I joined the staff of the Committee on Degrees in Social Studies at Harvard University in 2000. As tutor, then as lecturer, I advised senior theses, conceived and conducted freshman and junior seminars and taught the year-long sophomore tutorial, Social Studies 10, six times. The fractured nature of my appointment, renewed annually for six successive years while never amounting to more than 65 per cent of a full-time position in any one year, kept me on the margins of prestige and promotion even as it kept me there long enough to serve three chairmen of social studies, two directors of study and three presidents of Harvard.

The post-pubescent children of notables for whom I found myself holding curricular responsibility included the offspring of an important political figure, of a player in the show business world and the son of real-estate developer Charles Kushner.

In the first meeting of my first seminar of my first year, Kushner's son Jared entered my classroom and promptly took the seat across from mine, sharing the room, so to speak. I was drawing an annual salary of $15,500 (£7,700) and borrowing the remainder for survival in Cambridge, in order that he might be given the best possible education. Jared later purchased The New York Observer for $10 million, part of which he made buying and selling real estate while also attending my seminar. As publisher, one of his first moves was to reduce pay for the Observer's stable of book reviewers. I had been writing reviews for the Observer in an effort to pay my debts.

Most of the students I encountered had already embraced the perspectives of the rich, the powerful and the unalienated, and they seemed to have done so with appalling ease. In keeping with the tradition of the American rich they worked exceptionally long hours, they were aggressive in exercising their talents, and on the ideological features of market capitalism they were unanimous. Their written work disclosed the core components of the consensus upheld by their liberal parents: the meaning of liberty lies in the personal choice of consumers; free competition in goods and morals regulates value; technological progress is an unmixed good; war is unfortunate.

Around this consensus crystallised an ethos. One of my less affluent students, the son of a postman, asked me once for advice about a financial investment. He said his friends had told him to invest "in prisons", meaning one of the private companies winning the management contracts for correctional facilities. I told him what I thought about this recommendation; but only later, when I learnt how little he had to invest ($2,000 was his total savings), did I allow myself to think I understood the significance of his question. No amount of money may be permitted to lie idle if something may be got for nothing. The capitalist theory of life as a game disallows uncapitalised advantages.

I asked each of my seminars whether they had so far encountered a teacher they genuinely appreciated. If so, what aspects did they most admire? Invariably they said good teachers made them "feel comfortable". To sense the sterility one had only to listen: "shopping period" was the name of the week they selected their classes. Once, when I proposed to teach a junior seminar entitled "Anarchist cultural criticism in America", I was instructed to go ahead only if I first changed the title to "America and its critics". Here was the same method of cultural hygiene that has transformed Harvard Square from a bohemian enclave into an outdoor mall.

Grading, the one instrument of power I wielded, offers the best example of the degradation of pedagogy by the frenzy of success. The Boston Globe's expose of grade inflation at Harvard has left little doubt that it is a semi-rigged competition, another subsidised risk. The formal scale runs from A to F. The tacit scale runs from A to B. I learnt the latter from students and supervisors, but especially from colleagues, few of whom wish to carry the opprobrium of the low end. This is as it may be. But the presence of two standards of value, one official and one tacit, is always a sign of corruption: the one necessarily dishonours the other. It also abridges the academic freedom of the teacher. Although I never gave a final grade below B minus, I can attest to the petty harassment that teachers attract in such cases. I do not mean merely that the students are never so aggressive and articulate as when they hunt for grades. I mean that they wage political reprisals against the B-minus grader and send gifts to high-placed academic directors.

Once, a judge and his wife went to my supervisor to complain about a grade I had assigned to their child in a senior oral examination. They rested their complaint on the fact that I was not yet in possession of the all-encompassing credential, the PhD. They pointed out that the second examiner in the room had assigned the exam a slightly higher grade, and that this second examiner was, in fact, a PhD. The judge and his wife did not know, nor did they care to discover, that I was by far the more experienced of the two graders. I had been conducting exams for four years; the second examiner had never before conducted one. A minor gaffe, but one that William James, author of "The Ph.D. Octopus" (1903), could have understood and appreciated.

In January 2008, a "group of Harvard alumni from the Vietnam War era" sent an open letter to the university's president. "We are concerned by what we see to be the widespread apathy and political indifference of the student body at Harvard College today," said the letter (reported in Times Higher Education on 4 January 2008), which defined the problem as "self-examination and broad intellectual growth versus the careerist, vocational orientation". The letter was only half-right: the students are the opposite of apathetic and indifferent. The new student rich have retained the radical energy of the 1960s, only to engage it in more lushly monetised competencies. The New Left occupied universities to protest against the bureaucratic hollowness of examination rituals and grading rationales. Now its children complete the attack on the authority of teachers, who are simply annexed to the management of student careers, drawn into a tacit agreement between corporation and client in which failure is not an option. I had to grade the students, and I had to grade them well. Everyone expected a recommendation letter.

The ethos, so understood, mimics the psychodynamics of inflation in this age of unlimited markets. Since the students were young, apparently, their parents and teachers have bathed them in ambitious glances, so that the source of their very identity has come to lie in their potential. Perhaps this is why, though they demand to be graded, they resent the teacher's claim to judgment based on performance, which implies a stable set of values. A relatively low judgment may be met by the always available thought that they could have done better.

This thought is not as easy to rebut as one might suppose. Harvard students may be divided into three types. The first two are those who infer from their presence on campus that they have already made it and those who infer that they are on their way to making it. Both types are keenly aware of the prestige-value of their situation. To mention to a stranger where one studies is to drop the "H-Bomb". Neither type, accordingly, has encountered any really good reason to suppose that their potential is anything but limitless. Members of the third type, the ironists and the scoffers, have their degree and eat it too, since their anti-Harvard posturing carries no real risks. The gigantic endowment, that great symbol of unspent potential, blesses their scepticism by indexing their value on the credentials market.

Consider how the grading scandal (an open secret on campus) broke into the public discussion at the same time the dot-com bubble burst. Try to see these phenomena as twin instances in the chronic overextension of the credit markets. Now ask the question: when intellectuals act as clerks and students act as clients, how do college teachers differ from corporate accountants?

Should I say I am grateful for the chance to teach at Harvard? I am. Should I acknowledge the many fine exceptions it was my privilege to instruct? I do, with pleasure. But the sedulous banality of the rich degrades teaching into a service-class preoccupation whose chief duty is preparing clients for monied careers. The liberal flattery of the student is both sentimental and irrelevant. If youth is wasted on the young, is teaching wasted on students?

Teaching on the part-time staff at Harvard is a little like visiting Disney World. The magic dust induces a light narcosis. The mind goes incontinent in the presence of paradox and conflict, and it is tough to tell how much fun you are having from how much you are having to pretend. The important thing is never to become the screamer who ruins the ride for everyone. The line is long.