By dawn you can hear engines grumble, as a line of trucks, minivans and motor homes moves slowly across the golf course outlands, preparing for a party in the parking lot. By 9am, the grilled meats sizzle, the jaunty tents, satellite televisions and beer-pong tables are laid out, and 10,000 "M" and "Go Blue" flags flap nobly from the rough.

It's American football Saturday at the "Big House", the colossal University of Michigan stadium. Later that day, 113,000 corpulent, delirious and free-spending fans will cheer the mighty Wolverines, and with a salute recalling Rome (or perhaps Berlin), will bellow out the Michigan fight song, The Victors. The national anthem soothes them briefly; blimps and skywriting planes drift above the stadium. By midnight, the groggy fans will disgorge more than $10 million (?6.2 million) throughout Ann Arbor (population 113,000), the sleepy Midwestern home of the university. Then the motorised troops disperse, perhaps to rest up for Sunday, when the professional football league plays its games.

One hour east, Detroit is slowly collapsing. The world's first paved road now carries rust-belt ¨¦migr¨¦s back south, or over the bridge to the mild socialism and gambling houses of Ontario, Canada. One hour west looms today's football opponent, Michigan State University (home of the lowly Spartans), another mammoth state university of 50,000 students, 8,000 academics, 1,600 buildings and one football stadium.

Like Michigan State and dozens of public and private American campuses from Maine to Hawaii, the University of Michigan is a financially self-sustaining city of education, a bulwark teetering against the metastasis of industrial cancer, deficit panic and post-imperial tristesse. It survives on a mixed gruel of grants, gifts, business schemes and revenues. Foundation and government sponsorships prop up programmes such as the Automotive Research Center or the Howard Hughes Medical Institute, and help spawn more than 60 start-up companies. Annual tuition fees, including room and board, are $20,000 for in-state students, $45,000 for out-of-state ones; nearly every student is in debt. There are 500,000 alumni, robotically humming The Victors as they flip open their chequebooks.

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And there is Wolverine football. Tickets start at $55. By the time you have added into the equation the T-shirts, television rights, the "tailgate-parking" parties, hot dogs, pay-now medical service for choking on hot dogs and other bits and pieces, Michigan earns more than $100 million annually from its sports.

A greater bounty comes in terms of prestige. Americans feel like winners when they invest in winners. Michigan may lag behind the University of California, Berkeley in money and Nobel laureates; but who wins more football games?

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When it comes to football, universities have hearty appetites, no matter their academic level. One hundred years ago, Yale University perfected a way of tackling that breaks your nose; students at the Massachusetts Institute of Technology once reprogrammed Harvard University's football scoreboard during the game; Harvard students like to yell: "Beat us now, work for us later!" When Robert Hass, the former US Poet Laureate, met with small-town business leaders, he found that they could all name the top local football players, but didn't know the top students.

The American university dominates culture and media, not through its accomplishments or graduates, but through its sports teams - the epitome of youth culture, an Adonisian gambol through the vale of becoming. This befits a system where a 22-year-old, after four years and more than $100,000-worth of education, would ask: "I wonder what field I should enter?"

Although the zeal for football predominates, basketball follows closely: every year the American workplace is nearly paralysed with betting and boyish stargazing during March Madness, the single-elimination college basketball tournament of 64 teams, broadcast on national TV. Any university team surviving the alliterative rounds of "sweet 16", "elite eight" or "final four" earns millions of dollars.

Only an on-campus shooting could gain more publicity. During the games, the institutions represented get to broadcast commercials about their campuses and programmes - oh yes, they also have classrooms. In our era, the college don of Chariots of Fire would berate the student-athlete for acting the amateur.

Football and basketball rankings, posted online and in the papers, may carry more clout than the US News & World Report or the Times ÖйúAƬ World University Rankings (except in the bloodshot eyes of parents and university deans, who pick through them like rabbit entrails). As a result, American academic tallies do not oppose the more influential sports rankings; they imitate them. They offer the fantasy that entire institutions can confront each other, in some totalised, mano-a-mano University Challenge.

How to compare Michigan's well-regarded master's of fine arts in creative writing with the University of Southern California's new PhD in the subject? A see-saw shelf of faculty books? Sport simplifies things: let the Wolverines and Trojans duke it out in the Rose Bowl.

College athletes can receive full scholarships to university, plus special tutoring and special, action-centred majors such as sports management or kinesiology. Much publicity focuses on low graduation rates among this group, especially for black men. And indeed, very few top basketball players graduate from the University of Maryland (the mighty Terrapins). Yet the memorably named football player D'Brickashaw Ferguson (University of Virginia, the Cavaliers) finished his degree in religious studies early and now plays pro. Overall, sportsmen's graduation rate is equivalent to that of other students - 69 per cent.

Athletes go to school all year round, starting with the summer before college, and work out two hours or more a day in the off-season. Most of them work longer and harder than other students.

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If they break student-conduct policies or get injured, they can lose their scholarships and must drop out of school (very few have wealthy daddies to save them). The university profits from their fame, and may even hold rights to their images (for sale to video-game companies, for example). Usually, one faculty member is stationed as the academic adviser to ensure that the rules are followed; you can see him racing across campus, wearing the frozen smile of a bowsprit in heavy seas.

Meanwhile, football coaches are the biggest earners on campus. Michigan's president Mary Sue Coleman earns $783,850, while coach Rich Rodriguez pockets $2.5 million - and 13 other collegiate football coaches are paid more. "Coach Rich Rod" also stars in TV commercials and delivers inspirational speeches to sagging Wolverinisti businessmen.

At the University of Alabama, a Walk of Fame features oversized statues of winning football coaches of its team, the Crimson Tide. David Brandon, Michigan's athletic director, is a former executive at Domino's Pizza and a possible candidate for the state governorship.

"I'm more of a pizza man," he admits.

Hundreds of workers help him feed and guide the behemoth: coaches, trainers, scouts, luxury box waiters, trademark lawyers, student wranglers, ballwashers, tinkers and tailors. On the web, you can find Michigan's "Official Athletic Site, partner of CBS College Sports Networks, Inc".

The state of Michigan's unemployment figures have shot through the roof; the only reliable business is to rent out U-Haul trucks to people leaving, or to hope for the legalisation of marijuana and its tax revenue. Years ago, the university acted as General Motors' bespectacled son, patiently waiting for handouts. Now it gobbles up the boarded-up businesses in Ann Arbor and generates thousands of jobs. Employment, 39,000; bond rating, AAA; library books, 8.2 million; endowment, $6 billion; and a Google founder, Larry Page, is a Michigan man. Some stricken universities recently dropped their football programmes; Michigan added seats and luxury boxes to the Big House, plus Roman colonnades.

The spillover income supports two dozen teams and stadiums for ice hockey, field hockey, wrestling, softball, volleyball, swimming (Olympian Michael Phelps and his coach) - as well as the marching band's auditorium and a film theatre just for the football team.

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It's not clear what sports profits are shared with the academic departments.

American universities are dreams of self-invention. Outside the business of the classroom, there are spirit groups, painted fratboys, secular yet pious pep rallies, liquor and cartoonish mascots. These include the University of Texas at Austin's Longhorns - they bring a cow to the football games; the University of Oregon's Fighting Ducks - they don't bring a duck; and Northwestern University's oxymoronic Fighting Quakers - "we beat them into consensus". St John's University's Redmen, politically incorrect, were renamed the Red Storm. Ole Miss (University of Mississippi) sought to replace its Confederate-sounding Rebel mascot with Admiral Ackbar, the drooling, oyster-faced leader of The Return of the Jedi's "rebel alliance" - then lawyers from Lucasfilm called.

Individual learning is a sober midnight, John Milton's Il Penseroso in his tower. But the groupthink of college sports churns up a yeasty, dawn-welcoming prayer.

Michigan has been losing of late (Michigan State beat it); yet Wolverine fans carry the durable, contrarian faith of climate-change deniers. Schools can tip the academic rankings by keeping classes small during fall term, but for their sports, gigantism overwhelms the numbers game: the Big Ten league, of which Michigan is a member, now holds 11 universities. Each one carries its banner globally, setting up satellite campuses in Dubai or China, no doubt with live-feed programming to watch the games. Michigan prints "Go Blue" T-shirts in every language.

America's industry and jobs are stagnant; its education guarantees only debt; its universities are paid to make handsome young boys gallop. Is this a theatre of late capitalism and its discontents, an institutional version of Death of a Salesman? Or does such spark and spurt trigger a new, generating motor, a Tom Brown's Schooldays of edutainment?

One night in October 1960, US senator Robert F. Kennedy spoke to Michigan students, hours after a televised debate with vice-president Richard Nixon in the presidential campaign. He asked them about a subject pursued by a Michigan professor: "How many of you who are going to be doctors are willing to spend your days in Ghana?...On your willingness to contribute part of your life to this country, I think, will depend the answer: whether a free society can compete."

Days later, hundreds of Michigan students signed a letter saying they would serve; thus the Peace Corps was started.

Nixon called the idea "a cult of escapism" - which can reasonably be said of college sports as well. But American universities are banking - in every sense - on the social passion that sports can create: to join a project greater than ourselves.