The daily life of the half million students at university in Australia mocks every fine notion of what university life should be about. The university mottoes proclaim their belief in the pursuit of truth and enlightenment, but in reality they are money-making machines which treat students as commodities to be trained to serve the needs of business and the state. No intellectual ethic, principle of education or student need will stand in the way of this mission.

The university system is rotten from top to bottom despite the best intentions of many who work in it. But, contrary to opinion, there was never a "golden age" of universities when they gave young people a chance to explore ideas, when the university was really "a place of light and learning", as is carved in the sandstone at the University of Queensland.

Education has always been a commodity, and students have always been trained with one thing in mind - how they might best serve capitalism on their graduation.

Australian universities started out in the mid-19th century as little more than schools preparing the sons of the ruling class for the exercise of power, and the sons of the middle class for the "liberal professions" of law and medicine and administrative posts in government.

At the beginning of the 20th century, the emerging demands of state-building and business began to put pressure on the universities to train more professionals - doctors, dentists, vets, architects, accountants and businessmen. However, university education was still reserved for a tiny minority of young people from wealthy backgrounds.

It was not until World War II that universities were radically "modernised" and emerged in the form that we see them today. Wartime mobilisation demanded a massive increase in science and technology, and this trend continued with the post-war economic expansion of the 1950s and 1960s, during which manufacturing, infrastructure and construction leapt ahead. The universities were expanded rapidly to meet this demand for skilled staff. The mining boom of the late 1960s led to still more rapid expansion in these fields.

The social sciences also increased fast in the 1950s and 1960s. The capitalist system required more staff in education, healthcare and social work to train and manage the ever-growing workforce and their families. The managerial layers in the big corporations and government were growing ever fatter, raising the demand for staff in personnel, accounting, advertising and so on.

For the first time, tens of thousands of young men (and increasingly women) of lower middle class and occasionally working class backgrounds were sucked into the system as governments began to offer more scholarships to augment the stock of Australian "human capital" at the service of business. Eventually, in 1973, university education was made free in order to accelerate this process.

As the university system expanded, the rhetoric about training "well-rounded gentlemen" gave way to the much more prosaic language of human capital. In 1966 the Martin Committee, stacked with senior business figures from BHP, ICI and Elders, explained the situation thus: "Education should be regarded as an investment which yields direct and significant economic benefits through increasing the skill of the population and through accelerating technological progress". Anxious governments around the world compared numbers of graduates in the way that they once compared the number of men in khaki. Graduates were no longer guaranteed a pampered life amidst the elite but were in many cases little more than glorified functionaries working for a boss.

The crisis of capitalism which took hold in the mid-1970s made university life more harsh and intense. Big business and governments still demanded university graduates to fill technical, professional and managerial positions. Only now, they determined that students and their families should bear the costs through the reintroduction of fees. At the same time a university qualification has become an essential ticket for entry into an ever wider number of jobs. Thousands of young people are getting slugged from both directions - they can't afford to attend, but they can't afford not to.

Because of rising costs, the Australian Vice-Chancellors' Committee's 2006 survey found that 12.5 per cent of students regularly went without food or other necessities because they could not afford them. Education Minister Julie Bishop's compassionate response? "Students should be more frugal".

And while they're at university students experience larger class sizes, the scrapping of tutorials, the replacement of permanent lecturers with casuals, and the narrowing of course choice as whole departments which do not attract significant numbers of fee-paying students are shut down.

Meanwhile, the squeeze is on staff as well who are increasingly subject to "performance management". Long gone is any notion of professional autonomy and job security for university staff. Every course is micro-managed, programs are ranked on international league tables, and "non-performers" are given the boot. Competition between universities to improve their position on the league tables is translated into competition between academics as they are driven to publish more. The average academic working week is now 55 hours and university staff report record levels of stress.

The irony is that many of these changes are being done in the name of "efficiency" and yet universities are becoming less efficient in any real sense. The proportion of university staff who actually teach students or conduct research, and the share of university funds that is allocated to teaching departments, are falling all the time. Administrations are now top-heavy with specialists in such bullshit areas as "quality assurance", "marketing and promotion", "development", and "strategic planning".

While university education may serve as a prop for big business, this does not mean that socialists ignore the demand that repeatedly comes from students that this is not how it should be. University should be about free inquiry and the pursuit of truth. Universities should live up to their fine-sounding mottoes. Students should be treated like adults and given a say in how universities are run. The contradiction between the "idea of the university", which is even now peddled by vice-chancellors, and the actual reality of university life constantly throws up these demands.

But the only way we can have a system worth defending is by some pretty radical changes. To start with, university education should be free and open to all. The competitive spirit which degrades the whole educational experience, from winning a place to graduating with the top score, should be scrapped. Anyone who wishes to enrol should be able to do so, regardless of their age and high school results. Degrees should be granted to all those who study for a fixed number of units. Exams should be abolished. Universities should be run by staff and student councils, with no representatives from business, religion and government.

Right now, these demands might seem utopian. They were, however, commonly raised in the 1970s (and in some cases in Europe partially implemented) as the student revolt of those years rocked the campuses. We have to rebuild campus activism, and the starting point is getting involved in the campaigns this year to stop the war in Iraq and to boot out the Howard government.