Capitalism in West Campus
Exposing and Resisting George Kozmetsky's IC2
by Robert Ovetz
Soon after taking office, President Clinton awarded presidential medals to two top University of Texas (UT) officials for their achievements in turning publicly funded research into profitable new technology. One of these recipients, George Kozmetsky, is a low profile multimillionaire weapons maker, S&L speculator, and investments advisor to UT. In actuality, Kozmetsky's recent notoriety is hardly the makings of the mythical "free market" entrepreneur. Using billions of dollars of public resources invested in UT, Kozmetsky has been a catalyst for recent efforts to reorganize US based universities into overt multinational corporations. Through his low profile, UT-funded thinktank, IC2 (renamed the Institute for Creativity and Competitiveness after years as the Institute for Constructive Capitalism), Kozmetsky has guided the use of publicly financed resources to begin reorganizing UT into a model multinational university corporation. However, these plans have met widespread opposition from students, Austin residents and others internationally.
This article investigates Kozmetsky's many international business dealings through IC2 as well as his connection to junkbonds, the S&L scandals, corrupt development schemes, and the deforestation of California redwoods briefly described in February's (sub)TEX. By investigating IC2's global activities we can devise new avenues for further circulating resistance to what is becoming a new strategy for managing the global economy.
Feeding at the Public Trough
Kozmetsky's approach to restimulating "economic growth" is to work internationally on local levels to reintegrate government, education, and private business. Each of these institutions are to serve the commercialization of publicly funded university research for private profit in the hands of the few such as himself. Widely known as "technology transfer," the process involves reallocation of resources towards potentially profitable academic research. This reallocation relies on the carrot and the stick methods: government subsidies for the cooperative and funding cutbacks and intellectual repression for those who resist pressures to further submit to the "market." This is the case at UT-Austin, which while undergoing widespread cutbacks since the late 1980s, has actually been rerouting billions of dollars into profit oriented projects. This reorganization of UT-Austin and other similar universities into overt profit-making multinational businesses I call "entrepreneurialization."
In the US, technology transfer has been driven by the development of military weapons systems, especially Star Wars research. IC2 has long made the military a fundamental nexus for their own projects not only because of Kozmetsky's own personal affinity for the war industry (he founded the multinational weapons dealer Teledyne in 1960) but because it has proven to be quite lucrative. The idea is for business to transfer the high costs of R&D to the universities who, as Kozmetsky has influenced UT to do, build state of the art facilities, labs, clean rooms, and stock them with equipment, researchers and cheaply paid graduate students. Corporations pay very little since grants from DoD, the National Science Foundation, state agencies and universities cover nearly all the costs. Technology transfer is a great deal for multinational corporations such as Kodak who are trimming their in-house research and shifting the costs to the universities and government who turn out highly profitable new products for them. (SeeCommercializing SDI Technology and Commercializing Military Technology, published by IC2). The institute has such a proven record in turning weapons into cash that it even received a $2.6 million contract from the Air Force Office of Science Research in 1992 to research industrial management and technology commercialization in Japan.
Entrepreneurialization of the universities is fundamental to IC2's plans to build a "technopolis" in various locations throughout the world. Modeled after a joint Australian and Japanese government project called the "Multi-Function Polis," the technopolis involves redesigning select cities so that all aspects of life, education, recreation, and work are organized around the interests of a newly implanted high tech industry. The "Silicon Valley" of California, Phoenix, Bari University in Southern Italy, and Austin have been identified as completed and emerging technopolises by IC2 planners. (SeeThe Technopolis Phenomenon, IC, 1990) Although they only see the universities as one of many factors in its development, in reality the research university is the central factor in the organization of the technopolis because its vast capital resources are used to subsidize the costs of establishing the industry and expansive R&D facilities.
The technopolis has hardly proceeded as planned however. In Austin, the battles over the building of an international airport (which we have continued to block for decades), tax abatements, environmental regulations, toxic wastes, and budget cuts and tuition/fee increases at UT indicates the difficulty IC2 has faced in attempting to transform Austin and UT according to its plans. Environmental opposition to the high tech industry has also been generated for many of the same reasons in Arizona, where Motorola left behind a three Superfund sites and a growing environmental movement to come to Austin. In the San Francisco South Bay area (or "Silicon Valley"), the computer industry is facing a growing environmental movement and hostility which is driving corporations to relocate to places like the Pacific Northwest and Austin. In fact, IC2 perceives the largest threat to the technopolis to be local populations such as those in Phoenix, the South Bay and Austin who come to believe high tech is destroying their "quality of life" and will organize environmental movements that will use government regulations and other direct means to disrupt it. (see Technopolis Phenomenon)
Since little progress has been made in realizing even one technopolis, IC2 has also undertaken numerous side projects in many countries to train a legion of followers who can at least initiate the rudimentary aspects of technology transfer. IC2 sponsors and attends conferences, publishes reports, studies, books, organizes seminars, MBA degrees, and provides consulting for businesses, universities ad governments throughout the world. The "institute" is located in a UT-owned building on San Gabriel between Lamar and 28th where it and the RGK foundation named after Ronya Kozmetsky, George's wife, operate. Many of the conferences, co-sponsored by such corporations as Bechtel (which made billions building and rebuilding Kuwait), Arthur Anderson and KPMG (both of which are currently being sued by the Resolution Trust Corporation for fabricating documents and other misdeeds in the S&L scandals), Regis McKenna, PaineWebber and assorted multinational high tech corporations such as Tandem and 3M.
IC2 has 70 endowed fellows located at UT and in Washington. Thirty two of the positions were funded by a "gifts" from the Kozmetsky's to UT in the mid 1980s that were matched by the university for at least million. They are named after a number of UT notables including recently retired Vice President and Provost Gerhard Fonken and Regent chair Sam Barshop. The institute also heavily relies on unwaged graduate and undergraduate interns who work either for the institute (ten in 1990-91 alone), take courses that require the students to work at its technology incubator park or through its other projects.
Fellows hail from many universities and corporations such as the university of Oregon, Washington University, University of Tulsa, University of Washington, Aoyama Gakuin University, Tokyo, Duke, NYU, Carnegie Mellon, MCC, Hitachi, and Digital. They also have associates in Peru, Tokyo, Hungary, and Russia. (See IC2 Institute Annual Report, 1989-90) In all, IC2 collaborated with 30 universities, 5 state governments, 8 branches of the federal government and Congressional committees, 36 private foundations and corporations, 4 Texas state agencies, and institutions in 9 other countries.
One of the fellowships is currently held by UT Management Professor John Doggett who is best known for his testimony against Anita Hill to deligitimize her charges of sexual harassment against now Supreme Court Justice Clarence Thomas. Doggett's company was established with assistance of the Agency for International Development, known for its close relationship with the CIA. (The Texas Observer, 11/ 15/91)
IC2 has begun to embark on a new strategy in an attempt to integrate all aspects of the university into its projects. Whereas it once brought campus faculty and students to it, now IC2 is attempting to go directly to faculty and students by invading the classroom and rewriting curriculum. As holder of a million endowed chair in the UT-Austin Economics department (the largest of UT's more than 1000 endowed positions), Kozmetsky is spearheading an effort to gain academic legitimacy for his projects. Last fall, the University Council approved the creation of a new master's degree and department of "Commercialization of Science and Technology" for whom Kozmetsky will conveniently be the graduate advisor. This comes directly on the heel of courses concerning issues of high tech commercialization taught by IC2 fellows from other departments in an effort to recruit graduate students.
One of these courses, Soc 396L-"Entrepreneurship," is taught by economics professor Sten Thore, who is under contract with the Defense Department (DoD) to develop new computer workstations. Offered by the sociology department, I enrolled in the course only to find it taught by a professor with no knowledge of sociology. During the entire semester, we never even read one selection from the phony syllabus which was mostly composed of IC2 publications. We were required to use Thore's computer program and textbook to gather financial data on various businesses. Meeting at the IC2 building, the course was an explicit attempt to recruit sociologists to their work. Because only three students were enrolled, less than the required limit, the course had to receive special approval from the dean, Sheldon Ekland-Olson, a sociology professor. Its approval was facilitated by another IC2 fellow and chair of the department of sociology, professor John Butler, who told me that he personally created the course. In actuality, Thore informed us in class that he taught the same course in any department that would have it, from sociology to aerospace engineering. Such is the high quality intellectual pursuit of IC2.
John Butler is best known for his appearance in then President Cunningham's entourage of token "minority" students and faculty on April 14, 1990 when Cunningham attempted to make an apologetic speech on the West Mall concerning weeks of racist incidents committed by UT fraternities. Cunningham was driven back into the tower in embarassment by about 1000 angry students and later further discredited by many of the entourage who were notified to attend but not informed as to its purpose. This action helped trigger a movement for multicultural reforms which Butler openly opposed in favor of Booker T. Washington's approach of patient submission. Still a "minority" insider of Chancellor Cunningham, Butler isn't as friendly to the minority of students and faculty in the sociology department that disagree with him whom he openly attempts to intimidate as "radicals" and "marxists." Butler isn't as candid about his IC2 affiliation though. In his annual report filed by each faculty member with the administration, Butler just happened to forget to list his position as IC2 fellow.
Ironically, IC2 is further entrenching itself in a position of informal decision-making power outside traditional academic governing structures and oversight with the help of those very structures which it is responsible for weakening. Such events underline the rapidly eroding role of faculty in the actual day-to-day operations of the university as it slowly evolves into a multinational corporation in which they become no more than its intellectual employees. Perhaps the faculty will resist this weakening of their own power base by voting to abolish IC2's department when it comes up for its one year review in 1995-96 on the grounds that it is an academic fraud.
Kozmetsky, S&L's and Clearcutting Redwoods
One IC2 fellow is named for Charles Hurwitz, Kozmetsky's longtime friend and business partner who owns the majority control in Maxxam. In 1985, Maxxam made a takeover bid for Pacific Lumber for $800 million in junk bonds provided by the the Wall Street firm Drexel Burnham Lambert. At the same time, Hurwitz acquired 23% of United Savings Association of Texas which was used to buy the junk bonds floated by his broker Michael Milken. Milken was indicted as part of the S&L junk bond scandal on 98 counts in 1989, seven of which are directly related to the Pacific Lumber deal.
After the takeover, Hurwitz plundered Pacific Lumber's pension fund, investing $60 million of its $90 million in First Executive Life, one of Milken's best customers. First Executive went under in April 1991 with 51% of its investments in junk bonds. And two months later, the Department of Labor filed a lawsuit against Hurwitz and Maxxam for violation of the Employee Retirement Income Security Act. The bankruptcy will cost Texas taxpayers as much as $375 million to keep Executive Life in business, $50 million in 1991 alone. Meanwhile, Maxxam began destroying one of the largest remaining tracts of virgin redwood forest of 200,000 acres in the US which it acquired in the deal to repay the junk bonds. Earth First!'s "Redwood Summer" of 1990 was organized to protect this forest through direct action. Kozmetsky sits on the board of Maxxam and is paid $250,000 a year. Kozmetsky was joined on the board, until his recent death, by former Texas Governor John Connally is also known for his bank and real restate deals concerning property along Barton Creek in Austin with none other than Charles Keating that lead to a bailout worth $133 million. UT is also a Maxxam shareholder with 3,800 shares worth $186,000. (See UT System Board of Regents, Permanent Fund Investments for the Fiscal Year Ending August 31, 1990, p. 24)
Getting Texas High (on Tech)
Kozmetsky has used IC2 to not only rewrite the curriculum from within, but to utilize the highly trained faculty, staff and students to develop new ideas and technology that can be marketed for profit. Kozmetsky has used Texas a test case for entrepreneurializing state universities to redirect resources from academic programs and services that serve students to activities that have potential commercialibility. Although higher education throughout the state has faced declining state support (the UT budget 's share of state funds has declined from 45% to 30% in the last decade), rapidly rising tuition and fees (between 1985 and 1993 graduate tuition increased 1300% ), staff and faculty hiring and pay freezes, and other rampant measures of austerity, support from the university and state has grown rapidly.
With Kozmetsky's and others assistance, UT shelled out about $50 million since 1983 for new facilities and endowed chairs for the Microelectronics and Computer Company (MCC) consortium (founded by Bobby Ray Inman former deputy director of the CIA), and $140 million for the DoD funded Sematech consortium since 1987. MCC is helping commercialize the superconducting supercollider (for which the state will spend $1 billion of its total cost of $8 billion) and Sematech is developing advanced semiconductors for new "smart weapons" systems. To complement their projects, over the past decade UT spent more than $200 million constructing and equiping new facilities for computer and military research at the Bacones Research Center (BRC) and hundreds of millions more across the campus for engineering, high tech and biotech facilities and equipment.
The use of university resources to build an infrastructure for commercializable research has spread statewide. Kozmetsky has personally been responsible for an exhaustive list of publicly funded high tech, biotech and military ventures throughout the UT System. He, along with Chncellor Cunningham, is on the board of the little known Houston Advanced Research Center, a consortium of Texas universities that does work on "smart weapons", imaging technology for oil exploration and was helping build the superconducting supercollider. Kozmetsky is involved in numerous business coalitions, lobby efforts and speculation ventures .
One of the ways in which IC2 has begun to further utilize the intellectual resources of UT to make money is through the Austin Technology Incubator (ATI) (run by its Center for Technology Venturing (CTV) in the business school). ATI is home to fledgling high tech companies often owned in part by faculty, the UT System or local multinationals. The Texas Capital Network, coordinated by IC2, serves as its commercialization fund with $40 million in venture capital. Both CTV and ATI receive funds from UT indirectly through IC2. ATI keeps the costs for new companies very low not only because the incubator provides facilties subsidized by UT, the city and Travis County, but also because it uses UT faculty as consultants and provides business graduate student who are required to work without pay for a company for their semester project. In 1989-90, for example, 81 students worked for companies such as Southwestern Bell, 3M, Ford, Dell Computer, MCC, and the Texas Department of Commerce on various studies and projects.
Although IC2 denies that it receives any funding from UT, student tuition and fees and tax money are actually used to underwrite the institute and its corporate partners. UT paid for its office space and utilities while it was originally located on the fourth floor of the Graduate School of Business. In fact, while IC2 has publicly denied it, millions of dollars of UT money has gone directly to the center through the endowments and other indirect avenues. The close relationship between the highest levels of the administration and IC2 are carried out through Kozmetsky's position as the UT System investment advisor and IC2's reporting directly to the president (the only other organization that does so is the Harry Ransom Center). UT also lists IC's budget and the value of its building in the annual Financial Statement . the institute also appears in the phone directory and the course catalogue. In fact, IC2 is listed in the UT Budget with a budget of $53,364 for an "administrative services officer" in 1991-92 and at least as far back as 1984-85 with a salary for the same position of $37,524-which are both higher than the salaries of most tenured faculty. In all, UT spent at least $300,000 just for that position. "The University of Texas at Austin" also appears on the cover of IC2's annual report, on the cover page of its books and reports, and co-sponsors most of its conferences. Support from the Graduate School of Business is also commonly cited.
Stretching its Claws
IC2 is a case study for understanding how a new type of international government-university-business partnership is evolving into a strategy for managing the international economy. From the Austin to China, Eastern Europe, and Russia, IC2 is showing business, universities and governments how to turn publicly funded and supported research and ideas into profitable private products. This process of "technology transfer" is a new popular strategy for resolving the global crisis of capital that was initiated by the international insurgencies of the 1960-70s and continues today.
IC2 is becoming increasingly active throughout the US and internationally, promoting the entrepreneurialization of the universities (whereby they become overt businesses themselves) and the use of government resources by business. It helped establish a replica of itself called the Interbay Institute for Innovation (I3), and the Center for Economic Development at the University of South Florida. Similar assistance was also given to the founding of the Science and Technology Foundation in Alaska and the SEI Center for Advanced Studies at the Wharton School.
IC2 participates in conferences and generates a wealth of publications advising corporations in university entrepreneurialization in numerous countries. In 1990 IC2 published Technology Commercialization and Competitiveness, a collection of presentations made at two conferences, one of which was held in Beijing in March 1989 with particpation from Bechtel, Tandem, KPMG, Booz-Allen & Hamilton, PaineWebber, and Regis McKenna before the blood of the Tiannamen Square massacre even dried. Presentations made at another conference on the globalism of capitalism in Shanghai in November 1990 and published in 1991.
Eastern Europe has been a site of recent IC2 activity. Kozmetsky has made numerous trips to the former Soviet Union to expand his exploitation of their universities which are undergoing a process of entrepreneurialization brought about by austerity and "autonomy" similar to the US. In June 1991 for example, Kozmetsky and IC2 executive director Raymond Smilor helped coordinate a conference with the USSR State Committee for Science and Technology that promoted the creation of incubators and science parks.
Another one of its fellows, Robert Hisrich, has trained businessmen in Poland and is director of an US Agency for International Development (which works closely with the CIA) commercialization program at four Hungarian universities. IC2 keeps track of licensing agreements, commercialization, patents and other related entrepreneurial university activities recently began providing information on identical activities in Eastern Europe as it seeks to undermine the revolutions and open the region up to more successful exploitation.
Western Europe has also been the cite of IC2 efforts. It has organized conferences, studies, and projects in France, Sweden, Austria and the UK and is currently conducting a study for the European Economic Community on publicly funded commercialization of university R&D.
Entrepreneurialization and Austerity
IC2's activities demonstrate the internationalization of what has struck the universities throughout the US especially hard since the early 1980s. As austerity intensifies, federal and state legislative reforms have begun to transform the universities from handmaidens of business to overt profit making multinational corporations. The 1980 federal Patent and Trademark Act and later amendments allowed corporations and universities to patent and license federally funded research. The Act and federal tax incentives, anti-trust and intellectual property changes have opened the door to universities making direct investments in spin off companies that are derived from university based research. Since publicly funded universities are exempt from federal, state and local taxes, corporations receive all the fruits while paying none of the taxes or having any of the liability for toxic waste or product liability. Eliminating university tax exemptions by showing their commercial orientation may be one strategy for tripping up this whole process.
In Texas, legislative changes have allowed university employees and officials to own interests in university investments. As chief investment advisor to the UT board of regents, Kozmetsky has steered UT policy to favor the commercialization of military related research. UT-developed Star Wars weaponry like the railgun is being licensed and spun off into a company jointly owned by engineering professor William Weldon and the UT System. Since the early 1980s, UT's profits from licenses and patents has increased from $100,000 to more than $3 million as of 1993. This is only the only the start. As owner of the largest number of patents of any university in North America, many may soon grow into large corporations.
With new opportunities for low risk profits, universities are just beginning to be entrepreneurialized. Declining state funding forces academic programs to reorient themselves to serve the needs of business or face austerity. For those who choose the former, IC2 is there to help. Although the UT budget has nearly doubled over the last decade to $666 million by 1993, state funding makes up less than a third of the budget and is barely increasing in actual dollars. Tuition, general fees, and the $4.2 billion endowment (second largest in the US) back bonds that finance construction and the equiping of commercially oriented research centers, computer consortiums, and college facilities such as in engineering. In all, the UT System is currently $1 billion in debt. Meanwhile, the university administration rationalizes rapidly increasing tuition and fees with rhetoric about filling in budget cuts when in fact most of the money, as well as about $100 million of the $250 million in interest from the endowment in 1991 (called the Available University Fund) and a number of other secret funds go to pay the debt.
Operating much like debtor countries, UT is disinvesting from programs that serve the needs of students, shifting a larger amount of the costs to students through additional fees and class shortages, and using austerity to restore control it has lost over the last two decades with rapidly growing enrollment and the multiculturalization of the campus. Likewise, a growing number of students are forced to go even deeper into debt with student loans to afford tuition, fees and living that they are expected to work for ten years to repay after they graduate. Meanwhile, the Texas Higher Education Coordinating Board, which runs the Texas student loan programs, made $120 million in profits from student indebtedness while spending $246 million between 1985-1993 on grants for commercializable high tech and biotech research in the universities. Understanding how such debt financing works offers us a concrete connection for circulating the struggles against debt that have exploded throughout in the "Third World" to the universities in the US.
As a thinktank funded and housed by a public university, IC2 epitomizes the current survival strategy of capitalism that is using technology transfer as an attempt to make us pay for the reorganization of the capitalist economy in the face of twenty years of crisis of productivity and profits created by the rebellions of the 1960-70s. For nearly a decade, this strategy has been a national economic policy and is quickly becoming common internationally. A current proposal to transform DoD's venture capitalist agency DARPA into a "civilian" oriented agency is making this even more explicit.
Squaring Up on IC2
We can turn around IC2's strategy by making connections between a number of interconnected struggles such as students fighting against austerity and for multiculturalism (for example, Bechtel funds some of the right wing organizations organizing the so-called "PC" counterattack), community resistance to the location of plants and toxic waste by high tech and biotech corporations, and international movements in China, Western and Eastern Europe fighting austerity and capital investments. For example, IC2's connection to the push for an unnecessary international airport in Austin is exemplified by the city's hiring of KPMG to conduct an airport master plan with help from local developers. Such a connection provides each of these movements fighting each aspect of high tech in Austin a means for alliance.
This is starting to take root in Austin where local groups have long blocked plans for an international airport, and are fighting Freeport McMoRan's development project on Barton Creek. At the same time, students are increasingly beginning to resist tuition and fee increases and city residents are fighting toxic pollution from the Sematech computer consortium and local oil companies. All of these struggles add up to blocking the transformation of Austin into a technopolis playground for the high tech and biotech industries. If we recognize IC2's plans as a response to the crisis of capitalism we created in the 1960s-70s and how we can circulate our multiple points of resistance to it today, defeating it does not appear so formidable a task.
After 10 years too long, Robert is finally giving a big "FUCK YOU!" to UT by graduating with his third and final degree. He can be reached at [defunct e-mail address redacted]
1 In September 1993, George Kozmetsky was awarded the National Medal of Technology and Norman Hackerman received the National Medal of Science. Hackerman is a former UT and Rice U. president and nuclear weapons researcher.
*Note: this was written in 1994