Chile steps back from bitter market fruits

South America’s neoliberal pioneer is taking higher education out of the market. The UK should take heed, says Bahram Bekhradnia

January 15, 2015

Source: Paul Bateman

Thirty years ago, Chile embarked on a new ideological direction, under its new president and dictator Augusto Pinochet. Guided by a group of young neoliberal economists, “the Chicago boys”, the state was supposed to withdraw from all aspects of life, and the market to rule everything, including the direction and funding of higher education. Thus, the state stopped providing direct grants to universities. Universities were funded for teaching only via the tuition fees that students henceforth paid. And students received loans from the government to enable them to pay their fees.

Sound familiar? That, of course, is exactly the system of higher education funding that was introduced in this country in 2012, and Chile could have been a model for the coalition government’s reforms. Well, after three decades, the Chilean government has now concluded that this is an unsatisfactory way to fund higher education: it has called in a World Bank team, of which I am a member, to help unscramble these arrangements. Chileans are looking for a new system under which the government will provide grants to universities funded from general taxation. If students are to pay fees – and the government’s intention is that the majority of students will not – then these fees will represent only a minority of funding.

In the meantime – and prompting this rethink – the following issues have arisen. First, the debt of former students is colossal in relation to their earnings, and is by far the highest in the world (England, however, has started to catch it up: graduate debt is set to explode as cohorts from the new funding regime complete their degrees). Second, very much as in this country, previous Chilean governments encouraged private institutions, which now educate 80 per cent of those in tertiary education, and are of very variable quality. As a result, and as in the US and England, there are serious concerns about some private institutions creaming taxpayer-provided loans for students and making unsatisfactory provision in return. Third, these funding arrangements make it difficult, if not impossible, for the government to steer the higher education system in a way that is possible with direct grant funding. This matters if – as governments around the world, including the UK’s, increasingly believe – higher education is a vital strategic element of a country’s economic and social development.

So the Chileans have had the good sense to see that these arrangements need to change. Given the now widespread recognition in this country, too, that the present arrangements are unsustainable, we might hope that England’s current higher education funding system will be dismantled after the election, whoever wins. But maybe not. We seem to be suffering from a lack of collective courage; and whatever our leaders may be saying privately there is a regrettable reticence about saying as much publicly. Although there is no shortage of people now standing up and recognising the unsustainability of the present arrangements, there is generally silence about how we might bring about serious reforms.

In Chile, the new government committed to reforms while in opposition, and it did not suffer from the timidity of the opposition in England – an opposition that cannot bring itself even to promise to reduce the student fee by a fraction, fearing that it will fall victim to the orthodoxy that it would be “unaffordable”.

Given that our public expenditure on higher education is one of the lowest in the Organisation for Economic Cooperation and Development, it really should not be difficult to argue for greater taxpayer investment in something that everybody agrees is essential for national well-being. Nor need it be more expensive, considering that the previous arrangements with £3,000 fees cost no more than those with £9,000 fees.

And it is not just the Labour opposition. The Liberal Democrats, who were complicit in the present arrangement in the belief – now acknowledged to be false – that it was economically unavoidable, have failed to make the case for a higher education system funded primarily from general taxation. And the recent report of the independent Higher Education Commission failed to make the case for taxpayer funding of higher education.

This is regrettable and foolish. It makes good political as well as good economic and social sense, but perhaps it will take a few more years – although, it is to be hoped, not as long as in Chile – for our national leaders to recognise that there is a better alternative and to have the courage to say so.

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