The Neoliberal Banking Model of Education

Michael B. MacDonald

In Pedagogy of the Oppressed Paulo Freire described negative impacts on student imagination by a process he famously called the banking model of education. Critical Pedagogy has used the banking model as a point of critical departure. But I have recently become concerned that the banking concept no longer fully describes our current challenges. While Freire’s original critical analysis still stands there is another layer of oppression requiring critique, the financialization of student life in neoliberalism. I see this form of oppression as having a different texture than the banking model, emerging from post-Fordist economic transformations and the rise of the financial sector. Post-Fordist finance is not the mode of banking Freire drew upon. His banking model was located at the local savings and loan where a community of people deposits money and expects interest before withdrawing. Contemporary banking has a new and more dangerous, in fact murderous, layer.

What’s more, Freire’s banking model drew upon a shared understanding of industrial capitalist production and its embedded forms of alienation. This alienation occurred in the capitalist mode of production in industrial capitalism where profit emerged from the exploitation of workers, and resistance was enacted through organized labor. Today, we seem to neither know where value is produced nor how to organize resistance. It feels to me that when I meet with activists, community organizers and critical scholars we have a difficult time figuring out where power and resistance are located in the post-Fordist period. Yet, examples of exploitation abound. We read daily about market turmoil, economic bubbles, growing personal debt, reduced government support, the reduction of the state, and the school to prison pipeline. While these issues may seem a long way from the banking model of education, I argue that they are not in fact separate, but are examples of a system of modern oppression, theneoliberal banking model of education.

We need to build upon and update Freire’s critique. The neoliberal banking model of education builds upon Henry Giroux’s extremely important work on public pedagogy that blurs any distinction between education and the marketplace and any distinction between labor/work, political power, media and language illustrated by Christian Marazzi and Franco Berrardi. These studies have shown that in neoliberalism there no longer a distinction between language production and value production, education and industry. Public pedagogy is the process of learning (power) that organizes all bodies (politics). Capitalist valorization is no longer just produced through the exploitation of working bodies at work, but also by exploitation through debt. Public pedagogy normalizes unchecked accumulation of lifestyle purchasing even if you don’t have the money. As anyone who has ever watched Friends will note, the normalization of lifestyles supports the development of lifestyle expectations funded by a steady stream of credit, turned into ever-increasing debt. The neoliberal banking model of education, supported by the mechanisms of public pedagogy, prepares all bodies to acquire debt, to find citizenship through consumption, and to value debt. Debt is the factory floor of the contemporary production of value. Those who can accumulate and carry debt are the exploited bodies of financial factories that do not have locations; they are embedded in the mechanism of lifestyle consumption, student loans, car loans, and mortgage loans.

Those who cannot accumulate and carry debt are marginalized, pushed into high-risk lifestyles that are leading rapidly to increasing numbers of incarceration bodies. Modern incarceration is the process by which bodies that could not previously hold debt are converted into a debt bearing commodities, where public money and the money of relatives is converted into prisoner debt.

I will warn you at the outset of this article, I have no happy ending. I do not provide any solutions, suggestions, nor words of comfort. Instead, I present a totalizing neoliberal banking model of education that shows little opportunity for escape. My intent is not to produce hopelessness, but to displace naive humanistic optimism in transcendental liberation with sober political analysis. Only through reinvigorated analysis can we hope to develop pedagogical and curricular strategies to break into the public pedagogy that supports and extends the neoliberal banking model of education.
Part One: Freire’s Banking Concept of Education

Freire describes the damaging effects of the banking concept of education in a three part process: a) a teacher disseminates information to students; b) students memorize information; c) with the intent to later cash out the information for grades and advancement. The student is the bank and the teacher the source of intellectual capital. The banking concept does damage because it contributes to two forms of alienation. The first occurs when learning moves from the material experience of learning in and withcommunity-anthropological and evolutionary human learning-to the virtual learning of industrialized and professionalized education. Virtual learning’s most common mode is the teacherly performance of talking in front of the class. In community embedded learning, students learn from practice that leads to the (often informal) production of locational praxis, the production of knowledge emerging from the struggle to understand and predict (therefore theorizing) lived reality. In virtual learning students collect information by way of transcription to later be returned as data on an exam sheet. What has transpired is a circuit of exchange. In this circuit information is transferred from teacher to student and back. Learning is assessed by a calculation of the difference between data loaned out against what is returned on exam day. The rate of return is given a percentage evaluation called a grade. Students with a high rate of return warrant a high percentage later used to organize student bodies into hierarchies of intelligence. Low rates of return equal a failure of learning, understood as the personal failing of the student or teacher, but almost never as a failure of the banking concept.

The second form of alienation is “narration sickness” (Freire 2013, 71) caused when the semiotic connections between sign-signifier and signified are dissolved. The sign-signifier connection comprises the symbolic representation of the socially produced meaning that is supposed to point to the signified, the world. Narration sickness breaks the sign-signifier from the signified. It is like lecturing about democracy without creating an environment for students to self-organize. It is very possible to lecture and test about the mechanics of democracy without students ever learning to self-organize. In this model the lived experience of students is not a subject for analysis and this is made worse by the use of learning to discipline the collective bodies and minds of students. During the democracy lecture students are made to raise their hands to ask a question, are required to sit still in rows, and are provided no input on how the class is going to proceed, nor how the testing and evaluation are going to unfold. The power of narration sickness is related to Michel Foucault’s biopower and biopolitics.

Alienation occurs when people are separated from their own labor. Marx locates this break in the purchasing of proletarian labor by the capitalist class. Freire contributes to the Marxist theorization of alienation by locating the beginning of the process in education. It seems to me that Freire is innovating on Marx’s theory of alienation by introducing narration sickness as a mode of semiotic alienation, the divorce of sign-signifier from signified. Pedagogical alienation separates learning from lived experience, and submerges learning in the production of workers. In this way the banking concept shares with Althusser an interest in theorizing the reproduction of capitalist ideology, social formation, and modes of capitalist exploitation.

Freire ingeniously argued that alienation caused by narration sickness emerges from a learning environment colonized by a marketplace of signs. The semiotic triangle of sign-signifier-signified is replaced in the classroom with sign-sign-sign and students’ tests are the recall of signs. The biopolitical power of education occurs in the break from the signified-community knowledge-that locates the authority of schools in the closed circulation and valuation of signs. The teacher distributes and collects signs in the name of learning. Students and teaching provide a material example of this in the oft-repeated distinction between school and the “real world”. The real is not a philosophical game, an inaccessible unmediated real, a la Zizek, but is the fully constituted semiotic triangle that points to the material and conceptual aspects of human lives. To break the triangle is to reduce learning to the virtual and to participate in a flight from the social, cultural, environmental and economic crises occurring in our communities. Freire’s banking concept helps explain why so many educational institutions seem to renounce the world. While there is still much to learn from Freire’s conception of the banking model, in the years of its popularization much has changed. The soaring increase in both student debt and student panic, read as existential crisis, must be understood in respect to the financialization of student life, fear of an uncertain future, and overwhelming debt.
Part Two: The Neoliberal Banking Model

The neoliberal banking model of education begins in 1971 when Richard Nixon broke with The Bretton Woods System, a financial agreement put in place to ensure economic stability following 1944. Until this moment, the American dollars was connected to the nation’s gold reserves. By disconnected the dollar monetary value entered into the world of socially produced linguistic value. In theory the neoliberal model “should favour strong individual private property rights, the rule of law, and the institution of freely functioning markets and free trade” (Harvey 2005, 64) but the “main substantive achievement of neoliberalization has been to redistribute, rather than to generate, wealth and income” (ibid., 159). Wealth began consolidating in the upper 10 percent of the population, with highest consolidation in the upper .1 and .01%. David Harvey calls the transfer of capital from the middle classes to the upper .1%, accumulation by dispossession. In A Brief History of Neoliberalism he explains that accumulation by dispossession has four main features: 1) privatization and commodification, 2) financialization, 3) the management and manipulation of crisis and 4) state redistributions (ibid., 160-165). Franco ‘Bifo’ Berardi has argued that neoliberalism has led to the elimination of “legal norms and social regulations” and has led to the transformation of “every domain of social life into an economic space (including health care, education, sexuality, affects, culture, etc.) where the only valid rule is that of supply and demand within an increasingly absolute privatization of services” (2009, 189). The current neoliberal banking model is characterized by: a) value determined by the exchange of fluctuating signs; b) production that is no longer only material production by wage labor but immaterial production (knowledge and creative capital) and; c) labor only as wage labor (and not community work for instance). As Franco Berardi has explained:

In the Fordist era, the fluctuations of prices, salaries, and profits were founded on the relation between the time of socially necessary labor and the determination of value. With the introduction of micro-electronic technologies, and the consequent intellectualization of productive labor, the relationships between existing units of measure and the different productive forces entered a regime of indeterminacy. (2009, 184)

Baudrillard described the transition from a banking model that “corresponded to a certain stage of the law of value” to a neoliberal banking model where the “whole system [is] swamped by indeterminacy, and every reality is absorbed by the hyperreality of the code and simulation” (1993, 2). Learning fully absorbed by the rules of capital means that each exchange between teacher and student is framed by economic rules. Students learn to evaluate the amount of intellectual labor they will expend based on the quantity of grade points that can be “earned”. But it is incorrect to say earned here, because students are trading effort for grades at an expected rate of exchange. Intellectual labor is disconnected from the goals of humanist enlightenment (a laKant and Foucault) and reduced to communicative wage labor. It is necessary to update Freire’s banking concept with the neoliberal banking model so as to work through the micro and macro impacts brought about by post-Fordism and neoliberalism.

The neoliberal banking concept makes it necessary to engage in a political economy of learning, to analyze student apathy from the perspective of the alienation of the working class from their labour, in this case intellectual labor (mental/scholastic development) that has been drawn into economic exchange. Neoliberalism is the process that has led not only to macroeconomic transformations like deregulation and the domination of financial sector but to microeconomic transformation that have turned learning into a form of wage labor, an aspect of a new form of semiotic or language capitalism:semiocapitalism.

Semiocapitalism is a political economy of debt and privatization, where value is separated from concrete production and is located in the economic valorization of thoughts, communication, human organization, and symbols. It is the perfect companion to the virtual learning of the banking model, plunging symbols into financial markets in a way that makes it impossible to separate information and capital. The potential destructive force of semiocapitalism is difficult to articulate, not because we do not see its impacts but because we are in the early stages of articulating it theoretically. The neoliberal banking model is the confluence of the banking model with the public pedagogy of debt that justifies the financing of language exchange in the creation of newly emerging forms of economic oppression.
Part Three: Semiocapitalism, debt, prison and the reorganization of life

Semiocapitalism does not add another layer of oppression to institutionalized schooling but makes imperceptible alterations to social interactions and modes of thought. Students evaluate intellectual effort based on rates of exchange, with non-classroom time considered ‘off the clock’ negatively impacting both classroom participation and out of classroom discussions with fellow students. But it is not enough to stop here because most student investment is not conceptualized as an investment of effort, nor necessarily of intellectual energy, but of accruing debt.

In Canada, students owe over $15 billion in federal student debt, increasing at a rate of $1 million a day, with an additional 5 billion in provincial debt, and ever increasing credit card debt. Student debt increases are not magical and can be traced to the reduction of government support for higher education. In the 1970s governments looked after 90% of the costs but today it is down to 57%. As governments pay less, students pay more. This means that governments instead of socializing costs for the good of the entire community are privatizing debt. Christian Marazzi (2011, 2011b) has pointed out that governments are not seeing these costs as necessary infrastructure investments into the post-Fordist knowledge economy but are instead treating it as expense to be reduced from the public books. Youth are asked to shoulder investment into the state knowledge economy in a period of economic transformation. This is like asking workers to build the factory that will exploit their labor.

In this privatization of economic transformation working class youth are especially hard hit. Their debt burden is amplified by punishing interest rates and by asset inflation on houses, cars, and clothes that is leading to greater and greater debt contributing to increasing inequality. Economists complain about the economic risk of high debt lifestyle spending but at the same time know that 70% of the US GDP is made up of consumption. The economy is not located on the factory floor, but on our lifestyle spending. The knowledge economy creates the communication resources that produce economic value, while governments rush to reduce taxation and therefore education spending instead of seeing it as direct investment into an expanding lifestyle economy.

In Anya Kamenetz’s 2006 book Generation Debt, she argued that debt is a “new model of subjugation” (Berardi 2009, 141). It is easy to understand why students invest in their education, higher education has for a long time been a trusted pathway to a better life. But there is something sinister here. The privatization of education investment, turned into student debt, becomes a commodity sold by government to banks for their profit. This is counter-intuitive. As governments decrease social support of learning, private business benefits through the packaging and sale of student debt to financial markets. Reduced investment into education becomes a way to create and support financial speculation that becomes the vehicle by which money is redistributed from the middle class to the upper .1% who have the capital to loan out in the first place.

The picture for youth in Alberta, Canada, where I live and work, is not rosy. First off, 50.4% of income in the province is earned by 10% of the population. If a student has been putting money in a bank account preparing for university interest rates have been so low (1%) that there is no chance of generating any wealth from savings. Asset inflation is making home-owning less likely, causing Canadian household debt to reach record levels at 162.6% of disposable income , while “household debt increased to $124,838 in 2014, up 40 percent from the previous year, and the highest in the country.” Food and fuel costs are increasing and Alberta’s percentage of GDP spent on Education is currently at4.7% GDP, below the OECD average of 6.1%. In fact, Alberta’s percentage of GDP to education is the lowest in the country (8.1% in Ontario). Alberta has the highest population growth at27.3% but only 17% university enrollment, the lowest higher education enrollment in the country. One of the reasons given for low university enrollment is the surplus of employment opportunities readily available in Alberta. And it is true that while youth unemployment nationally is at 13-14% in Alberta it is only 9-10%. But 10% youth unemployment is high when adult unemployment is only 5.2%. Comparing this to Germany where the adult unemployment rate is 4.7%, German youth unemployment is only 7.1%, much lower than Alberta’s 10%. And there are worrying signs that the recent drop in oil prices may increase youth unemployment making it more difficult for university students to find summer work. It has been argued that “the stark difference in youth unemployment between the U.S. and many European countries may, in fact, have quite a lot to do with that high school-to-college transition, which Americans have traditionally viewed as leading to good jobs and financial security.” It seems that students have learned that speculation on their university education is a model of success and perhaps this is part of the new neoliberal banking model of education. This new model not only degrades communication resources and the connection of learners with the material world but also degrades student’s futures and contributes to precariousness “not a particular element of the social relations, but the dark core of the capitalist production in the sphere of the global network where a flow of fragmented recombinant info-labor continuously circulates” (Berardi 2009, 191). But this is to mistake what is actually occurring. The neoliberal banking model of education is not interested in youth success, but in the creation of debt across the entire society.

In higher education this translates into a dangerous ideology of investment through debt and economic individualism – a collective system of theft of the future and an erosion of traditional democratic forms of sociality expressed in citizenship, the public good, and the welfare state. The public good now finds expression in the creation of individual debt, not the socialization of debt. Youth are in debt to themselves for their education while provincial and federal governments sell off increasing debt loads to banks. What makes matters worse is that consumption is not real growth when it is powered by debt. Long-term growth is powered by education, quality of workers, the capacity of communities to build social bonds, cohesion, inclusivity, and innovation of social life not financial enterprise alone. The most worrying form of neoliberal banking model of education is enacted upon youth unable to carry debt. They are excluded from the social bonds of debt production and are entered into the school to prison pipeline, a vicious mode of neoliberal model of education.

Vulnerable youth are pushed into this pipeline by insufficient access to debt production. The reduction of school funding, caused by reductions of corporate taxes and reduced tax rates of the highest earners, creates a cascade of problems for under resourced schools. That these schools are located in poor neighborhoods is not an accident. Middle class and upper middle class families are able to carry the large mortgage debts and pay the companion property taxes that organize school funding. Children who come from families that cannot maintain large debts are converted into criminals. The ACLUargues that

Overly harsh disciplinary policies push students down the pipeline and into the juvenile justice system. Suspended and expelled children are often left unsupervised and without constructive activities; they also can easily fall behind in their coursework, leading to a greater likelihood of disengagement and drop-outs. All of these factors increase the likelihood of court involvement.

But this needs to be read as the entry point into an increasingly private prison system that produces debt, the new mode of profit production. While most money is made by corporations who profit off of incarcerating prisoners on behalf ofstates, prisons also produce debt by shifting the costs of maintaining prisoners from the state to families. Predatory companies like JPay specializing in family to inmate financial transfers that handle “7 million transactions in 2013, generating well over $50 million in revenue. It expects to transfer more than $1 billion this year” ( Time Magazine). Incarceration produces debts that already poor families need to pay while making money for the owners and managers of prisons and the prison industrial complex.

Vice has reported that George Zoley, the CEO of GEO Group, the second-biggest [sic] investor in the incarceration industry

made nearly $6 million last year through salary and bonuses alone, but the real money is in stocks-he owns more than 500,000 shares in GEO, and he has made $23 million in stock trades during one 18-month period. But you can’t accuse him of not earning his pay, exactly. GEO saw a 56 percent spike in profits in the first quarter of 2013, and the company’s executives reassured investors that the incarceration rate wouldn’t be dropping any time soon when announcing its earnings. Zoley will be mega rich for years to come.

This is a start at sketching out the neoliberal banking model of education. The banking model of education unhitched the sign-signifier from the signified turning learning into a virtual exercise that produced narration sickness. The banking model produced a marketplace that was further transformed post-Fordist developments and neoliberal rationality. The neoliberal banking model began locating knowledge value in debt, and debt as the sole product of value. That students graduate into failing sectors with precarious jobs is no longer a problem for economic growth. The proletariat is reduced to precarious labor, becoming the precariate. With debt as the central location of value production, failure is success for financial elite. We need to theorize the mechanics that produce and normalize growing debt to explain how youth are being converted from humans to debt bearing bodies.

Works Cited

Baudrillard, Jean. (1993). Symbolic Exchange and Death. London, UK: Sage Publications.

Berardi, Franco. (2009). The Soul at Work: From Alienation to Autonomy. Los Angeles: Semiotext(e).

Freire, P. (2013). Pedagogy of the Oppressed. New York, NY: Bloomsbury.

Giroux, H. A. (1997). Pedagogy and the politics of hope: Theory, culture, and schooling: A critical reader. Boulder, CO: Westview Press.

Giroux, H. A. (2000). “Public pedagogy as cultural politics: Stuart Hall and the ‘crisis’ of culture”.Cultural Studies, 14(2), 341-360.

Giroux, H. A. (2003). The abandoned generation: Democracy beyond the culture of fear. New York, NY: Palgrave Macmillan.

Giroux, H. A. (2004). “Public pedagogy and the politics of neo-liberalism: Making the political more pedagogical”. Policy Futures in Education, 2(3-4), 494-503.

Giroux, H. A. (2009). Youth in a suspect society: Democracy or disposability?. New York, NY: Palgrave MacMillan.

Harvey, David. 2005. A Brief History of Neoliberalism. New York: Oxford University Press.

Marazzi, Christian. (2008) Capital and Language: From the New Economy to the War Economy. Los Angeles: Semiotext(e)

Marazzi, Christian. (2011a) Capital and Affects: The Politics of the Language Economy. Los Angeles: Semiotext(e)

Marazzi, Christian. (2011b) The Violence of Financial Capitalism (New Edition). Los Angeles: Semiotext(e)

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