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How To Reform The Banking System, Bring Fairness To Broken Britain And Abolish Tuition Fees Through The Medium Of Expressive Dance…Well Music Royalties

January 26, 2011

In a nutshell:

Banks and big business should pay a levy to cover the knowledge and expertise created by the universities and which they use every day to predict market behaviour and generate their profits. This levy, in the same way that the Performing Rights Society collect money for songwriters whenever a song is played on the radio or in a public business, would be used to replace the university teaching grant and could thus prevent the fees rise for students, provide the much needed finance to support the university system and make the banks and big business pay the true economics costs of their wealth generating activities.

Maybe I should start from the beginning…

It has been bugging me that the removal of the teaching grant, the central government funding of universities, from arts and humanities subjects and its substantial reduction for STEM subjects implies certain assumptions about the value of universities. If the university system is to be funded almost entirely from the individual fees that students pay for their courses and the justification for this is that these students will be the beneficiaries of this through their increased earning capacity, the subtext is that the remaining tax payers shouldn’t have to pay for them: part of the coalition government’s mantra of fairness. The implicit statement here is that the benefits that flow from our university system, flow to the individuals who receive the degrees and that there is no social benefit from universities worth paying for from public finance.

Of course, it is slightly more complicated than that because the UK research funding councils provide public money that funds research for the greater good of our big society. Most academics will tell you however, that the vast majority of research that goes on in the country, the everyday plodding, doesn’t happen within funded research projects but happens because part of their contractual obligation is to engage with research: a contractual obligation that will henceforth presumably have to be funded from student fees. Students will not just be paying for the benefits that they personally receive but also for the benefits that the country (and the rest of the world) receive from that large percentage of research that is funded through their wage bills.

A digression on true economic costs…

One of the basic tenets of capitalism is that a business produces something for which there is a demand which stimulates a price that more than covers the cost of production i.e. it produces a profit. One of the frequently raised problems with this system is that businesses can often avoid some of the true costs because they accrue to other individuals or to society in general. For example, a business that builds an airport does not have to compensate the people whose quality of life deteriorates because of the airport’s existence – a social cost. A firm that pollutes a river as a byproduct of a manufacturing process may pass some of that cost on to water treatment businesses and some on to society in the form of a more polluted environment. Alexander Graham Bell may, and there is controversy surrounding this, have avoided the cost of crediting Antonio Meucci’s invention when he patented the telephone. My general point on true economic costs is that businesses can often make excessive profits by avoiding them and my specific one is that intellectual property payments (for the knowledge that individuals and universities produce that make the world a better and more interesting place) are often one of the costs that businesses avoid.

Paying for knowledge…

Yesterday morning (Jan 25th), following a bomb at Moscow airport, Stephen Hutchings, professor of Russian Studies at the University of Manchester explained “the terror threats the country (i.e. Russia) faces” for listeners on BBC Radio 4’s Today programme. For three of the past seven years Professor Hutchings’ research has been partially funded by the Arts and Humanities Research Council but during his academic career the majority of his research will have been funded by the central funding that his university received and his obligation under his contract of employment to carry out research (as well as to teach). Professor Hutchings has published four books, edited two more and written numerous chapters and academic journal articles on his research specialisms. All that material is freely (or very cheaply) available to market analysts in investment banks and multinational corporations and is used by them, either first hand from his publications or second hand from their Reuter’s screens and news feeds, to inform their hugely profitable gambles on where and when to conduct business and lend money. These institutions are avoiding one of the true economic costs of their income generating activity. In short, this is another way in which the tax payer has been subsidising the profitability of the investment banks and big business: by paying the research costs of the information systems that form the basis of that profitability.

Professor Hutchings’ current research centres on representations of Islam on Russian television. In other words, that bête noir of government ministers, the supposedly pointless and ‘soft’ academic subject of media studies and cultural theory. Imagine how much more of this apparently useless research in media studies is currently informing the frantic financial guessing game about whether (and to what effect) News International will gain a controlling stake in SkyBSB.

My immediate thoughts about this were that academics should start a guerrilla campaign to reclaim the true economic costs of their intellectual property. Every academic in the country should send the finance department of every investment bank, multinational corporation and government ministry an invoice for “consultancy fees in relation to: <your research specialism here>” for the sum of £4256.59. This number was randomly produced by dividing £500m by the number of academics in the UK (117, 465). The tantalising idea that many of these institutions might actually just pay some of these invoices before they realised what was happening spurred me on further. The bottom of each invoice should include a suitably financial service style, tiny print disclaimer saying that payment of this invoice constituted a voluntary contribution to the true costs of the intellectual property that underwrote the profitability of their company. I was on a roll. I was all set to send the idea to Dave Gorman’s Genius and Mark Thomas’ People’s Manifesto (apologies for the UK-centric, middle class, middle aged focus on BBC Radio 4).

A collection agency…

Before any of my Radio 4 centred media ambitions were realised though, my own research specialism, the study of recorded popular music, reared its ugly head. In the music industry the collection agencies pay royalties to performers and composers for using their musical output to create wealth – by sampling where radio and TV stations, pubs and clubs, cafes and shopping malls have used music to help their sales and to charge them for it. Organisations such as the Performing Rights Society (PRS) and the Mechanical Copyright Protection Society (MCPS) were set up to collect these royalties and distribute them to their owners: the people who created the music.

What if, I reasoned, academics and universities were to do the same? The profitability of the banks comes from knowledge and the vast majority of that knowledge comes from the banks being kept up to date with politics, economics, history, cultural theory and, yes, even media studies. This is the controversial notion of impact being discussed in relation to research funding at the moment. The government and the universities should set up a collection agency that replaces the university teaching grant with a levy on all businesses that rely on using university research to analyse society: banks, big business, central and local government. They pay a fee based on a relatively simple metric of usage: much like the PRS collect fees based on audience figures for radio and television. The majority of the cost to the PRS lies in allocating this royalty to the individual composers and performers. In this instance, the entire royalty goes to the Higher Education Funding Councils and is distributed equally to all universities. This can be used to offset the fee increases in some way, perhaps by forcing universities to use 50% of the money for bursaries for less well off students or perhaps by just reducing fees across the board. It also stops the banks and big businesses from profiteering from our national store of research wealth without paying for it and creates a fairer society that more accurately reflects the true economic costs of wealth creation.

OK…

So I may not have mentioned expressive dance anywhere in this and I can see that a conservative government is unlikely to want to actually reduce the profitability of the banking sector – especially in order to benefit media studies – but my point here is that this new system of funding universities is fundamentally unfair and worsens the imperfections of the free market system (as if they weren’t bad enough). Perhaps, even more importantly, it sends the message to the world that the UK government places no value on the contribution that British universities make to society other than through the increased earning potential of the students it educates. I don’t want to live in a society, even a Big Society, that shares those values.

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2 Comments
  1. Armin Höhn permalink

    Hi Simon

    I really appreciate your ideas and I totally agree with you that those big businesses, banks etc. you’re addressing need to reconsider their attitude towards intellectual property they benefit from. I just see one problem: In a globalized society, multinational companies benefit from multinational research. If I released a song worldwide, I’d get royalties from every country’s respective organisation (such as the ASCAP in the US, the GEMA in Germany or – as you mentioned – the PRS in the UK). If you transfer this principle to your idea of companies paying fees for the intellectual property they use, you’d have to make sure that every big business, no matter where it’s located in the world, pays their share. In other words: Why should British companies exclusively fund UK-based research which is later used to support e.g. the Spanish economy? And, the other way around, should a Spanish company be allowed to make use of British academics’ intellectual property for free?

    Establishing an international system is impossible since the individual countries’ tuition fees and funding system still vastly differ from each. The Bologna Process, on the other hand, attempts to standardize the higher education system within the EU. So why not take this approach one step further and initialize a cross-national funding system? If, theoretically, every EU citizen is permitted to study in any EU country he or she wants, they should also be practically able to without facing restrictions caused by financial issues.

    This might be utopian and I’m really not an expert on this subject – these were simply my immediate thoughts from a non-UK point of view. What do you think?

    Best
    Armin

    • Hi Armin

      You’re right. This isn’t an international solution – and with EU countries all investing differing amounts in universities and charging different amounts as fees, I can’t imagine the Bologna process will be extended to funding. In any case I’m sure my idea wouldn’t be considered an acceptable solution by the UK Coalition government in any case because of that very lack of a level playing field around the world. Their argument would be that the banks would simply relocate themselves to a country where these costs weren’t levied on them and the UK would lose out further. It’s the same argument for not taxing them too heavily. I would argue that governments are too timid about scaring the banks away and that they, and I include any bank that makes money by investing in the UK whether they are based here or not, should not only charge for the research costs but lobby for other countries to adopt this as well.
      On a more pragmatic note, considering that the current government (and the EU) are unlikely to adopt this measure, I think that UK (and EU) universities should be using these intellectual and moral arguments to oppose the cuts. They seem to be lying down and giving in at the moment. It seems that only Germany and France are investing in higher education within the EU at the moment.

      Best
      Simon

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