Pitfalls of the market

August 1, 1997

The Dearing report will be greeted as a landmark in the changing history of British higher education, but it also marks a further significant step in a gathering debate about the future role of tertiary education worldwide.

British institutions may now have their report, but their Australian counterparts still await theirs, and in New Zealand a green paper is expected next month. Around the world, questions as to what we should expect of our tertiary sector, how universities should relate to the rest of the sector, and what institutional and funding arrangements are the most appropriate have all been moving to the top of the agenda.

At the heart of this growing debate is a central paradox. Tertiary education is attracting more and more attention because greater and greater value is placed on it. But at the same time, our political leaders proclaim that the cost of tertiary education has become insupportable and an escape route must be found. It is the balancing of these two contradictory factors - the demand for more and more combined with a preference for funding less and less - which explains why tertiary education is so much in the public and political eye.

If tertiary education were a business selling a product into an ordinary market, the outlook would be rosy indeed. There is a considerable consensus that tertiary education is a good thing and that more of it is wanted. Those countries that fail to match international participation rates feel themselves to have failed. It is widely acknowledged that the future belongs to those countries that educate a higher proportion of their populations to a higher level. The example of the "Asian tiger" economies is widely and approvingly cited. Much of their economic success is said to rest on the immense efforts they are making in respect of education and tertiary education in particular.

But there is a fly in the ointment. Especially in the older western democracies, increasing concern is expressed about the cost of achieving the desired goals. There is a readiness to will the end but not the means. The taxpayer, it is said, is so hard-pressed that the burden can no longer be borne. Other sources of funding must be found. The issue becomes considerably more pressing, it is argued, as the numbers in tertiary education grow and look set to grow even further.

How real is this problem? There is surely a good deal of confused thinking here. If the goal of increased participation in tertiary education is a desirable one and is achievable by countries poorer than ourselves, what is meant by saying that it would cost too much to achieve? Having identified the goal, are we really saying that it is beyond our reach, or are we saying something rather different - that there is a political or ideological debate about how it should be funded.

The answer to that question is a simple one. The customer, not the taxpayer, must pay. This may or may not be desirable on other grounds, but it is certainly not a means by which the country can be relieved of a financial burden. What the taxpayer gains by way of tax relief (perhaps) will be lost by the same person as a private consumer. The outcome is not a net reduction in spending, but a shift from the public to the private purse.

There is of course an important debate about the policy implications of such a shift. The change goes with the grain of the fashion for shifting the emphasis from publicly-funded providers to the individual's power of choice in the marketplace. Governments are anxious to get the credit for keeping tax rates low. But, if the goal is kept in view, there must be real doubt as to whether the aggregate of a myriad of individual decisions will be an effective way of securing it.

In New Zealand, for example, the cost to an individual student of an undergraduate degree is probably in the region of NZ$35-40,000 (Pounds 14,-Pounds 16,000) over a three-year period. If the cash is not available, a student loan can be taken out. It is estimated that half of those who take out such loans will not have paid them off by the time they are 40. It would not be surprising if many in-dividual potential students decided to forgo their tertiary education and to avoid saddling themselves with this debt. Indeed, the evidence of the last year or two is that first-year enrolments have certainly stopped rising and may even have turned down. The transfer of responsibility to the individual, in other words, may have satisfied an ideological purpose, but it may well have seriously jeopardised a community goal - an important matter to New Zealanders, since a recent Organisation of Economic Cooperation and Development study found that New Zealand was well behind the OECD average in terms of tertiary participation rates.

The question of whether tertiary education is too expensive for the taxpayer to fund has been bedevilled - in New Zealand at least - by a further issue. At an earlier staging post in what is now a virtually continuous process of review, the Todd working party set up four years ago to consider the funding of tertiary education spent many happy hours debating the esoteric question of whether tertiary education delivered a private or a public good. Some said that the benefits were 80 per cent public and only 20 per cent private. Some preferred a 75:25 ratio while others said that the better view was that there was a 50:50 balance. Some brave souls even ventured the view that tertiary education was entirely a private good.

All assumed that they were dealing with a zero-sum game - that the greater the private benefit, the lesser must be the public good. But the absurdity of this argument need only be stated to be demonstrated. All education, at any level, delivers a personal benefit. It is the only means by which the benefits of education can actually be delivered, since we necessarily educate people. The public good is then delivered by the contribution made by those educated people to the society in which they live and work.

The case for the public funding of tertiary education, in other words, is precisely the same as the case for the public funding of primary and secondary education. It delivers an immensely important public good, and public funding is the most effective way of ensuring that the public good is in fact delivered. It is a community goal best achieved by community action. It seems paradoxical that at the very moment when the value of that public good is seen as more important than ever before, we should be jibbing at providing the resources that are needed to deliver it.

The real objection to the public funding of tertiary education seems to rest on a rather different point. It is not that the country cannot afford it or that it does not deliver a public good. It is rather that tertiary education is seen as providing a differential privilege to those who enjoy it. Why, it is said, should the community fund a benefit which is available only to a minority and a minority which will, into the bargain, be able to use that benefit to become better off in due course than the rest of the community?

But if the objection to the public funding of tertiary education is that it benefits a minority, it seems perverse to respond by making it less likely that the majority will be able to enjoy those benefits. The most likely outcome of transferring the financial burden from the community as a whole to the pockets of individuals is that only those who can afford it will avail themselves of it. The future for tertiary education is surely that it will or should become available to many more in our society. It will, in other words, become much more like primary or secondary education. If that is the case, it surely makes sense to fund it accordingly.

The move to mass participation in tertiary education - or "massification" as it is sometimes unattractively described - is certainly desirable, but it has created other pressures. This is particularly true for those societies which have traditionally boasted an elite group of tertiary institutions. How are those institutions to react, and how are they to maintain their position, when tertiary education is open to all? The response to this question has again varied from one country to another. In Britain and Australia, the distinction between the elite institutions and those catering for the mass market has been swept away by the stroke of a legislative pen. In the United States the market is supposed to sort things out. In New Zealand the debate hovers uneasily between the need to maintain the reputation of New Zealand's university sector and the demand from the polytechnics for what they call "parity of esteem".

It has already been conceded that New Zealand polytechnics may award degrees. The polytechnics complain that their degrees do not have the same status as university degrees. The effort is therefore being made to underpin the value of a polytechnic degree by ensuring that all degrees have a common value on a national qualifications framework. The danger is that, by equating the two, the value of a polytechnic degree might not go up, but the value of a New Zealand university degree might go down.

To minimise this risk, New Zealand universities are likely to try, as their British and Australian counterparts have done, to find other criteria - such as their commitment to the teaching of undergraduate degrees by people who are engaged in research and by bench-marking against universities internationally - by which they can differentiate themselves from other parts of the sector.

The debate in New Zealand has again been skewed by an ideological bias. Education, it is said, must be "seamless". This is unexceptionable if it means that students should be able to move without excessive difficulty from one part of the sector to another. But "seamlessness" has on occasions been taken to mean that everyone can do anything, that it is unnecessary and harmful to differentiate between different parts of the sector, and that the market can safely be left to decide.

It would surely be better to acknowledge that different parts of the tertiary sector serve different but equally valuable purposes, and that this is likely to become more true as participation rates rise. If it is thought that only university status is worth having, then dangerous gaps can be created as institutions crowd in to the university sector, and the outcome would be that the particular role of universities themselves could be undermined.

Would that matter?Yes it would. In a properly structured tertiary sector, universities make a unique and irreplaceable contribution. They produce graduates who are flexible, sceptical, ready to adapt to change, sensitive to different cultural and ethical value systems, critical of received wisdom and able to take the long view. Through the international network of research and scholarship, they connect to leading-edge developments worldwide. And through their role as "critic and conscience of society" they help to maintain freedom of expression and thought in a democratic society.

Without a flourishing university sector, we would be all the poorer. Could it be that, on this issue as on funding, a policy-directed, rather than entirely market-driven, sector might better serve our national purposes? Perhaps good government matters after all.

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

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