Hands on market controls

October 18, 1996

For New Zealand universities, like those elsewhere, life is getting difficult. The value of our contribution to society is no longer taken as read. We are more and more required to defend and justify ourselves in a climate of scepticism and lack of sympathy.

While this is a challenge we should welcome and exploit, there are important issues, such as funding and academic independence, on which we have no option but to take a stand if we are to remain true to the idea of the university.

Tertiary education in New Zealand has been caught by the change in attitude and policy that has affected most advanced countries. There is growing hostility to the idea of public spending and provision coupled with a belief that market solutions are the only proper instruments of policy. Although New Zealand has come rather late to this position, the smallness and openness of our political system means that, once the pendulum begins to swing, it can swing very far and fast.

New Zealand universities are still financed on a lump-sum basis, but we are now having to report what we do in greater detail and in terms of "outputs". No doubt in due course these outputs will each bear a price tag and we will in effect be required to offer them for sale.

Initially, the customer will be the government. But eventually, in an odd reversal of the Marxist prediction about the "withering away" of the state, the ideologues who make policy no doubt envisage the government dropping out of the picture and the universities selling their product directly to the student consumer.

Now, there is nothing wrong with markets. They provide by far the most valuable and important tool we have for organising economic activity. They have the irreplaceable virtue of stimulating innovation and enterprise. But they do that - partly - by allowing for the possibility of failure. By definition, there are operators in the market-place at any given moment who are in the process of failing, as one supplier yields to another who is more efficient.

That is fine if one is talking about suppliers of, say, baked beans. It is not such a good idea if what is being provided is a once in a lifetime chance at a decent education. There are not many students who would be happy to work for three or four years for a degree in an institution they later discovered had been failing and which eventually folded.

It is in the nature of universities that they should be relatively permanent institutions offering continuity and stability rather than the more immediate entrepreneurial virtues of the fly-by-night operator.

The market has defects when it comes to the provision of tertiary education. The New Zealand government seems to be at least vaguely aware of this difficulty. They have before them the United States model, which shows that standards among private providers can vary enormously and that there are many institutions which fail to meet an acceptable level.

The government's response to this problem explains the paradox in current policy - that at the same time as the universities are being told that we must compete in a free market, we are subject to an ever more direct and oppressive central control. The universities have never been more tightly constrained in terms of budgets, what they can pay their staff, and what they are funded to teach.

The emphasis is shifting to greater central intervention, particularly in terms of course content and quality. The government recognises that the vagaries of the market-place do not provide the consumer with an adequate guarantee of quality. That is why, contrary to the rhetoric of the free market, New Zealand universities are being forced more and more into a straitjacket of qualifications authorities and reporting of outputs.

We are in danger of getting the worst of both worlds - the vagaries and confusion of the market-place combined with the increasingly heavy hand of direct government intervention.

A similarly ideological stance lies behind the systematic reduction in government funding for universities. It is simply asserted that it is wrong for the taxpayer to fund an educational provision that delivers a personal rather than a public good.

The Todd committee, set up in 1994 to consider tertiary funding, in fact devoted a good deal of time to nice calculations as to what proportion of the benefits of tertiary education could be ascribed to personal rather than public benefit. It seemed unaware that this was a nonsensical exercise.

The public and private benefits delivered by tertiary education are not a zero-sum game, whereby an increase in personal benefit necessarily means a reduction in public benefit. The public funding of tertiary education is to be justified nearly 100 per cent on the public good it delivers.

In this respect, it is no different from primary or secondary education. The fact that individuals are the delivery mechanism by which the benefits of higher education are diffused throughout the community is a bonus to those individuals and is common to all sectors of education.

If the objection is that, in the case of tertiary education, the benefit accrues only to some individuals rather than to all, it hardly seems logical to restrict the opportunity of acquiring a tertiary education still further by making it more expensive. The better course would be to ensure that the chance of tertiary education is widened to embrace more people.

Yet, if the move towards the private funding of education is pursued, there is a real danger that access to tertiary education will be restricted. If our message to potential students is that they must find or borrow NZ$40,000 (Pounds 20,000) in order to obtain a university qualification, then many of them will opt to do without. There is already evidence that the high and rising price charged for tertiary education is having a deterrent effect on student numbers.

There must also be a doubt as to whether we can go on forever producing larger numbers of graduates at the same level of quality with less and less funding. In the end, either quality or numbers, or both, most suffer.

These issues throw up an equally serious challenge to the whole notion of what a university is. Claims to academic independence are easily dismissed as simply another instance of universities defending a vested interest. The reality is, however, that without academic independence you do not have a university. And the threat to that independence is just as great from the market and the customer as it is from direct government intervention.

Market-driven provision combined with greater government intervention offers us the unattractive prospect of serving two masters, neither of whom readily understands the risks that are run when academic freedom is threatened. The world of tertiary education is an international one. There is nowhere that deficiencies can be hidden. If questions should ever arise over New Zealand university education, either in terms of quality or academic independence, we will have done ourselves quite unnecessary and avoidable damage.

Bryan Gould is vice chancellor of the University of Waikato, New Zealand.

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