From Profits to Pandering: How Government Turned Universities and Businesses into DEI Bureaucracies

The Board of Trustees at the University of North Carolina at Chapel Hill, on May 13, announced that they would be diverting the $2.3 million that the university spends on diversity, equity, and inclusion (DEI) policies toward campus safety amidst protests over the Israeli-Palestinian conflict. UNC-Chapel Hill joins a list of universities like the University of Florida and the University of Texas that have eliminated their DEI programs in part due to lawmaker pressure.

Protestors have boiled up on college campuses, voicing their concerns and demands for schools they claim are supporting the Israeli war effort in Gaza. At Chapel Hill, the school was woken up on the morning of May 11 to vandalism of an administration building, the same day as its commencement ceremony. It has since voted to eliminate its DEI program in favor of greater campus safety.

It took protestors as well as lawmakers in other states to eliminate DEI programs. However, why did universities get so invested in DEI programs that often exist only to push Maoist-style racial tensions on their campuses? Ludwig von Mises gives us an answer from his 1944 book Bureaucracy. The government caused these schools to diverge from what Mises properly dubs “profit management” and into bureaucratic, and often pseudo-Marxist, management.

Universities, like all other institutions that deal in the buying and selling of scarce resources, are businesses. They offer services—education, in their specific case—in exchange for payment—tuition paid by students. The financing of a student’s purchase of education is certainly caught up in government intervention, but that is another issue entirely.

However, universities certainly do buy scarce resources to sell to students. Professors must be hired, buildings must be obtained, and other educational materials don’t simply fall from the sky. Students certainly buy the services of universities. They may be doing so just for the sake of earning a diploma in a field they love. Most will treat their education as a higher-order good to reach lower-ordered goods they truly desire (perhaps a career path they enjoy or financial success). Universities are businesses, plain and simple.

The idea that a university isn’t one has seeped in alongside government spending in them. Some will cite necessary research conducted in universities as a part of the education imparted to students, but this positive externality is true of every business. Yet politicians use this justification almost exclusively for subsidizing higher education and setting controls on it. (Worry not! They have other excuses for getting in everyone else’s business!)

Value is certainly created when universities are run like businesses. The very fact that a university profits at all is a sign that it is efficiently using the resources available to it to provide for its customers—the students. Students derive value from it; that is plain enough to see by their willingness to pay tuition. If they didn’t value the service, they wouldn’t forgo the pleasure of leisure to take up textbooks and study. However, to the encroaching politician or bureaucrat—the operations of the business alone in free exchange aren’t enough value.

To the bureaucrats, the business isn’t meeting the lofty ideals they want it to reach. Rather than use their funds as a consumer or producer to influence others, they wield a pen and gun to force businesses to comply with the lofty ideals they establish. These ideals, even those that generally are acceptable to average citizens, provide entry points for the federal leviathan.

Legislation that targets government contractors and universities that accept government funds will always necessitate compliance. “Equal employment standards,” harassment and whistleblower claims, nondiscrimination clauses, and other government-established standards force the private (or semiprivate) firms to report and track compliance. Even if they would meet these standards otherwise, now government paperwork and processes must be imported. What would otherwise be productive resources are funneled into lawyers who “help to maintain compliance” and human resource personnel who drag their feet.

These nonproductive employees and activities drag down businesses. It is no wonder that a well-established trick used by larger companies is to lobby for further regulation. Regulation makes companies into political rent seekers. The costs of compliance alone can prevent new competition from arising. However, they also drag profit-seeking firms into bureaucratic management. Mises defines “bureaucracy” as “that matter of affairs of which there is no cash value on the market.” In layman’s terms, it means that a firm or agency works bureaucratically by focusing on satisfying ends for which there is no profit to pursue. By placing ideals greater than profit, the firm goes chasing inefficiencies.

Mises also describes the despotism that this creates for private business:

Under this system the government has unlimited power to ruin every enterprise or to lavish favors upon it. The success or failure of every business depends entirely upon the free discretion of those in office. If the businessman does not happen to be a citizen of a powerful foreign nation whose diplomatic and consular agents grant him protection, he is at the mercy of the administration and the ruling party.

However, what has the government done? By establishing a myriad of legal codes and compliance costs, the firm must now create a glorified “compliance department.” These employees and departments owe their existence wholly to government edict and the tedious bookkeeping mandated by it. Thus, they must further justify their existence.

To not be resented by their employers and their coworkers, they must invent some ideals they strive toward! What better than our dreaded DEI? An apparatus has already been made. The firm has already adopted the tendencies toward inefficiency. Rather than focus on those affairs that may create more value for its consumers, these employees and departments can now pander toward these lofty ideals.

The social minority that pushes for these ideals, that otherwise would not be a marketable audience for the firm, offers just as valid advice for the conduct of this business. Better yet would be if this social minority also has the backing of the government bureaucrats that dispense funds? Why not cater to them and build better relations with the resident jailers?

DEI departments, while creating no value for the universities, are instead born of bureaucracy. Resources, like UNC-Chapel Hill’s $2.3 million, are funneled toward these new bureaucrats. Yes, they ensure compliance with government DEI edicts, but they are also given room to push their own social causes. The colleges have been turned down the road already; why turn back now when they could barrel forward?

Government regulation and bureaucratization created the environment for these offices to flourish. Issuing mandates that force compliance rather than cost-cutting create behaviors that provide ample ground for new bureaucrats and their ideals to flourish. Rather than consider ideas like merit, we are forced to think of people in the narrow lenses of social activists that are hired to satisfy government compliance.

Government overreach made DEI flourish, so we shouldn’t be surprised when some firms realize they must cut costs. The DEI ship is sinking, and one wishes it would take university bureaucracies with it.

*****

This article was published by The Ludwig von Mises Institute and is reproduced with permission.