Here is what he says:
Modern nations have two economies, which exist side by side. Economy I is the tradable sector. This includes companies that make goods like planes, steel and pharmaceuticals. These companies face intense global competition and are compelled to constantly innovate and streamline. They’ve spent the last few decades figuring out ways to make more products with fewer workers.
Economy II is made up of organizations that do not face such intense global competition. They often fall into government-dominated sectors like health care, education, prisons and homeland security. People in this economy believe in innovation, but they don’t have the sword of Damocles hanging over them so they don’t pursue unpleasant streamlining as rigorously. As a result, Economy II institutions tend to get bloated and inefficient as time goes by.
And then there is this conclusion:
The problem is that the bloated Economy II is becoming a burden that Economy I can no longer carry. Unless we reform Economy II and control its spending, the bloat will crush us. National productivity will slide. The economy will stagnate.
I have been part of higher education most of my life. I love the university. I consider the university an essential component of a thriving society. I will do everything I can to battle for the health of the university. But I fear the university of our day resides in Economy II.
According to Brooks’ model, I have contributed to the bloat of Economy II. I accept that responsibility, but I know from experience how hard it is to bring about speedy change in organizations in Economy II. I know as well there are a lot of folks out there with easy solutions for us, chief among them the media, but even some of our boards of trustees, most of whom live and work in Economy I.
While Brooks does not focus on higher education, only K-12, I confess we have managed to raise college tuition over the last two decades at unprecedented and unsustainable rates. We have discounted our budgets to dangerous levels. We have made virtually zero productivity gains, all the while spending enormous amounts on fixed costs, including unalterable salaries. Something must give in Economy II, and higher education must move deeper into this painful recognition.
Here’s what I have been thinking over the past months. I believe the university of our day has a chance to enter an era of innovation as never before. We must feel first the headwinds in our face, but then we have a chance to use technology for just the right leverage for exciting new change in education. Technology itself has entered a new era of profound usefulness for education. If we do it right, that may be our tool to meet these challenges.
If Brooks is right, and I think he is, our overall economy, in particular Economy I, will not support indefinitely the current economic model of the university. Our university leaders know this. They must define the realities, the dangers, the headwinds we face, and then they must point the way forward toward new and exciting innovation.
But here’s the other thing I think: Our faculties have all the talent necessary to lead us forward on this exciting venture of innovation. But they must think innovation, not always their strong suit. The time of the blame game—too much the mode of institutions in Economy II—is over. It is time for powerful new innovation. It is time to work together.
I actually think the university just may become a model for other institutions trapped in Economy II. If we do not seize this moment of opportunity, though, the bloat threatens to sink our ship. We must recognize the headwinds for what they are and lean our way forward with innovation and creativity and experiment. The university is too important to our society to do otherwise.