As Australia confronts a productivity crisis, one of the nation’s most heavily subsidised sectors, higher education, must face scrutiny. Australia’s universities receive billions in taxpayer funding, yet increasingly deliver less of what matters: knowledge, skills, and national value, particularly in the non-Stem and business-related areas.

Instead, universities are increasingly producing inflated credentials, promoting divisive identity-based ideologies, and expanding bureaucratic inefficiency all while undermining both social cohesion and economic vitality. And has also been observed, academic ‘gurus’ often provide bad advice, adding to the disrepute of universities.

This decline is neither mysterious nor accidental. It is the direct result of government policy choices made over decades.

Successive governments, in the name of expanding opportunity, have flooded the university system with students far beyond what the labour market requires. In doing so, they have unwittingly fuelled a dynamic complexity scientist Peter Turchin calls elite overproduction – the mass creation of credentialed individuals whose economic expectations vastly outstrip the opportunities available to them.

In this context, the Albanese government’s proposal to raise the share of university-educated Australians from 45 to 55 per cent by 2050 is both ill-conceived and untethered to evidence. The target appears arbitrarily chosen. Worse, this expansion is being pursued precisely as the value of many university degrees is diminishing, and as an increasing number of graduates struggle to secure meaningful, well-paid employment; a challenge only intensified by the accelerating disruption of artificial intelligence.

This policy ignores mounting evidence that degrees, particularly in non-technical fields, are delivering diminishing returns and worse, are contributing to generational disillusionment and social instability. Indeed, a growing number of trades and technical careers now outperform non-technical university pathways. Electricians, mechanics and plumbers often enjoy higher incomes, less debt and greater job security than many university graduates. Yet prestige and policy continue to funnel young Australians into increasingly fragile academic tracks.

The numbers are damning. At most Australian universities, nearly half of salary expenditure goes not to teaching or research, but to administration. And as this bureaucratic sprawl metastasises, politicised, ideologically conformist departments flourish.  Meanwhile, rigorous scholarship and open inquiry are quietly suffocated. The result is a system structurally hostile to dissent and resistant to reform.

Austrian economist Joseph Schumpeter predicted this phenomenon in his 1942 book Capitalism, Socialism and Democracy where he warned that capitalism’s very success would generate a class of educated, economically unproductive intellectuals who, alienated from the market forces that sustain society, would turn against it. These ‘intellectuals’, often academics, media professionals, and bureaucrats would not fix what is broken but would instead seek to delegitimise the system itself.

American economist Thomas Sowell similarly observed that intellectuals often operate without feedback loops. Their ideas shape policy, institutions and culture. But when those ideas fail, they face no consequences. Shielded by tenure and ideology, these intellectuals remain insulated from the very society that funds them.

Australia’s university sector has produced just such a class: over-credentialed, under-employed and often resentful, with the pathologies associated with elite overproduction now on full display. Young Australians were sold the dream that university would guarantee a secure, fulfilling life. But with rising debt, precarious work and a housing market out of reach, many now feel betrayed.

This disillusionment is not confined to Australia. In the US, the collapse in humanities enrolments, rising graduate underemployment and growing campus radicalism are all downstream effects of this same phenomenon. Even practical fields like Stem, once seen as safe bets, have not been immune. A recent crash in tech hiring has left many computer science graduates adrift.

Unrest follows unmet expectations.  When a society produces more elite aspirants than it can absorb, those left behind grow bitter. And as history shows, from the revolutions of 1848 to the upheavals of the 2010s, surplus elites, not the working class, often prove the most combustible force in society.

This is not merely a cultural grievance. It is a structural crisis.

Universities no longer prepare students for the world as it is. Instead, they encourage utopian expectations that reality cannot fulfil. When degrees become more expensive and less valuable, and when ideas taught in lecture halls fail outside them, public trust collapses and with it, the legitimacy of the institutions themselves.

We are already seeing the consequences. A Deloitte study recently found that two-thirds of new hires globally are underprepared for their roles. Meanwhile, employers increasingly report that graduates lack practical skills, critical thinking and even basic literacy despite years spent in expensive education.

These failures do not end at the campus gates. The graduate glut is crowding out opportunity in many professions once seen as respectable and attainable. Many of these fields are now saturated with angry ideologues. The traditional fallback roles for university graduates are vanishing, even as the academic conveyor belt rolls on.

At the same time, the ideological monoculture in universities, which celebrates identity, grievance and subjective ‘lived experience’ while dismissing empiricism, free markets and national cohesion is feeding broader social fragmentation. Rather than preparing students to contribute to the economy and society, universities increasingly groom them to critique, disrupt or reject both outright.

The overproduction of elites has also distorted the political landscape. As disillusioned, indebted graduates seek to explain their stalled prospects, many gravitate toward utopian ideologies, radical politics, and identity-based movements. Their frustration becomes a cultural force amplified by media, reinforced by academia, and often subsidised by the taxpayer.

Tying university funding to graduate outcomes is a rational first step. But much deeper reform is needed. The pipeline from secondary school to university must be diversified and rebalanced. Vocational education should be treated not as a consolation prize, but as an equal and often superior alternative. More fundamentally, a cultural reset is needed in how we value education. Not every form of learning must lead to a credential, and not every credential is proof of competence. Australia’s future depends on productive citizens, not paper elites.

Universities must be compelled to refocus on their original mission: to produce and transmit knowledge, to cultivate intellectual integrity and to equip students to navigate and contribute to a competitive world.  That requires less ideology, more rigour, less bureaucracy, more accountability.

A society that subsidises intellectual fragility and institutional decline under the illusion of progress cannot thrive. But one that demands excellence, relevance, and national value from its universities just might.