If you had to guess which consumer commodity has risen faster in price than any other since 1985, several types of goods and services might come to mind. Gas, food, housing and medical care, for instance, are all things that, in the blink of a generational eye, Americans might rightly believe have become much more expensive.

You would be wrong, however, if you picked any of these items out as being the most expensive. Instead, it is the cost of a college degree from an accredited, four-year educational institution that has risen faster and farther than any other consumable over the past 28 years. Since 1985 the cost of obtaining a sheepskin – tuition, room and board – has increased a mind-boggling 538 percent. In comparison, medical care – whose costs have grown so far out of control as to prompt widespread angst and political turmoil – has only risen a little under 300 percent, while gas, housing and all other consumables have “only” tripled and doubled in price since 1985.

In fact, to get similar rates of growth with which to compare the skyrocketing cost of a college education, you have to leave the world of physical goods and services and turn to the ephemeral land of stock market returns. Only then would the lines all fit comfortably on the same graph. The Dow Jones Industrial Average, for instance, has increased by 869 percent since 1985 while the S&P 500 and the NASDAQ have risen 690 and 1,033 percent respectively.

Not a bad showing, then, if one could slice up shares in America’s universities and sell them as investment securities on the world’s stock exchanges.

These two sets of data – consumer price inflation and stock market returns – while seemingly distinct, are in fact related in more ways than simply sharing a similar growth pattern. Each may in fact be causing the other to grow in a way that, since the 1980s, has deeply compounded America’s growing problem of economic inequality. To see why, consider just what happened in the late 1970s and 1980s to set these trends in motion.

Wonder years

Back in the olden days of the New Deal economy prior to the Reagan Revolution, American labor and capital, though often at odds with one another, more or less evenly split the proceeds of the American market economy in a way that was widely shared (albeit within the deplorable but then-enforced boundaries of White heterosexual masculinity). This was due to three important factors.

The first was the power of American labor, via unions, to compel capital to surrender some of its profits to the hourly workers and salaried professionals of the working and middle classes. In addition to raising the general standard of living, the existence of a wide pool of relatively well-off middle and working-class consumers expanded the market for consumer goods of all kinds, thus spurring economic growth. Like Henry Ford realizing he could make more money if his workers were paid enough to afford to buy his cars, mid-twentieth century America operated on similar economic principle.

The second factor was a relatively closed national economy that was mostly moved by internal forces such as the domestic cost of labor and capital. International trade and investment simply did not account for a big enough part of the national economy to impact the ebb and flow of the consumer-driven domestic economy to matter. To be sure, certain companies and investment firms did engage in business abroad – but such matters hardly affected the real, domestic economy these foreign-orientated firms operated out of. The proceeds of this rich economy were therefore mostly spent within it.

Finally, the third factor which kept this system of widely-shared industrial prosperity humming was relatively low inflation. So long as prices did not rise or decline too quickly, the system could continue indefinitely. Thus the American economy operated like boats of various sizes floating in a protected harbor. A rising tide, as the saying goes, did in fact lift all boats back then, because all the craft riding at anchor were lashed together even as a seawall of international trade and investment barriers protected them from economic tempests emanating from without.

What’s more, the usual costs of such a system did not apply to the U.S. because as the world’s manufacturer, banker, technological leader and military protector after the Second World War, the United States could set the rules of the world’s economic game to its own liking. Thus, to continue the analogy, the protected harbor that was the U.S. economy was so massive that, like the Himalayas, it created its own climate.

Universal universities

Thus situated and unchallenged, the U.S. economy and its people grew richer, wealthier and more equal than ever before. A suburban home, a TV in every room, long vacations, and two cars in every garage became an American birthright, as did an inexpensive, quality public education that, naturally enough, extended all the way up to even the most prestigious universities and colleges in the country.

It could be no other way, for in the international battle for hearts and minds with the communist world that was then taking place, not only did wealth matter, but social mobility, too. Perhaps even more so than the sheer fact of prosperity itself, the American story sold both abroad and to Americans themselves was premised on a post-war version of a Horatio Alger story wherein any, with sufficient hard work, could secure themselves a little piece of the American Dream – and the most obvious way to secure that dream was though acquiring a college degree.

Indeed, falling into the zeitgeist of the times created by mass prosperity and assumed upward mobility, entire university systems were created out of whole cloth, those that existed were strengthened and expanded and, for the first time, elite schools like those comprising the East Coast’s Ivy League were opened up and subjected to a form of open competition in enrollment the likes of which had never before existed at these institutions. It is no coincidence, for instance, that the dreaded SAT entrance exam first made wide appearance at the outset of this meritocratic golden age.

As a result, places like Harvard went from being little more than immensely rich finishing schools for a lily-white, East Coast Protestant elite to being inundated with Catholics, Jews, women and, soon enough, African-Americans, Asian-Americans and Hispanics – a new Mecca of secular diversity and scholarly achievement that could be matched nowhere else on Earth. What was even more important was that where Harvard and its brethren led, other U.S. schools – from flagship public universities in the Midwest and California to teacher colleges in the rural South – soon followed. Meritocracy, legitimized by diversity and shared prosperity, ruled the day.

Academia? More like Bacchanalia

All of this was paid for, of course, by the wealth created by the New Deal economic system that existed between the end of the Second World War and the mid-1970s. When that system collapsed and the contemporary model of global, neoliberal capitalism became clearly dominant by the end of the 1980s, the foundational pillars of the modern American system of higher education also began to crumble – only instead of falling into a downward spiral as did so many working and middle-class Americans, competition between American universities meant a renewed emphasis on both agreed-upon notions of academic excellence and an unwavering dedication to enhancing the student experience even as the financial underpinnings for widespread participation in higher education began to wither away.

What has emerged is a perversely expensive system that offers, for the lucky few who can afford to go, a half-decade college experience – long gone are the days when most students graduate in four years – in increasingly sumptuous, resort-like communities that offer everything from health spas, overseas vacations known as “study abroad” terms and professional-quality sports programs that rival the Roman games in their bacchanalian decadence.

This experience is in turn overseen by a vast, overweening staff of student-orientated professionals who cater to their students-cum-customers’ whims much as a cruise director might cater to tourists embarked upon a pleasure cruise.

Only then, after all this pampering, does actual education begin, though it is of course corrupted and undermined by the customer mentality that is now manifest throughout the entire system of higher education. This, of course, requires another immense, equally bloated and useless bureaucracy of extraordinarily well-paid has-been dons-turned-deans, up-jumped provosts, unnecessary Vice Chancellors, Vice Presidents, Assistant Directors, Associate Directors, Vice Associate Assistant Presidents and so on. Aside from pushing paper, attending meetings and clamoring for increased budgets, there is very little these people seem to actually do.

On the ground in the actual academic departments are members of the senior faculty. Like country squires everywhere, this class of academics resents their aristocratic superiors higher up in the bureaucracy while at the same time scheming unendingly to join their ranks. Regardless of their success in doing so — and protected by tenure all the while — they spend their days publishing easily compiled edited volumes, plot for bigger offices, direct armies of underpaid and overworked serfs called “graduate students,” and teach untenured faculty that actual education of undergraduates is the least important part of the entire, nominally taxpayer-funded enterprise.

Little wonder then these professionals – paid well over the median wage and protected by a medieval system of professional accreditation and governance that rivals the guilds of ancient Mesopotamia – balk at doing any actual work — i.e. teaching – unless they are bribed by exorbitant amounts of money to do so. Research, they will cry, is important – and it is, except if one is a member of the humanities or much of the social sciences, both of which have specialized themselves into such microscopic fields of irrelevant professional expertise that no one, not even other academics putatively in their field, care much about what they have to say. The sciences have done this too, of course, but then again their research findings actually do useful things like potentially cure cancer or turn sunlight into electricity – the primary reason these fields remain so well-funded through government research grants.

A tuition-hiking arms race

Thus, what American higher education is today is akin to what General Motors was in the late 1960s – a proud, arrogant, rich institution that scoffs at the idea of reform and knows for a certainty that what is best for itself is also, coincidently, best for students and taxpayers.

Universities can take this stance because it recognizes that an American college education is not merely about obtaining skills, knowledge or wisdom – it also is at least partly about obtaining the prestige of owning a signaling, positional good that no one else, or at least very few, possess. This makes spending by students something of an arms race that creates a Red Queen effect. More and more is spent to obtain ever more sophisticated and prestigious degrees, but since everyone else has them as well students’ situation vis-à-vis others in the status hierarchy remains unchanged. Indeed, they are all worse off – very much like male Peacocks whose impressive plumes make them so vulnerable to predators.

The irony of contemporary American universities is that their value to students comes not so much from the fact that they are so excellent – many are in fact rather mediocre – but precisely because they are so difficult and expensive to get into and finish. By doing so, students signal to others their elite status, which then allows holders of these degrees entry into otherwise closed circles as a consequence. America’s universities understand this and thus charge whatever they want for tuition – passing on the ever-rising cost of college to ever-more desperate students and their families. This market power is even more manifest when, as now, state financial support is reduced to a trickle, jobs are scarce, social mobility has collapsed, and students are forced to take on more and more debt just to finish their schooling.

This is because in a society that is growing ever more unequal like ours – symbolized by those stock market returns mentioned previously – positional goods like a college degree that offer hope of entry into the professional middle-classes actually become more valuable to those that hold them – thus increasing the price one needs to pay to obtain it, which makes it more scarce, with makes it more valuable to possess, and so on ad infinitum. This is exactly how that vast army of useless bureaucrats, palatial sports complexes, and inflexible professoriates has been built up over the years despite the fact that most colleges and universities are now receiving far less federal and state aid and grants than ever before. People will pay because they have no choice. Universities understand this, and have grown as fat, lazy and resistant to change as Detroit once was in its heyday.

But like Detroit before it entered the death spiral that turned it into the industrial wasteland we all know today, inklings that the center cannot hold in American higher education are beginning to make themselves felt. Student debt, which has risen to compensate for long-running reductions in government support for higher education, has now reached a point of unsustainability that simply cannot go on. Indeed, students who are finishing up their degrees today are so wracked with debt from the get go that they are hard pressed to spend on other traditional consumer items like cars and houses, let alone start families and so produce the next generation of American workers. We are in effect eating our own economic seed corn by doing to our students the opposite of what Henry Ford did for his workers.

Those working on the day-to-day details of college and university budgeting understand this intimately. In a recent survey of university and college Chief Financial Officers, barely a quarter express a strong belief that their financial models are sustainable over the next five years. Looking ten years out, and that number falls by half – only 13 percent of university CFOs believe their institution’s financial model is sustainable. Furthermore, nearly all understand that the tactic of increasing tuition and fees – which has been the stopgap tactic ever since the general cutoff in government funding began way back in the 1980s – is now reaching the point of diminishing returns. The market, meaning debt-drowned students and their families, can no longer afford what universities are peddling.

Five-year vacations for the children of the bourgeoisie?

Having built hideously expensive Cadillacs that no one can now afford, university administrators are catching a glimpse of the beginning of the end of the system as it currently exists and, like Detroit, they have responded by cutting corners. This is why despite the fact that though the number of Americans actually qualified to enter a reputable degree program has not really increased over the years, more and more are nonetheless being accepted into college – schools desperately need the tuition dollars these unqualified and underprepared students bring in.

That these students have no hope whatsoever of actually graduating is, to cash-starved universities, of little consequence. Likewise, for those that do get through, it is only due to a gross watering down of academic standards that gives them a degree, but little else, and which in turn lessens the value of the degree to everyone else who graduates from that institution. Again this matters little to budget-mad administrators charged with ensuring paychecks and light bills get paid on time. In the short run the need for cash outweighs the long-term dilution of the value of degree – which, like monetary inflation, is paid by degree holders sometime in the distant future.

Furthermore, cutting the low-hanging fruit of non-professional staff and economizing on such things as office supplies is also reaching its logical conclusion. When one secretary is responsible for multiple departments and printer toner is rationed out like shoes in the old Soviet Union, you know the end has been reached. It is at that point that universities must seriously consider gutting the many layers of higher-level administrative fat, ask for more actual work from their faculties, turn to cheap, even lower-quality online courses, or otherwise prostitute themselves to wealthy donors and corporate sponsors in order to make ends meet. Oh, and hope and pray that the long drought of government funding finally, mercifully ends.

Receiving manna from heaven is not likely to happen, however, and the decision-makers running America’s system of higher education know it. Taxpayers, hit hard by the great recession of 2008 and the cumulated weight of some thirty years of stagnant wages, are refusing to cough up any more funds for institutions that seem ever more out of reach and less worthwhile for ever larger numbers of ordinary people. Why pay more, they may justifiably ask, for pampered profs and five-year vacations for the low-achieving sons and daughters of the American lumpen-bourgeoisie when one’s own mortgage is underwater?

A good question. Unless American higher education can definitely answer it in a way that makes sense to most people, the system is doomed – it will, like American health care, have simply priced itself outside the range of what most people consider worth paying. Change is therefore coming to American higher education regardless of whether the institution likes it or not, and the longer America’s universities resist in making economizing reforms the uglier and more traumatic that transition will be.