to the financial crisis. How dangerous is the situation for one of the world's most renowned universities?
It's definitely serious, but not catastrophic. Thanks to the boom on Wall Street, Harvard and all the private universities were increasingly able to rely on donations and yield on assets to finance their huge budgets. In 2008, these accounted for a share of around 40 percent of the income of the research universities. Those days are probably over now, everyone will have to tighten their belts. But on a very high level. Even after this loss, Harvard still owns 25 billion dollars, an unimaginable fortune ten years ago. America's universities have seen many financial crises. In the 1970s they were fighting for survival, professors' salaries were in free fall. In mid-2008, Yale owned 26 billion dollars. 20 years ago it had only 400 million and was almost broke. Much harder hit than the universities are the university lecturers, whose private pension funds were yielding sizeable returns that have suddenly vanished - and with them their plans to retire comfortably in the near future. Many will have to continue working for longer than they intended, because the basic pension simply isn't enough. That's a bitter pill.
F&L: What are the core elements of Harvard's unprecedented success and that of the other American Ivy League universities in research and teaching? What part does culture play, and what part money?
Money was and always will be important, of course - especially the financing mix, the nominally extremely high tuition fees least of all. But only the cultural factors allow the money to flow so freely and have such an astounding impact. American society delights in higher education like no other, demands educational efforts and rewards the joy of discovery. Achievement, competition and colleges are among its icons. Even insignificant universities are extremely proud of their "mission" and their work. This creates a stimulating mixture of tough competition and high expectations, encouragement and pleasure in taking risks, not to forget pragmatism and an open style of interaction. Trying new things is worthwhile.
F&L: Why are American higher education institutions "so different", as the subheading of your book claims?
On the one hand because every one of them is forced to find its own place on a well populated market, to hold its ground and move ahead. This results in great diversity and allows the system to become very dynamic and flexible (there's nothing that's not out there), but also chaotic. It's inclusive like no other, has room for elite establishments and discounters alike, serves the desire for distinction as well as that for professional qualification and upward social mobility. On the other hand, this colourful image almost always appears in black and white from a German point of view, as Harvard or wasteland. Not only is that a distortion, it's quite simply wrong.
Forschung & Lehre :: February 2009
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