Higher Education, Public Good and Markets [1 ed.] 9781138213180, 9781315146386

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Higher Education, Public Good and Markets

This book critically examines some of the major trends in the development of higher education. It demonstrates how in the context of liberalisation, globalisation and marketisation, the crisis in higher education has assumed different dimensions in all advanced and emerging societies. The author shows how the state tends to slowly withdraw from the responsibility of higher education, including in the arena of policymaking, or simply adopts a policy of laissez-faire (of noninvolvement) which helps in the rapid unbridled growth of private sector in higher education. The notion of higher education as a public good is under serious contestation in current times. The book argues for the need to resurrect the compelling nature of higher education along with its several implications for public policy and planning, while providing a broad portrayal of global developments, comparative perspectives and key lessons. The volume will be of interest to scholars and researchers of education, political science, public policy and administration, governance, development studies and economics, and to those working as policymakers and in higher education sectors and think tanks as well as NGOs. Jandhyala B. G. Tilak, an eminent economist of education and former Vice Chancellor, National University of Educational Planning and Administration, New Delhi is currently Distinguished Professor at the Council for Social Development, New Delhi, India. He has authored/ edited more than 12 books and around 300 research articles in refereed journals. In recognition of his research, he received the Swami Pranavananda Saraswati UGC Award, Malcolm Adiseshiah Award, Dewang Mehta Award, and Inspirational Teacher of the Year Award. He has served as Visiting Professor at the University of Virginia in the US, Hiroshima University in Japan, and Sri Sathya Sai Institute of Higher Learning in Prasanthi Nilayam, India; Consultant at the World Bank; and President of the Comparative Education Society of India.

He also served as the editor of Journal of Educational Planning and Administration. ‘Jandhyala B. G. Tilak is India’s most prominent economist of higher education. In this volume, he not only cogently discusses key economic issues, but also focuses on broader higher education themes. Higher education has become a key arena for public policy debate – and the topic of considerable controversy. Tilak’s thoughtful and often datadriven insights are an important contribution to the discussion.’ Philip G. Altbach, Research Professor and Founding Director, Center for International Higher Education, Boston College, USA ‘Having followed the research contributions of Professor Jandhyala B. G. Tilak over two decades, I am glad to see some of his seminal publications appearing as a book. He has been one of the eminent educationists to advocate higher education as a “public good” at a time when there are forces against this concept. His unique contributions on financing higher education mainly linking with issues of access and affordability and on the concept of University are well known.’ M. Anandakrishnan, Former Director, Indian Institute of Technology, Madras, and Chairman, Indian Institute of Technology, Kanpur, India ‘Professor Jandhyala B. G. Tilak is the world’s leading scholar of Indian higher education and we all benefit from his clear-minded writings on the core issues that shape higher education everywhere: higher education and socio-economic development; the role of states, planning and markets; objectives of public and private good; and problems of privatisation and globalisation. This beautifully written volume will bring his work, which is powered by a deep commitment to equality, universal educability and democracy, to a still larger audience and help ensure its lasting impact.’ Simon Marginson, Professor of International Higher Education, University College London, UK ‘A must-read collection of readings on the political economy of higher education by a true scholar in the field.’ George Psacharopoulos, Visiting Professor of Economics, University of Athens, Greece, and formerly with the London School of Economics and the World Bank

Higher Education, Public Good and Markets Jandhyala B. G. Tilak

First published 2018 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2018 Jandhyala B. G. Tilak The right of Jandhyala B. G. Tilak to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-PublicationData A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested ISBN: 978-1-138-21318-0 (hbk) ISBN: 978-1-315-14638-6 (ebk) Typeset in Sabon by Apex CoVantage, LLC

Dedicated to the memory of my parents Jandhyala Lalita Kunjali & Venkateswara Sastry

Contents

List of figuresix List of tablesx Prefacexiii Acknowledgementsxv Introduction

1

  1 Higher education: a public good or a commodity for trade? Commitment to higher education or commitment of higher education to trade

10

  2 Higher education between the state and the market

35

  3 Are we marching towards laissez-faireism in higher education development?

55

  4 Lessons from cost recovery in education

70

  5 Financing of higher education: traditional versus modern approaches

100

  6 The privatisation of higher education

119

  7 Current trends in the private sector in higher education in Asia

141

  8 Higher education in the BRIC countries: comparative patterns and policies

168

viii  Contents

  9 Economics of internationalisation of higher education185 10 Social control on higher education

225

11 Higher education and development in Asia

237

12 Universities: an endangered species?

260

Index285

Figures

3.1 Gross enrolment ratio in higher education and achievement in technology 65 7.1 Private sector squeezes public space 147 9.1 Growth in global foreign student enrolment (in millions) 192 9.2 Regional distribution of students studying abroad (%), 2008 194 9.3 Foreign students as percentage of host country enrolments, 2004 and 2008 197 9.4 OECD countries with highest net inflow rate of students (%), 2008 203 10.1 Clark’s triangle of academic coordination 229 11.1 Index of growth in higher education in Asia 238 11.2 Higher education attainment in Asia and the Pacific, 1990s244 11.3 Gross enrolment ratio in higher education and achievement in technology 246

Tables

1.1 Decline in public expenditure on higher education per student (% of GDP per capita) 19 2.1 Trends towards private higher education 46 2.2 Emerging trends in policy, planning and financing of higher education 48 2.3 Conflicting interests of the State and markets in higher education49 3.1 A chronology of some important events in higher education development in the recent period 57 3.2 Gross enrolment ratio in tertiary education (%), 1980–200058 3.3 Trends towards private higher education 59 3.4 Emerging trends in policy, planning and financing of 60 higher education in developing countries 3.5 Distribution of enrolments in tertiary education (ICED5A), 2000 61 3.6 Returns to higher education (%) 63 3.7 Regression estimates of higher education on economic development in Asia 63 3.8 Regression estimates of higher education on achievement of technology in Asia 64 4.1 Distribution of education subsidies by income group (%) 74 4.2 Declining private returns to higher education in selected countries (%) 76 4.3 Distribution of enrolments in education in India, by household expenditure quintiles, 1986–87 78 4.4 Share of fees in costs of higher education in selected countries (%) 80 4.5 The contribution of students/families (fees) to the recurrent budgets of selected African universities 81

Tables xi 4.6 Private and social costs of higher education in India and the United States (%) 81 4.7 Share of household expenditure in total national expenditure on education in selected countries 82 4.8 Student loan programmes and government losses in selected countries 84 4.9 Efficiency of alternative measures of cost recovery 89 6.1 Privatisation trends in selected countries (percentage of enrolments in private higher education) 120 6.2 Enrolments in public and private higher education (%) 120 6.3 Percentages of public and private sectors in higher education institutions 121 6.4 Expenditure per student in higher education (private/public)123 6.5 Percentage rates of return to private versus public higher education 127 6.6 Percentage of specialisation of private and public sectors in higher education in Latin America 129 6.7 Fees as percentage of total expenditure on higher education135 7.1 Number of private higher education institutions in Asian countries 146 7.2 Distribution of enrolments in tertiary education (type A and research), 2002 148 7.3 Non-US private universities in the world university rankings (2004) 152 7.4 Public and private universities in Asia in the world university rankings, 2004 153 7.5 Enrolments in private higher education and overall gross enrolment ratio in higher education 156 7.6 Conflicting interests of the State and private sector in higher education and research 158 7A.1 Different data sources and different estimates on enrolments in private higher education institutions in Asia 163 9.1 International student mobility, 2008 193 9.2 Top ten countries with foreign students, 2008 195 9.3 Benchmarks for international students in selected countries198 9.4 Growth in international students in Malaysian higher education198

xii  Tables 9.5

Developing countries with highest outbound numbers of students 199 9.6 EduGATS in higher education in developed and developing countries 205 11.1 Rates of return to education in Asia (%) 239 11.2 Rates of return to higher education in Asian countries 240 11.3 Gross enrolment ratio in higher education in Asia and the Pacific 241 11.4 Regression estimates of higher education on economic development in Asia 242 11.5 Higher education attainment in Asia Pacific 243 11.6 Higher education (GER) and technology (TAI) 245 11.7 Regression estimates of higher education on achievement of technology in Asia 246 11.8 Coefficients of correlation between higher education and social development indicators 247 11.9 Share of expenditure on higher education in GNP (%) 250 11.10 Share of fees in costs of higher education in selected countries (%) 252 12.1 Changing interests of universities in education and research274 12.2 Emerging trends in higher education 275

Preface

Higher education around the world experienced dramatic changes during the last quarter century or so. There have been three important developments: recognition of the importance of higher education in development was accompanied by discussions on alternative methods of funding higher education, which were followed by a rapid increase in the role of private sector in higher education. A simultaneous development that has taken place at the global level is the entry of the General Agreement on Trade in Services in education. As a result of the multitude of developments, the very nature of higher education seems to be undergoing a theatrical change – from being a public good to an individual good which can be sold in domestic and international markets. As a critical contribution to some of these various issues confronting higher education today, including trends, contours, and debates, this book, I hope, will attract the attention of the scholars as well as policymakers dealing with higher education. This is a collection of my own articles published in various journals during the last couple of decades. With a dominant common undercurrent theme, and being a collection of articles by the same author over a period of time, there is some repetition in arguments and evidences presented in various chapters. Though often academic contributions seem to be one’s own, they are often enriched by intangible contributions of a variety of actors – the family members, the friends, the teachers, the students, the administrators, the mentors, the admirers, the critics, journal editors, reviewers and many others. There are many of their kind in my case and it is difficult for me to acknowledge by name all of them. I fondly remember the contributions of my teachers, the generosity of my friends, experts and critics, and the tremendous support that I received from my wife and children throughout my work. The National Institute/University of Educational Planning and Administration, which I served for more

xiv  Preface than three and a half decades until recently, has provided an excellent conducive environment for my research. I am also grateful to George Psacharopoulos, Philip Altbach, M. Anandakrishnan and Simon Marginson, all eminent experts in higher education, who have words of appreciation for my work, which are reproduced as part of the blurb of the book. I would like to thank all the publishers of my earlier research reproduced here, who have generously granted permission in gratis, to reprint/reuse the material in this book. Antara Ray Chaudhary at Routledge India, Taylor & Francis, has taken a special initiative in bringing out this book in the present attractive form.

Acknowledgements

The original sources of articles included in this collection are mentioned here. The author and the publishers gratefully acknowledge the following for granting permission in gratis to reprint the respective articles in this volume. Taylor & Francis/ Routledge

‘Higher Education: A Public Good or a Commodity for Trade? Commitment to Higher Education or Commitment of Higher Education to Trade’, Prospects, 38(4): 449–466, 2008 ‘The Privatization of Higher Education’, Prospects: Quarterly Review of Education, 21(2): 227–239, 1991 ‘Higher Education and Development’, International Handbook of Educational Research in the Asia-Pacific Region, 11, Springer International Handbooks of Education: 809–826, 2003

UNESCO

‘Higher Education between the State and the Market’, in Guy Neave (ed.), Knowledge, Power and Dissent: Critical Perspectives on Higher Education and Research in Knowledge Society, pp. 235–254 (Paris: UNESCO Publishing, 2006)

Centre for International Cooperation, Hiroshima University

‘Are We Marching towards Laissez-faireism in Higher Education Development?’, Journal of International Cooperation in Education, 8(1): 153–165, 2005

xvi  Acknowledgements Tyrrell Burgess Associates

‘Current Trends in Private Sector in Higher Education in Asia’, Higher Education Review, 41(2): 48–77, 2009

Rajagiri College of Social Sciences

‘Social Control on Higher Education’, Rajagiri Journal of Social Development, 4(2): 93–105, 2008

Oxford University Press

‘Lessons from Cost Recovery in Education’, in Christopher Colclough (ed.), Marketizing education and health in developing countries: miracle or mirage? pp. 63–89 (Oxford: Clarendon Press, 1997)

Deomed Publishing Financing of Higher Education: Traditional versus Modern Approaches Journal of Higher Education, 2(1): 28–37, 2012 Indian School of Political Economy

‘Internationalisation of Higher Education GATS: Illusory Promises and Daunting Threats’, Journal of Indian School of Political Economy, 19(3): 371–418, 2007

Economic and Political Weekly

‘Higher Education in BRIC Countries: Comparative Patterns and Policies’, Economic and Political Weekly, 48(14): 41–47, 2013

Common Ground Publishing

‘Universities: An Endangered Species?’, Journal of the World Universities Forum, 3(2): 109– 127, 2010

Introduction

Higher education systems, in many developing as well as developed countries, are characterised with a continuing crisis, with overcrowding, inadequate staffing, deteriorating standards and quality, poor physical facilities, insufficient equipment and overall public apathy. More importantly, higher education is subject to neglect and even discrimination in public policy. One of the important consequences of public apathy has been dwindling public budgets for higher education, adversely influencing the quality, quantum and equity, and rather almost every dimension of higher education. The World Bank policies that discouraged investment in higher education for a long period, improper use of estimates of rates of return, and excessive, rather exclusive, emphasis on Education for All (EFA) in the recent years, adverse economic conditions in many developing countries, following structural adjustment policies, etc., are some of the reasons for the neglect of higher education. Besides, the view that higher education is not important for development, certainly not for poverty reduction or reduction in inequalities, and that it has no significant effect on economic growth, equity, poverty and social indicators of development in developing countries has also contributed significantly to this neglect. It is also being assumed that the State can as well withdraw from its responsibility of providing higher education in favour of the markets. As these widely held assumptions influence the policymakers in their designing of public policies, a confrontation with the assumptions is an imperative today. Today higher education is at crossroads. In the larger context of liberalisation, globalisation and marketisation, the crisis in higher education has assumed different dimensions and nature, different from the earlier ‘continuing crisis’. Higher education in all societies – advanced as well as emerging – is under severe strain. Public policies are in disarray, with contradictory policy statements being made. In fact, many

2  Introduction societies are also characterised by absence of any clear coherent longterm policy on higher education. Public apathy for higher education has strengthened the forces of privatisation of higher education on a large scale. The phenomenon of internationalisation of higher education, which is not altogether new, also assumed different colours, proportions and directions with varying implications for development of national higher education systems. These trends got a significant boost with the formal introduction of neo-liberal policies. With the highly rationalised and individualised neo-liberal logic that is based on the fundamental principle of private returns, market forces have become very active. From times immemorial, education has been considered as something special, as a ‘public good’, even if the term is not explicitly used. UNESCO World Conference on Higher Education in Paris in 1999 unanimously reiterated and adopted a communiqué acknowledging higher education as a ‘public good’ and calling on countries not to disinvest in the sector during the global economic crisis. UNESCO (2015) pleaded for education to be considered as a common good – ‘a global common good’. These assertions assume significance, as the very notion of higher education being a public good, a least-contested view prevalent for several decades and in fact, many centuries, is now under serious contest, as higher education is being increasingly viewed by many as a commodity, as a private good, as an individual good that can be marketed in the national markets and can be subjected to international trade in global markets. Critical analyses of some of the major trends in the development of higher education demonstrate that the state tends to slowly withdraw from the responsibility of higher education, including in the arena of policymaking, or simply adopting a policy of laissez-faireism – non-intervention by state – which helps in the rapid unbridled growth of private sector in higher education. The rapid growth of private higher education results in loss of equity – social and economic; increase in regional disparities; erosion in quality; loss of important academic disciplines (in favour of marketable disciplines) of study; change in attitudes; erosion in national, social and educational values; public pauperisation and private enrichment; crowding-out of the public sector and imbalanced development of higher education; and, above all, the loss of public good nature of higher education. Many methods of financing higher education, specially mobilising resources from non-state sources with varying effects on equity and efficiency in higher education, have come into vogue, though state financing that is financing higher education out of general tax and

Introduction 3 non-tax revenues seems to be still the best option. Given the changing attitudes and approaches of the state to development of universities, one may wonder whether universities are becoming an ‘endangered species’. This is the broad canvas within which the contribution of the book, which covers areas spanning theoretical and conceptual issues such as education as a public good, importance of public funding, and empirical issues on relationships between higher education and society to current policy issues such as privatisation, cost recovery, financing, autonomy, the changing nature of the universities, General Agreement in Trade and Services (GATS) and internationalisation of higher education, could be understood and appreciated. All these issues are discussed from a particular perspective: public good vis-à-vis market, which is becoming indisputably the most dominant one. The book is based on a few selected articles published by me over the years covering many aspects of higher education. Given the common underlying theme, repetition of some of the arguments could not be avoided. The first chapter, which comes from a keynote speech that I gave in a meeting of the Noble laureates in Barcelona in 1995, highlights the public good character of higher education, and the last chapter, which is based on an address I delivered in the World University Forum in Davos, warns of the danger of ‘classical’ university becoming an endangered species. The main argument of the book lies in stressing the need to resurrect the public good nature of higher education, along with all its implications for public policy and planning. It simply argues that the role of the state in higher education development is critical and cannot be reduced. The process of weakening of the public sector needs to be arrested and its long cherished critical role gradually restored. The several chapters in the book revolve around this theme. It covers various issues confronting higher education today, including varying trends, multiple contours, and debates and discourses. *** The first chapter begins with a debate about whether higher education is a public good or a commodity for trade. Conventionally, higher education is regarded as a public good that benefits not only the individuals but also the whole society by producing a wide variety of externalities or social benefits. But of late, the chronic shortage of public funds for higher education, the widespread introduction of neo-liberal economic policies and globalisation in every country and in every sector, and the heralding of the international law on trade in services by the World Treaty Organisation and the GATS all tend to question the

4  Introduction long-cherished and well-established view of many on higher education as a public good, and to propose and legitimise the sale and purchase of higher education, as if it is a normal commodity meant for trade. The very shift in perception on the nature of higher education from a public good to a private good, a commodity that can be traded, may have serious implications. The chapter describes the nature of the shift taking place, from viewing higher education as a public good to a private tradable commodity and its dangerous implications. The discussion in the first chapter sets the stage before we analyse and discuss various critical issues in higher education, many of which are closely related to the very concept of higher education as a public good. The higher education system the world over is in flux, hanging between the conflicting interests and varying powers of the state and the market. Chapters 2 and 3 describe how policymakers in higher education in many countries today are in a confusing state, being confronted by growing markets on the one hand and the weakening public sector on the other. Over the years, many developing countries have shown indifferent attitudes towards the development of higher education, deliberately deserted higher education and slashed budgetary allocations to higher education. Public policies are formulated in favour of private higher education by many countries out of compulsion, and some out of conviction. Some countries have in the past adopted policies which are strongly supportive of public sector and are anti-private; and some intend to regulate the growth of private sector, and policies in many countries can be described as policies of laissezfaireism, which in effect work as pro-private. As market forces have become very active, many tend to adopt clear policies towards marketisation of higher education. There is a rapid transition from a system that operated on a welfare state philosophy to a market-oriented one. The path adopted by several countries is first a cut in public funding for higher education, followed by weakening of the policy framework and regulatory mechanisms, then adoption of laissez-faireism and finally adoption of formulation of policies towards privatisation and marketisation of higher education. Though a major part of higher education in many countries is still under the state sector, the growth of private sector has been alarming, and if the trends continue, private sector may eventually altogether displace the public sector from the scene. Laissez-faireism in many countries, by its very nature, helps the growth of market forces. If pro-private policies are adopted, the process would be fast, as is being experienced in many developing countries. But since the markets in developing countries are ‘incomplete’ and ‘imperfect’, the outcomes

Introduction 5 are also far from perfect, and, in fact, in many cases, the market forces produce disastrous consequences. In Chapter 4 on cost recovery in education, I examine several arguments of the ‘neo-liberal’ economists and the economists believing in welfare state philosophy on issues relating to financing and cost recovery in higher education. These two schools of thought present distinct arguments in favour and against many of the cost-recovery methods being adopted nowadays. Specifically, we also look at the several approaches of cost recovery in education, discuss the pros and cons of the several approaches, including their effects on equity and efficiency, and review the experience of some of the countries in this regard. The effects of these cost-recovery measures on the quantity, quality and equity in higher education need to be examined for sound policymaking. The analysis helps in discerning some valuable lessons for educational policymakers and planners around the world faced with difficult policy choices. All measures have certain strengths and certain weaknesses, but on balance, one may conclude that progressive taxation, funding education out of general tax revenues and financing of higher education probably out of general and specific tax revenues may still be the best options. All others are only second best solutions, though financing through the budgetary resources for higher education will not be the panacea for all problems being faced by higher education. This forms a necessary condition for development. The best option is not a new idea. Conventionally, higher education is heavily subsidised by the state in almost all countries. This has been justified by the recognition of education as capable of producing externalities, as a public good (and as a quasi-public good in case of higher education), as a merit good, as a social investment for human development, and as a major instrument of equity, besides as a measure of quality of life in itself. The launching of neo-liberal economic reforms in most developing and advanced countries of the world is associated with changing perceptions on the role of higher education and adoption of business models in setting up and running universities. Private universities, commercial universities, corporate universities and entrepreneurial universities are becoming the order of the day. The several basic characteristic features of higher education, such as higher education as a public good, merit good, social investment and as a human right, are under attack. Recent evidence shows that many universities are going in a big way with different kinds of measures of generating resources – from student fees, through student loans and other non-governmental sources. It is argued that the major transition in the method of financing of higher education is taking place at a

6  Introduction rapid pace, which is not desirable. It is often not realised how important it is for the state to finance higher education. Based on the degree and extent of privatisation of higher education systems in many countries of the world, higher education can be classified into four categories – extreme or total, strong, moderate and pseudo. There has been a gradual shift from pseudo and moderate to the extreme form of privatisation. There are several ‘myths’ under circulation, partly supported by weak and biased research on the relative efficiency and gains of private education. For example, many consider the public sector to be inefficient in the field of education and correspondingly the market-focused private sector as efficient and therefore desirable. It is necessary to explode this and other similar widely prevalent myths about private higher education, contrasting with facts. The myths examined in Chapter 6 include superiority of private higher education over public education with respect to internal and external efficiency and quality; easing of financial burden of the state; ability to respond to individual, social and market needs; philanthropic nature of private higher education entrepreneurs; and other generally claimed positive effects of private higher education on income distribution and inequalities. Among the world regions, the Asian region experienced a very high rate of growth of private sector in higher education. Some systems in the region could be described as predominantly private or as ones with an extreme degree of privatisation of higher education. In fact, all the four types of higher education could be noted in the Asian countries. The growth in Asian countries is more in response to the ‘excess demand’ phenomenon than to the phenomenon of ‘differentiated demand’. Increasing scarcity of public resources on the one hand, and the neo-liberal environment thrust on the weak states on the other hand, are the two most important factors that have advanced the rapid growth of private higher education. A review of some of these recent trends in the growth of private higher education in Asian countries is attempted in Chapter 7 and of the BRIC (Brazil, Russia, India and China) countries in Chapter 8. Their socio-economic and educational effects would help in drawing important lessons for others. Though higher education sector is undergoing reforms, there is indeed a dilemma regarding the relative roles the public and the private sectors have to play in the emerging scenario. However, the general tendency of higher education reform is to embrace market principles and usher in the private sector to play a larger role in the higher education sector. Though this approach is debatable, policymakers in Asia, the BRIC countries and elsewhere appear to be convinced

Introduction 7 by the neo-liberal logic. The accompanying policies – whether they are relating to finding, or privatisation, or internationalisation, or ­massification – all stand as a testimony to this. The approaches of the governments in Asian countries, or in the BRIC countries and, in fact, in many other countries, have changed considerably during the last few decades. How are the BRIC countries, the four largest low- and middle-income developing economies (which are attracting wide attention from many all over the world – ­developing as well as developed as emerging economic powerhouses) doing, and how is the higher education system being shaped in these countries? There are several common features in the policies adopted by the BRIC countries. However, there are also considerable differences in the approaches the governments have adopted for expansion of higher education. The approaches are strongly influenced by the ­initial conditions, the social and economic histories, the political character of the State and a variety of factors. In many cases, the adoption of market approaches produced disastrous consequences. Quickly reviewing the level of development of higher education in the region, and public policies, including select policies on financing higher education and privatisation, it underlines the need for increased public financing and warns against excessive reliance on cost-recovery measures and privatisation of higher education. The empirical evidence in Asia and the Pacific countries testifies to the strong relationship between higher education and development, including economic growth, inequalities and human development, invalidating the earlier circulated presumption that higher education is not important for development. It is clear that no nation that has not expanded reasonably well its higher education system could achieve a high level of economic development. The importance of higher education in promoting economic growth as well development, broadly defined, is increasingly being realised today world over. Internationalisation of higher education has taken different forms and is nowadays predominantly defined in terms of, if not broadly equated to, trade in education placing it under the purview of the GATS, in the framework of which internationalisation takes place through four different modes, familiarly known as (1) cross-border supply, (2) consumption abroad, (3) commercial presence and (4) movement of natural persons. Of all, the most dominant mode continues to be the second one, viz., the student mobility. Though student mobility is not new, this is also being viewed nowadays essentially as an instrument of trade, having a great potential to generate financial resources. Other measures such as twining, setting up offshore campuses, etc., are also

8  Introduction being treated within the framework of international trade only. In all this, economic gains prevail over academic considerations. Universities by very definition are characterised by autonomy. However, rarely are they completely autonomous; they are controlled either by the state in case of state institutions or by markets in case of private universities. Ironically, the State which is ideally expected to play a very significant role in the development of higher education is increasingly unwilling and unable to do so; in contrast, the markets, the entry of which into the arena of education is not welcomed by all, is very eager to take complete control of higher education; and the rest of the society has been a helpless onlooker only. While strongly favouring autonomy, in Chapter 10 it is argued for meaningful democratic social control on higher education. Social control is to be distinguished from government control or control by market forces. Social control, however, includes control by not only the State but also several other actors. Social control on higher education has to be understood in relation to social functions of and society’s responsibility for higher education. Normative modes of social control or simply democratic social control of higher education might ensure, by creating and building ‘social pressures’, that the public good nature of higher education is resurrected. Finally, Chapter 12 peeps into the future of the public university. To look into the future of the university, we need to trace back and study how the universities have been undergoing changes. Spelling out the idea of a university, the chapter traces its historical evolution from the ancient, medieval and even modern periods to the present day, showing the drastic changes that are taking place in its very concept, mission and functioning, particularly during the last quarter century or more (see Minogue 1973; Aviram 1992; Denman 2005). One can note universities of five generations, starting from the ancient period to those of the new millennium. The universities of the fourth and the fifth generations that belong to the twentieth and twenty-first centuries have drastically changed the very concept, definition, nature, mission and functioning – almost every aspect – of universities. The ‘critical university’ (Loughead 2015) is vanishing and the concept of ‘public university’ is disappearing, as the so-called public university is adopting a multitude of private aspects (Guzmán-Vawlenzuela 2016) and private universities of various questionable types are emerging. The need to re-establish the classical idea of the university is obvious. ***

Introduction 9 The dozen chapters together form an attempt to provide a nuanced critic of several trends in higher education and how they affect the relationship of higher education with society at large. Presenting a broad portrayal of the global developments in higher education and its relationship with society, the book offers a critical perspective on higher education. Often drawing from experiences of many countries, the study provides comparative perspectives on several issues, from which valuable lessons can be discerned for sound public policymaking in higher education. I consider it a successful attempt if a message comes from the book loudly and clearly that the case for public provisioning of higher education remains strong and that it is imperative for the state to play a dominant role in this field.

References Guzmán-Vawlenzuela, C. (2016). Unfolding the Meaning of Public(s) in Universities. Higher Education, 71, 661–679. Loughead, T. (2015). Critical University. Lanham, MD: Lexington Books. UNESCO. (1999). World Conference on Higher Education. Paris. UNESCO. (2015). Rethinking Education: Towards a Global Common Good. Paris.

1 Higher education: A public good or a commodity for trade? Commitment to higher education or commitment of higher education to trade* Conventionally, education has for a long period been regarded as a public good, producing a huge set of externalities (mainly positive externalities), benefiting not only the individuals but also the whole society. In case of higher education too, not only educationists but also other social scientists and thinkers, including economists, have recognised the public good nature: higher education constitutes a public good in itself, and also it produces public goods, benefiting simultaneously the individuals and the larger society. This view has been almost universally prevalent for a long period, influencing public policies on higher education. In recent years, however, the growth in market forces and more importantly international law on trade in services tend to question or simply gloss over the long-cherished, well-established view of many that higher education is a public good and to propose and legitimise the sale and purchase of education, as if it is a commodity meant for trade. Higher education tends to be not regarded as a public good or a social service, and it appears as if we have ‘lost the “public” in higher education’ (Zemsky 2003). Even in the earlier decades, while there were some who questioned the concept of higher education as a public good, the heralding of the neo-liberal and globalisation policies, and later the advent of international trade in educational services accentuated such thinking. Public good and similar principles are viewed as too naive to be relevant in the rapidly changing, increasingly privatised and liberalised modern context.1 The conventional wisdom is becoming rapidly invaded by the strong, powerful forces of national and international mercantilists, represented in the World Trade Organization (WTO) and the General Agreement on Trade and Services (GATS), the institutions that were set up outside the United Nations system. Higher education is seen primarily as a private good, as a tradable commodity that can be subjected to

Public good or commodity? 11 the vagaries of national and international markets. As Knight (1999) summed up: With the massification of higher education, increasing at an exponential rate, there is strong interest on the part of large and small countries to make the export of education products and services a major part of their foreign policy. In fact, we see major shifts in foreign policies where education was primarily seen as a development assistance activity or cultural programme to one where education is an export commodity. In short, higher education is subject to severe pressures from domestic and international markets. The divide between public policy and commercial activities is at stake. In a sense, at the centre of the current debate is a fundamental clash of values between traditional versus modern, state versus market, national versus global, and educational versus commercial. This article reviews the arguments on both sides: higher education as a public good and higher education as a tradable commodity, and argues how important it is to recognise and resurrect the public good nature of higher education.

What is a public good? Let us start with the basic question: what is a public good? Among the several beautiful concepts that economists have contributed to development studies, the concept of public good is an important one.2 What is a public good? Economists (see Samuelson 1954; also Musgrave 1959) define public goods as those that are non-excludable and nonrivalrous, i.e., such goods cannot be provided exclusively to some: others cannot be excluded from consuming them; secondly, non-rivalrous means their consumption by some does not diminish other people’s consumption levels of the same goods. Public goods generate a large quantum of externalities, simply known as social or public benefits. Public goods are available to all equally; marginal utility is equal, and the marginal cost of producing public goods is zero. They are also collective consumption goods.3 Economists consider all public goods that strictly satisfy all the preceding conditions as pure public goods; alternatively, other public goods that do not necessarily fully satisfy all the conditions are seen as semi- or quasi-public goods. Further, if the benefits of public goods are limited geographically, they are called local public goods (Tiebout 1956); and the public goods whose benefits accrue to the whole world are called global or international public

12  Public good or commodity? goods (Stiglitz 1999).4 By contrast, private goods are altogether different; they do not satisfy any of these conditions. An important implication of public goods is: production of public goods has to be financed by the state out of general revenues, without necessarily relying on prices or any user charges like student fees, and markets, as individuals do not completely reveal their preferences and will not be ready to meet the full costs. Therefore, the personal or market provision of public goods is not feasible, and even if feasible is inefficient.5 Even if some public goods are excludable, market mechanisms cannot provide public goods efficiently and cannot ensure optimum levels of production. Public goods are typically characterised by underproduction in a market situation, because private demand would fall severely short of socially optimal levels. Besides, public goods are generally made accessible to all and they are not subject to competition. That the provision of such goods is subject to market failures, and that economies of scale also operate in case of many of the public goods, further supports their public provision. In fact, public goods that are subject to economies of scale are better provided by the state as a monopolist, than by many, as the economies of scale enjoyed by the single supplier far outweigh any efficiency gains from competition. To prevent the abuse of the monopoly power, and to ensure that any producer surplus is returned to the society, it is only natural that it is produced and supplied by the state. On the other hand, private goods are not available to all and they are subject to the principles and laws of markets. Some view that the distinction between public and private goods is ‘technical’ and ‘ideological’ and that classification of public goods is not an absolute one; it depends upon government policies, market conditions, level of development and political realities. After all, public goods have been provided since the Middle Ages, and hence they need to be redefined time and again in consideration of changing political realities (Desai 2003). Sadmo (1998) argues that normative theory serves better than the positive theory in recognising and classifying the public goods.6 The concept of public goods needs to be interpreted, considering all aspects – the intrinsic nature of the given good, the public goods it produces, the social purpose it serves, and the limitations of markets or what is widely known as market failures in the production of such goods.

Is higher education a public good? Some argue that higher education cannot be treated as a public good, as it does not satisfy either of the first two features, viz., non-excludability

Public good or commodity? 13 and non-rivalrousness. Entry into education institutions, it is argued, can be restricted to some, and others can be excluded; and since the places of admission are generally given, admission to or consumption by some necessarily means reduction in the consumption levels of others. Similarly, it is argued that there are additional costs in providing access to higher education to additional members of the society. This, in my view, is a very narrow interpretation of the technical attributes of public goods and of consumption of education. As Stiglitz(1999) has argued, knowledge, thereby higher education and research, does satisfy all these conditions. As an illustration, he has given the example of a mathematical theorem, which is non-excludable (once it is published no one can be excluded from reading and enjoying the theorem), and non-rivalrous (one’s enjoyment of the theorem will not affect others’ enjoyment of the same). It is equally available to all; all may have same utility. There is zero marginal cost for making it available to an additional person.7 For the same reason higher education is also regarded as a collective good, as the cost of excluding an additional person from benefiting from higher education can be infinite, while the cost of an additional person can be nil (Johansson 1991, pp. 63–64). Few deny the existence of externalities in the case of higher education. So if the consumption is interpreted as consumption of benefits from education, not consumption of a good per se (admission to a university in the present case), education satisfies both the essential features: the spread of benefits from an educated citizenry cannot be restricted to a small population, nor is the quantum of benefits received by some affected by the level of benefits others receive. As Stiglitz (1986) noted, there are two critical properties of public goods: it is not feasible to ration public goods, nor it is desirable to do so. While it may be feasible to ration admissions to higher education it is not feasible to ration the distribution of benefits that flow from higher education; nor is it desirable to ration admissions to higher education (Weisbrod 1988). Exclusion of the poor from the consumption of education will result in a loss of overall equity as well as efficiency in the economy. Thus education, specifically higher education, satisfies all the three essential features of public goods: they are non-excludable, nonrivalrous and they produce externalities. Other associated features of public goods, like ‘free-riders’, are also applicable to education. Education is also a merit good, a good with special merit, ‘deserving public support to a level of supply beyond that which consumer sovereignty would imply’ (Colclough 1997, p. 10). Higher education is also an ‘experience good’ (McPherson and Winston 1993), whose product characteristics, such as quality and price and even the benefits, are difficult to observe in advance, but can be ascertained only

14  Public good or commodity? upon consumption. Higher education is also associated with asymmetric information including imperfect quality information (Dill and Soo 2004; Stiglitz 2000). Consumer choice has no much meaning in case of merit goods (see Arcelus and Levine 1986), as consumer behaviour is critically dependent upon information the consumer receives (Nelson 1970), which in case of education is imperfect, incomplete and highly inadequate. Further, higher education institutions have multiple objectives and they are not just economic. They also produce multiple, varied types of outputs, some tangible and many not. Because of these special features, public goods like higher education cannot be provided by markets in a manner that satisfies social demand. Optimum levels cannot be produced and supplied by markets, as profits cannot be a criterion in the production of the public goods; private producers cannot profit from producing public goods. Obviously, since public goods yield both private and public benefits, there are also private benefits from higher education (Bloom et al. 2006). After all, while the benefits associated with private goods are exclusive to the private individuals, those associated with public goods are not exclusive: public goods benefit the society and private individuals too. But the public benefits outweigh the personal benefits by several times, and hence higher education cannot be treated as a private good, or as a ‘public and private good’ (Levin 1987), or as a ‘mixed good’ one that is both public and private, as some (e.g., Hüfner 2003, p. 339) argue.8 In short, higher education is a public good beyond any doubt and the current controversy is ill motivated and unwarranted. The public good nature of higher education is well understood when one recognises the traditional functions of higher education and the social benefits that it produces, many of which constitute public goods in themselves.

Functions of higher education Traditionally, the functions of higher education are recognised as noble and lying at the core of the very sustenance of societies. From the society’s point of view, the core functions higher education performs can be listed as follows (see also UNESCO 1998). First, and most important, higher education helps in the creation, advancement, absorption and dissemination of knowledge through research and teaching. After all, it is well established that universities are nurseries of ideas, innovations and development, and gradually they become reservoirs of knowledge.

Public good or commodity? 15 Secondly, higher education helps in the rapid industrialisation of the economy, by providing manpower with professional, technical and managerial skills. In the present context of transformation of societies into knowledge societies, higher education provides not just educated workers, but knowledge workers who are essential for rapid growth of the knowledge economies. It also helps in reaping the gains from globalisation. Thirdly, universities are institutions that assist in building the character and morals of individuals; they inculcate ethical and moral values and orderly habits, create attitudes and make possible the attitudinal changes necessary for the socialisation of the individuals and the modernisation and overall transformation of the societies, by protecting and enhancing societal values. Fourthly, higher education also helps in the formation of a strong nation-state, contributes to the deepening of democracy by producing a better citizenry which actively participates in the civil, political, social, cultural and economic activities of the society, with members who understand, interpret, preserve, enhance and promote national, regional, international and historical cultures, in a context of cultural pluralism and diversity. It also has the potential to produce social and political leaders of high calibre and vision. The nation-building role of higher education is considered as one of the most important functions by many. Further, higher education contributes to the development and improvement of education at all levels and allows people to enjoy an enhanced ‘life of the mind’, offering the wider society both cultural and political benefits (TFHES 2000, p. 37). Since all these are in the public interest, higher education thus serves the public interest. Because of the nobility involved in the multiple functions – social, economic, political and cultural – higher education is also regarded as a noble public service and higher education institutions as temples of learning. The Task Force on Higher Education and Society (TFHES) (2000) highlighted higher education’s ability to serve public interest, by: unlocking the potential at all levels of society, helping talented people to gain advanced training whatever their background; creating a pool of highly trained individuals that attains a critical size and becomes a key national resource; addressing issues for study whose long-term value to society is thought to exceed their current value to students and employers; and providing a space for the free and open discussion of ideas and values.

16  Public good or commodity? An important ingredient in the public interest in higher education is its role in creating a meritocratic society that is able to secure the best political leaders, civil servants, doctors, teachers, lawyers, engineers and business and civic leaders, while at the same time being inclusive. Many of these social functions that higher education performs also constitute social benefits.

Social benefits of higher education Higher education confers a broad array of benefits on the individuals, and also on the whole society. These are well recognised by all, including economists, starting with Adam Smith, who also pleaded for the same reason for public financing of education. Such benefits are numerous and diverse: some are individual or private and many are public and social. Both individual and public benefits are economic, social, political, cultural and demographic in nature. They may even flow across generations and across borders. The social benefits of higher education are immense. In fact, as stated earlier, many social benefits also constitute public goods in themselves. Since the benefits flow across borders, higher education is also considered as an international public good (Naert 2004). As the Carnegie Commission on Higher Education (1973, p. vii) clearly stated, ‘benefits from higher education flow to all, or nearly all, persons . . .  directly or indirectly.’9 Many have documented the several types of benefits that accrue to the individuals and to the society (e.g., Weisbrod 1964; Bowen 1988; Merisotis 1998; Baum and Payea 2004; Institute for Higher Education Policy 2005). The public benefits include economic benefits and social benefits. Public economic benefits are those that have broad economic, fiscal and labour market effects. These benefits result in the overall improvement of the national economy, as a result of citizen’s participation in higher education. At the macro level, one can note that societies with increasing numbers of the higher educated in their population are dynamic, competitive in global markets and successful in terms of higher levels of economic development (TFHES 2000). An important public economic benefit is greater productivity of the labour force. The presence of an educated labour force increases the productivity of the less well-educated, too (Johnson 1984; Lucas 1988), which is an important externality. Other specific public economic benefits include increased tax revenues, higher levels of savings which are necessary for investment that result in higher levels of growth, growth in overall consumption levels, increased supply of educated labour force, decreased reliance on government support

Public good or commodity? 17 for welfare programmes and so on, many of which are well documented in the literature on human capital. Further, the benefits of education as a socialising force are realised in a variety of ways. Instilling common core virtues through public education is not only important; it can later reduce the cost of enforcing desirable social norms. Gradstein and Justman (2002, p. 1192) highlight the role of public education in producing a major externality, viz., the shrinking of the ‘social distance’ between individuals of different distinct ethnic, religious and social groups, and thereby in reducing the associated transaction costs, and in reducing the potential for conflict over rent-seeking activities between competing groups in the population. In addition to these ‘normal’ externalities, in case of higher education in particular, ‘technological’ and ‘dynamic’ externalities may be very important.10 For the same reason, Krueger and Lindahl (2001, p. 1120) argue that the existence of quite large externalities can cause ‘an enormous return to investment in schooling, equal to three or four times the private return to schooling estimated within most countries’. Public social benefits are those benefits that accrue to the society, but are not directly related to economic aspects. Such public social benefits include reduced crime rate, social cohesion and appreciation of diversity, increase in the age of marriage (thus resulting in decrease in fertility rate among women), improved health conditions, etc. The political and civil benefits of higher education are also immense. Public higher education systems are generally regarded as the single most important instrument in the maintenance of a democratic system, as it produces better, more well-informed citizenry, enabling more sensitive and wider public participation and debate on national issues.11 They also help in building strong nation-state philosophy, at the same time offering resistance to social and political ideas that threaten the broader social interests. Institutions of higher education are custodians of liberty, freedom and an unfettered search for truth; they are considered as civilising forces, inculcating good character and values, producing leaders (Lawrence 2004). Their contribution to increased quality of civic life, better elected governments and democracy is very substantial. Higher education is also viewed as a major instrument of equity, serving as an important means of access and social mobility to disenfranchised segments of population. Public education has an intrinsic equity content. Thus the typology of benefits indicates a broad range – economic, social, cultural, political, etc., often overlapping – short-term and long-term, having a significant positive impact on the people’s wellbeing. They are indeed diverse. As Snower (1993, p. 706) noted,

18  Public good or commodity? ‘the uncompensated benefits from education are legion.’ Very few (e.g., Arrow 1993) believe that externalities in higher education are negligible. Externalities or public benefits are generally believed to be nonmeasurable. But even if externalities cannot be quantified, it is clear that they do exist (Summers 1987), so one should refrain from being dogmatic (Hope and Miller 1988, p. 40). Large quantitative evidence does exist on the effects of education on economic growth, income distribution, infant mortality, life expectancy, health conditions, fertility rates, population control, etc.12 McMahon (1999) has indeed measured several social benefits of education, such as benefits relating to health, population growth, democracy, human rights, political stability, poverty, inequality, environment and crime, apart from the direct benefits of education relating to economic growth in a cross section of countries. Thus, higher education is not only a public good, it also shapes, produces and helps realise other public goods. In this sense it can be regarded as a very special public good of a high order. Thus there is a huge accumulated stock of conventional wisdom on the versatile and critical contribution of higher education to various development facets of society. Further, higher education is not only a means for development, it itself constitutes development, a higher standard of quality of life, as higher educated people acquire the ability to read, write, understand and enjoy serious writings; develop critical thinking and become involved in scholarly debates on academic as well as sociopolitical issues of national and global importance; and become socially and politically engaged (Helliwel and Putnam 1999). The abilities of the people to get engaged in critical writings, thinking and in social and political activities constitute a non-excludable public good, since ‘they allow a more complex organization of social life’ (Checchi 2006, pp. 15–16). In this sense, education is development; it is freedom, and the creation of capabilities among the people is an important function of higher education (see Sen 1999).

Why is the conventional wisdom changing? Despite overall awareness of the public good nature and role of higher education in society, a rapid shift in the development paradigm of higher education is taking place. Two essential factors explain the new trends that treat education as a marketable commodity and not as a public good. Both factors are also related to each other. First, higher education systems, even in economically prosperous countries, are under severe financial strain, with growing student

Public good or commodity? 19 numbers on the one hand, and a chronic shortage of public funds on the other. In recent years, most countries have inflicted serious cuts in state grants to higher education institutions. The resultant fall in public expenditures can be noticed in many countries in any or all of the following: total public expenditure on higher education, per student expenditures, share of public expenditure on higher education in the corresponding country’s national income, or in the total government budget expenditure, allocations in absolute and relative terms to important programmes that include research, scholarships, etc. Some of the available evidence presented in Table 1.1 on the extent of decline in public expenditure on higher education per student as a percentage of gross domestic product per capita during the last decade and a half in a select few countries shows very clearly that: (1) the decline is not confined to the developing countries, though a larger number of developing countries experienced the decline than the number of high-income countries; there has been a very significant fall even

Table 1.1  Decline in public expenditure on higher education per student (% of GDP per capita) 1990–91 UK 40.9 Australia 50.7 New Zealand 67.8 Chile 27.1 Czech 45.9 Nepal 90.8 Malaysia 116.6 India 92.0 Estonia 55.9 South Africa 90.9 Hungary 81.3 Jamaica 132.3 Regions High-income 47.1 countries South Asia 90.8 Upper-middle-income 61.8 countries

2006

Change

27.6 22.5a 25.2 11.6 30.4 71.1a 71.0 61.0 18.2 50.1 24.3 40.7a

–13.3 –28.2 –42.6 –15.5 –15.5 –19.7 –45.6 –31.0 –37.7 –40.8 –57.0 –91.6

29.0

–18.1

68.6a 23.3

–22.0  38.5

 Refers to 2005 Note: Data for two points of time are not available on all countries; data on some select countries only are presented here.

a

Source: World Development Indicators 2004 and 2008 (Washington, DC: World Bank)

20  Public good or commodity? in advanced countries such as the United Kingdom, Australia and New Zealand, and in the group of the high-income countries as a whole; and (2) the fall in the ratio is very steep in some of the countries, developed as well as developing. The second important factor that contributed to the radical shift in the thinking on the nature and role of higher education is the introduction of neo-liberal economic policies in the name of stabilisation, structural adjustment and globalisation, associated with the International Monetary Fund and the World Bank. Neo-liberalism and also liberal neutralism are untenable in theory and are highly inadequate in guiding social practice, more so in the case of higher education (Jonathan 1997a, b). These policies question the role of the state and involve withdrawal of the state from, and liberalisation and privatisation of, several social and economic sectors including higher education and even the welfare programmes. These policies also clearly favour and promote an increase in the role of the markets. The case for treating higher education as a marketable commodity received great support from these policies and these organisations. Such policies have been introduced in almost all developing countries, and even many developed countries found it convenient to adopt such policies as an easy escape from the problem of public funding of higher education. Further, inclusion of education in the negotiations under GATS and WTO, which is an obvious extension of the neo-liberal economic policies, is also found to be highly attractive to many universities and the governments (Tilak 2007). Higher education as an internationally traded service is believed to be capable of producing an immense amount of profit to the exporters of education. After all, the international market in higher education was valued at US$ 30 billion, or 3 per cent of global services exports in 1998 (OECD 2004). For example, of the US$ 30 billion, the United States and the United Kingdom accounted for US$ 11.4 billion each in 2001. Third in rank comes Australia with over US$ 2 billion (OECD 2004, p. 32). The total value of exports of the five largest exporting countries (United States, United Kingdom, Australia, New Zealand and Canada) itself was estimated to be nearly US$ 30 billion in 2005 (Bashir 2007). Many governments of the ‘exporting’ countries encouraged the negotiations on higher education under GATS and WTO, as trade in higher education is essentially viewed as an important source of revenues for the universities, thus reducing the need for the governments to allocate higher proportions of their budgetary resources. For example, even some of the best universities in the world, such as Oxford and Cambridge, which were seen as ‘gold standard’ in higher

Public good or commodity? 21 education until ten years ago, are entering into the business of trading their degrees to overseas students, essentially constrained by state grants (Suror 2005). As Knight (2007) reported, more than 50 large transnational companies, which are active in providing international education programmes on a for-profit basis, are publicly traded on stock exchanges. It is generally argued that international trade in higher education benefits both the ‘exporting’ countries as well as the ‘importing’ ones; importing countries gain access to high-quality higher education systems, and exporting countries make economic gains, besides reaping academic pay-offs in terms of diversity, etc. Although the accrual of economic gains to the exporting countries seems to be real, gains on the academic front to the importing countries or to the exporting countries are elusive. It is widely noted that (1) only substandard institutions in advanced countries participate in the trade in higher education in developing countries; and (2) the institutions in advanced countries also adopt dual standards and procedures – tough and high-quality ensuring mechanisms and strong regulatory procedures and methods for education in their own countries and questionable mechanisms and methods for export of education to the developing countries. As a result of all this, developing countries suffer both economic and academic losses, and rich countries might get only economic benefits, but few benefit in academic and intellectual spheres; and all countries lose the public good nature of higher education (Tilak 2007). Unfortunately, those who patronise the cause of higher education as a marketable commodity recognise only the individual economic benefits conferred by higher education, and refuse to recognise the vast magnitude of social benefits higher education produces, and the inability of the markets to produce a sufficient quantum of public goods. They (e.g., Tooley 1994, 2001, 2004) find that markets are capable of solving all educational problems. For them the individual interests should take precedence over social interests. They also stress the superficial principle of individual choice in this regard. The principle is superficial, as it matters only for those who can pay for higher education. They also believe that markets serve the social interests and that ‘unfettered market is always superior’ (Schultze 1977). But most such claims are open to question; some empirical studies have indeed proved them to be wrong.13 One of the strong arguments neo-liberals have made against the public provision of higher education and clearly in favour of private education and/or high fees and user charges in higher education is: public provision of higher education benefits the upper-middle and upper-income

22  Public good or commodity? groups of the population more than the low-income groups and thereby accentuates unequal distribution (World Bank 1995; Jimenez 1987). Though this argument is true to some extent, the situation in developing countries is changing rapidly; access to higher education is no longer confined to upper-middle and high-income groups; the participation rates of the low socio-economic strata are rising, albeit slowly. For example, in India, about 40–50 per cent of the enrolments in higher education are accounted for by socio-economically weaker sections of society (scheduled castes/tribes and other backward castes in 2004–2005) (NSSO 2006). Secondly, and more importantly, it is to be noted that acceptance of the neo-liberal arguments on public financing of higher education and withdrawal of the state from higher education would reduce the rates of participation of socio-economically weaker sections of society in higher education and further accentuate inequalities in higher education (see Tilak 1997). Further, higher education is also regarded by some as a ‘positional good’ – an economic good which has a relative or social value, but not an absolute one, and earns economic rents or quasi-rents for being scarce (Hirsch 1976). The traditional function of higher education as a positional good serving mainly as a status symbol is important, but limited, because positional goods, strictly speaking, are inherently scarce, and they do not produce absolute value, which are not strong features of higher education. More importantly, it can be argued that public provision of education to larger numbers of the population, or what is known as ‘massification of higher education’ will reduce the undesirable nature of higher education as a positional good, while the treatment of higher education as a private commodity, on the other hand, will only fortify it as a positional good, meant for the privileged. Thus one notices only practical economic compulsions and vested interests in making quick money, and no theoretical base for the arguments to treat education as a commodity rather than as a public good. But the pace of change in the conventional wisdom is rapid. The idea of the university as a place of scholarship and as a community of scholars and students drawn from all corners of society, seeking truth and engaging in the task of pursuing scientific research, etc., and not as a confederacy of self-seekers, is treated as an old fashioned idea. These neo-liberals view higher education institutions neither as centres of learning nor as important social institutions. For them there is no distinction between higher education and the production of cars and soaps. They treat universities as knowledge factories. For them investment in higher education is not human capital, but venture capital;14 and equity in higher education means not socio-economic equity, but ‘equity’ in share markets relating to investment in universities.

Public good or commodity? 23

Costs of treating higher education as a commodity Treating higher education as a commodity is much more complex and dangerous than it appears on the face of it. It might affect higher education in a variety of ways. First and foremost, by treating higher education as a commodity that can be bought and sold in the domestic and international markets, the public good character of higher education may disappear altogether. Instead of serving public interests, higher education might become disengaged from the public interest and might become an instrument that serves individual narrow interests. As the TFHES (2000, p. 45) warned, reliance on market forces reduces the public benefits that higher education produces. This, in my view, could be the most serious casualty of commoditisation of higher education. As Altbach (2001, p. 3) observed, if higher education worldwide were subject to the strictures of the WTO, academe would be significantly altered. The idea that the university serves a broad public good would be weakened, and the universities would be subject to all of the commercial pressures of the marketplace – a marketplace enforced by international treaties and legal requirements. The goal of having the university contribute to national development and the strengthening of civil society in developing countries would be impossible to fulfill. University education might be designed independently of academic and social responsibilities. Second, the commoditisation of higher education would terribly weaken governments’ commitment to and public funding of higher education, and promote a rapid growth in the privatisation of higher education. Privatisation, specifically profit-seeking private institutions of higher education, might become the order of the day with all its ramifications, converting an institution that is basically a non-profit institution into a profit-seeking institution. Eventually, the whole higher education scene might be eclipsed by the private sector, and the public sector might become invisible. I have described elsewhere (Tilak 1991, 2005, 2009) the several problems associated with the growth of private higher education in terms of quality and quantity of higher education and equity, in addition to the problems it creates in developing a balanced system of higher education with a necessary focus on all areas of study that are important to society in the long run. Marketisation of higher education will result in a rapid extinction of some of the important disciplines of study that serve as a basic foundation

24  Public good or commodity? for the development of any humane society. Only the marketable and revenue-generating courses of study will survive. This is already being experienced in countries like India, with an increase in demand for engineering education, management education and areas like fashion technology, and with a falling demand for the natural and physical sciences, social sciences, humanities, languages, etc. And then societies have to struggle to highlight the importance of and revive the social sciences and humanities. Third, treating higher education as a marketable product may severely affect knowledge production and will lead to ‘knowledge capitalism’ (see Olssen and Peters 2005). The reduction in the role of the state, and a corresponding increase in the role of the markets – d ­ omestic and international – in higher education would generally severely restrict access to higher education, and widen education inequalities within and between nations. In the WTO framework, Trade-Related Aspects of Intellectual Property Rights (TRIPS) include legal means in both domestic and international law for excluding and restricting access to knowledge. Knowledge capitalism makes higher education beyond the reach of large numbers of youth belonging to middle and lower socioeconomic strata. This is not good for those populations nor is it good for the higher education system itself. Similarly, knowledge capitalism keeps many economically poor countries away from good quality higher education. This, too, is not good for those poor countries, nor is it good for other countries in this rapidly growing, interdependent world. This, too, will not help build strong, vibrant higher education systems in the developed countries. Fourthly, knowledge is a public good. The TFHES (2000) has also noted the public interest value of higher education in terms of creation of research and knowledge. Higher education adds to society’s stock of knowledge, which is an important externality. If research and knowledge are treated as private goods, and access to them is restricted, new knowledge creation becomes impossible as new knowledge is necessarily built on old knowledge. The noble tradition that universities are centres of creation and dissemination of knowledge in a spirit of academic freedom with special stress on independent research may become an idea of the past. The quality and content of higher education and research might become severely dampened. Even if research is conducted in private or public universities, the integrity of research could be at stake, with the interests of the corporate sector determining research priorities and outcomes. Further, research supported by the corporate sector may satisfy the perceived present demands, but may fail to look at society’s long-term needs. Basic and fundamental

Public good or commodity? 25 research that forms the humanistic foundation and helps in understanding the universal context, in which humanity lives, may get traded off in favour of current applications. The core academic values would get traded off in favour of commercial gains (Bok 2003). The GATS and related developments such as TRIPS could raise fundamental roadblocks to the provision of global and national public goods. Fifthly, progress in higher education depends on the time-tested ‘social contract’ system, a contract between the older generation, the younger generation and the education system (Martin 2005). The principle of the contract is simple: the present generation of adults finances the education of the future generation. The principle refers to the bonds between the present and future generations, and between society and its collective children, which constitute the bedrock upon which every successful civilisation rests. The responsibility one generation feels towards those that follow is a valuable public asset. The mechanism works through the method of taxation: the present generation of taxpayers pays for the education of the future generations. If higher education is regarded as a private good, as an individual responsibility that one has to finance oneself, through tuition and student loans, for example, one finances one’s own higher education out of one’s own future income, the principle of social contract is in great trouble. Jeopardising the principle of the social contract may lead not only to impeding the progress of the education system, but also to training of the entire social fabric throughout. Lastly and quite importantly, it is important to realise that trade in higher education might actually jeopardise existing human rights agreements, as the several provisions in WTO and GATS conflict with the United Nations conventions (see Tomasevski 2006). The provisions in the trade agreements are indeed subversive of and contradictory to the true meaning of higher education. After all, the Universal Declaration on Human Rights (United Nations 1948) has clearly stated: Everyone has the right to education . . .  and higher education shall be equally accessible to all on the basis of merit. The United Nations Covenant on Economic, Social and Cultural Rights (Article 13) further states: Higher education shall be made equally accessible to all, on the basis of capacity, by every appropriate means, and in particular by the progressive introduction of free education. (emphasis added)

26  Public good or commodity? The Bologna Declaration has also ratified the UN Covenant. Treatment of higher education as a commodity and trade in higher education may make realisation of these conventions not just difficult, but impossible.

Conclusion Basically higher education is a public good; it is also recognised as a merit good. Besides being a public good in itself, it produces several public goods. The public goods that higher education produces, shapes and nurtures are also diverse. The social purpose it serves, the nation-building role it performs, the public good nature and the human right nature of higher education – all these dimensions are very closely related, and they need to be considered as fundamental and non-compromisable principles in the formulation of public policies relating to higher education. But higher education as a public good is now at risk, as higher education comes to the centre stage of the WTO (Altbach 2004). The financial pressures and broader changes in economic thinking – ­specifically the emergence of neo-liberal thinking – play an important role here. The role and definition of higher education and other public goods is contested and embattled. The neo-liberals see the role of higher education differently; they view it as a commodity that can be traded in domestic as well as international markets. The neo­-liberal economic policies introduced almost everywhere – every society and every sector, the chronic shortage of funds for higher education, and the advent of WTO and GATS in higher education – all dramatically changed the public thinking on higher education and weakened the social commitment to higher education all over the world. GATS is basically hostile to public goods and social services, including specifically higher education. As a result, the wave of commoditisation of higher education is on and the ‘higher education bazaar’ (Kirp 2003) is growing rapidly. Increasingly, all components of higher education and research, including good ideas and policy concepts, are traded in the international marketplace (Newman and Couturier 2002). ‘Commitment to higher education’ has given way to ‘commitment of higher education’ to WTO under GATS. But though a majority of the countries have not made ‘commitments’ to liberalise their higher education systems under WTO,15 a ‘progressively higher level of liberalisation in higher education is taking place’ (Tomasevski 2005, p. 12), with an increase in quantum and types of pressures to ‘seek’ and to ‘offer’ commitments on higher education (Knight 2006). The very shift in the perception of the nature of higher education from a public good to a private one, a commodity that can be traded,

Public good or commodity? 27 and the reforms being attempted in higher education in this direction that do not recognise the principle of the social contract, may have dangerous implications, replacing academic values by commercial considerations, social concerns and purposes by individual interests, and long-term needs by short-term demands. Even if there are some gains to be had from the commoditisation of higher education for trade, they may be few and short-lived, whereas the losses could be immense and may produce very serious, irreversible long-term dangers to the whole society. The core academic values and social purposes are so important that they cannot be traded off in favour of markets (e.g., Kirp 2003). At the bottom line, it is important to realise that higher education institutions are not commercial production firms (Winston 1999; see also Clotfelter 1996) and hence higher education is not a business commodity that can be subject to liberalisation, privatisation and commercialisation and be bought and sold in markets. Higher education is related to the national culture and the values of a society. It protects culture, intellectual independence and the values of a civilised society. Higher education institutions act as bastions of rich traditional values, at the same time as providing the setting for a new kind of social imagination and experience. They are not only centres of learning, continuously creating and disseminating knowledge, and inculcating the skills and attitudes necessary for the modernisation of societies, but also important social institutions that provide the setting for a very distinct kind of interaction among young men and women, between the generations and the nations (Béteille 2005, p. 3377). All this makes higher education very different from other goods and services covered by GATS. Therefore it is necessary to make special efforts to protect the integrity of research, to preserve the much cherished educational and social values and, in brief, to resurrect the public good nature of higher education, so that it serves the public interests that it is expected to do. As Altbach (2001) cautioned: Universities are indeed special institutions with a long history and a societal mission that deserve support. Subjecting academe to the rigors of a WTO-enforced marketplace would destroy one of the most valuable institutions in any society.

Notes * This chapter originally appeared as ‘Higher Education: A Public Good or a Commodity for Trade? Commitment to Higher Education or Commitment

28  Public good or commodity? of Higher Education to Trade’, Prospects, 38(4), 449–466, 2008. Reproduced with permission. This is a revised version of the keynote address delivered at the Second Nobel Laureates Meeting at Barcelona, organised by the Global University Network for Innovation & Universidad Politecnica De Catalufia, Barcelona, Spain (December 2, 2005). Without implicating for the opinions and the errors that remain in it, the author acknowledges with gratitude the helpful comments and observations made by Frederico Mayor, Marco Antonio Dias, Josep Ferrer Llop, Nobel laureates Joseph H. Taylor, Jr., Adolfo Pérez Esquivel, Jerome I. Friedman, Jose Seramago, Werner Aber, Martinus J. G. Veltman and Rigorreta Menchu Tum who participated in the meeting and the two anonymous referees of Prospects. 1 See Tilak (2008) for a review of Indian experience in this context. 2 Hence, it is not proper to blame, as some (e.g., Grace 1994) do, economic science for the neglect of public good nature of education. 3 But not all collective consumption goods are public goods. Some of them are ‘price-excludable’ goods, i.e., some can be excluded using the price mechanism (e.g., clubs), some are ‘congestible’ goods, i.e., the more the consumers, the more congestion there is (e.g., a public road, or a music programme in an auditorium). 4 Stiglitz (1999) has identified five such global public goods, viz., ­international economic stability, international security (political stability), international environment, international humanitarian assistance and knowledge. See also several papers in Kaul et al. (1999) and Kaul et al. (2003). 5 For example, each one cannot have a school; or each cannot and should not be allowed to have a pistol for safety. 6 See Besley and Ghatak (2006) for a discussion of different types of public goods, including market-supporting and market-augmenting public goods, and on spontaneous provision of public goods. 7 The additional person may, however, have to incur a small cost of accessing it, say in the form of purchasing the book. 8 Given the quantum and nature of externalities, and the individual benefits, some prefer to treat school or more specifically basic education as a ‘pure’ public good, and higher education as a quasi-public good (Blaug 1970; Levin 1987; Tomlinson 1986), but a public good nevertheless. 9 In fact the commission goes further, adding that for the same reason, ‘the costs of higher education are assessed against all, or nearly all, adults directly or indirectly.’ 10 On dynamic externalities, see Schultz (1988), Romer (1986, 1990), Lucas (1988) and Stewart and Ghani (1992). See Azariadis and Drazen (1990) and Behrman (1990) for a discussion on ‘technological’ externalities. See also Schultz (1990) and Birdsall (1996) on the externalities produced by research and higher education. 11 For example, the Indian university system is found to have played a very significant part in education for democratic citizenship (Béteille 2005). See also Patnaik (2007). 12 Weale (1993, p. 736) argues that these externalities are particularly important in developing countries. See Bowen (1988) and Leslie (1990) for elaborate descriptions of externalities in education.

Public good or commodity? 29 13 See Tilak (2006, 2009) for a critique of some of the assumptions and claims of advocates of private higher education. 14 See, for example, www.ifc.org/edinvest, which produces a monthly electronic newsletter, championing the cause of facilitating investment in the global education market. 15 Only 52 countries (including the European Union, which is counted as one country) made commitments with respect to education sector as of March 2006. Of these countries, 36 have agreed to liberalise access to higher education (Education International 2006; Knight 2006). Further, it is important to note that the public higher education sector is in principle not covered by the GATS negotiations and no member country has expressed an interest in including it. But the situation seems to be changing rapidly.

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30  Public good or commodity? International Handbook of Higher Education (pp. 293–308). Dordrecht, the Netherlands: Springer. Bok, D. (2003). Universities in the Market Place: The Commercialization of Higher Education. Princeton, NJ: Princeton University Press. Bowen, H. R. (1988). Investment in Learning. San Francisco, CA: Carnegie Council. Carnegie Commission on Higher Education. (1973). Higher Education: Who Pays? Who Benefits? Who Should Pay? New York: McGraw-Hill. Checchi, D. (2006). The Economics of Education: Human Capital, Family Background and Inequality. Cambridge: Cambridge University Press. Clotfelter, C. T. (1996). Buying the Best: Cost Escalation in Elite Higher Education. Princeton, NJ: Princeton University Press. Colclough, C. (Ed.). (1997). Marketizing Education and Health in Developing Countries: Miracle or Mirage? Oxford: Clarendon Press. Desai, M. (2003). Public Goods: A Historical Perspective. In I. Kaul et al. (Eds.), Providing Global Public Goods: Managing Globalization (pp. 63–77). New York: Oxford University Press. Dill, D. D., and Soo, M. (2004). Transparency and Quality in Higher Education Markets. In P. Teixiera, B. Jongbloed, D. Dill, and A. Amaral (Eds.), Markets in Higher Education: Rhetoric or Reality? (pp. 61–86). Dordrecht, the Netherlands: Kluwer. Education International. (2006). GATS: Education Is a Right, Not a Commodity. www.ei-i.e.org/en/article/show.php?id=36&theme=gats. Grace, G. (1994). Education Is a Public Good: On the Need to Resist the Domination of Economic Science. In D. Bridges and T. McLaughlin (Eds.), Education and the Market Place (pp. 126–137). London: Falmer. Gradstein, M., and Justman, M. (2002). Education, Social Cohesion and Economic Growth. American Economic Review, 92(4), 1192–1204. Helliwel, J. F., and Putnam, R. D. (1999). Education and Social Capital. NBER Working Paper W7121, National Bureau of Economic Research, New York. Hüfner, K. (2003). Higher Education as a Public Good: Means and Forms of Provision. Higher Education in Europe, 28(3), 339–348. Hirsch, F. (1976). The Social Limits to Growth. London: Routledge & Kegan Paul. Hope, J., and Miller, P. (1988). Financing Tertiary Education: An Examination of the Issues. Australian Economic Review, 4, 37–57. Institute for Higher Education Policy. (2005). The Investment Payoff: A 50-State Analysis of Public and Private Benefits of Higher Education. Washington, DC: IHEP. Jimenez, E. (1987). Pricing Policy in the Social Sectors: Cost Recovery for Education and Health in Developing Countries. Baltimore, MD: Johns Hopkins University Press. Johansson, O. (1991). An Introduction to Modern Welfare Economics. Cambridge: Cambridge University Press.

Public good or commodity? 31 Johnson, G. E. (1984). Subsidies for Higher Education. Journal of Labor Economics, 2(3), 303–318. Jonathan, R. (1997a). Illusory Freedoms: Liberalism, Education and the Market. Oxford: Wiley-Blackwell. Jonathan, R. (1997b). Educational Goods: Value and Benefit. Journal of Philosophy of Education, 31(1), 59–82. Kaul, I., Confecao, P., Le Goulven, K., and Mendoza, R. U. (Eds.). (2003). Providing Global Public Goods: Managing Globalization. United Nations Development Program, New York. Kaul, I., Isabelle, G., and Marc, S. (Eds.). (1999). Global Public Goods: International Cooperation in the 21st Century. New York: Oxford University Press. Kirp, D. L. (2003). Shakespeare, Einstein and the Bottom Line: The Marketing of Higher Education. Cambridge, MA: Harvard University Press. Knight, J. (1999). Internationalisation of Higher Education. In Organization for Economic Co-Operation and Development (Ed.), Quality and Internationalisation in Higher Education. Paris: OECD. Knight, J. (2006). GATS: The Way Forward After Hong Kong. International Higher Education, 43, Spring, 12–14. Knight, J. (2007). Internationalization: A Decade of Changes and Challenges. International Higher Education, 50, Winter, 6–7. Krueger, A., and Lindahl, M. (2001). Education for Growth: Why and for Whom? Journal of Economic Literature, 39, 1101–1136. Lawrence, C. (2004). Higher Education: Public Good or Private Benefit? Melbourne, Australia: Melbourne University (Chifley Memorial Lecture). Leslie, L. L. (1990). Rates of Return as Informer of Public Policy With Special Reference to the World Bank and Third World Countries. Higher Education, 20(3), 271–286. Levin, H. J. (1987). Education as a Public and a Private Good. Journal of Policy and Management, 6(4), 628–641. Lucas, R. E., Jr. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1), 3–42 (Marshall Lecture). Martin, R. E. (2005). Cost Control, College Access, and Competition in Higher Education. Cheltenham: Edward Elgar. McMahon, W. W. (1999). Education and Development: Measuring the Social Benefits. Oxford: Oxford University Press. McPherson, M. S., and Winston, G. (1993). Economics of Cost, Price and Quality in US Higher Education. In M. S. McPherson, M. O. Schapiro, and G. Winston (Eds.), Paying the Piper: Productivity, Incentives and Financing in US Higher Education (pp. 69–107). Ann Arbor, MI: University of Michigan Press. Merisotis, J. P. (1998). Who Benefits From Education? An American Perspective. International Higher Education, 12. www.bc.edu/bc_org/avp/soe/cihe/ newsletter/News12/text1.html. Musgrave, R. A. (1959). The Theory of Public Finance. New York: McGraw-Hill.

32  Public good or commodity? Naert, F. (2004). Higher Education as an International Public Good and GATS: A Paradox. UNU-CRIS Occasional Paper No. 0-2004/10, United Nations University, Tokyo. National Sample Survey Organisation (NSSO). (2006). Employment and Unemployment Situation Among Social Groups in India 2004–05. New Delhi: NSSO. Nelson, P. (1970). Information and Consumer Behavior. Journal of Political Economy, 78(2), 311–329. Newman, F., and Couturier, L. K. (2002). Trading Public Good in the Higher Education Market. London: Observatory on Borderless Higher Education. Olssen, M., and Peters, M. A. (2005). Neoliberalism, Higher Education and the Knowledge Economy: From Free Market to Knowledge Capitalism. Journal of Education Policy, 20(3), 313–345. Organization for Economic Cooperation and Development. (2004). Internationalisation of Trade in Higher Education: Opportunities and Challenges. Paris: OECD. Patnaik, P. (2007). Alternative Perspectives on Higher Education in the Context of Globalization. Journal of Educational Planning and Administration, 21(4) (First Foundation Day Lecture, National University of Educational Planning and Administration, New Delhi). Romer, P. M. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy, 94(5), 1002–1036. Romer, P. M. (1990). Endogenous Technological Change. Journal of Political Economy, 98 (Supplement), S71–Sl02. Sadmo, A. (1998). Public Goods. In J. Eatwell, M. Milgate, and P. Newman (Eds.), The New Palgrave Dictionary of Economics (pp. 1061–1066). Houndmills: Palgrave. Samuelson, P. (1954). The Pure Theory of Public Expenditure. Review of Economics and Statistics, 36(4), 387–389. Schultz, T. W. (1988). On Investing in Specialised Human Capital to Attain Increasing Returns. In G. Ranis and T. P. Schultz (Eds.), The State of Development Economics: Progress and Perspectives (pp. 339–352). Oxford: Basil Blackwell. Schultz, T. W. (1990). Restoring Economic Equilibrium: Human Capital in the Modernizing Economy. Cambridge: Basil Blackwell. Schultze, C. L. (1977). The Public Use of Private Interest. Washington, DC: Brookings Institution. Sen, A. (1999). Development as Freedom. Oxford: Clarendon. Snower, D. J. (1993). The Future of the Welfare State. Economic Journal, 103(418), 700–717. Stewart, F., and Ghani, E. (1992). How Significant Are Externalities for Development? World Development, 19(6), 569–594. Stiglitz, J. E. (1986). Economics of Public Sector. New York: W.W. Norton & Co. Stiglitz, J. E. (1999). Knowledge as a Global Public Good. Global Public Goods, 1(9), July, 308–326.

Public good or commodity? 33 Stiglitz, J. E. (2000). Contribution of the Economics of Information to Twentieth Century Economics. Quarterly Journal of Economics, 115(4), 1441–1478. Summers, A. (1987). Comment. Journal of Policy Analysis and Management, 6, 641–643. Suror, H. (2005). Cash for Class at Oxbridge. The Hindu, February 9. www. hindu.com/2005/02/09/ stories/2005020902431000. htm. Task Force on Higher Education, Society. (2000). Higher Education in Developing Countries: Peril and Promise. Washington, DC: World Bank. Tiebout, C. M. (1956). A Pure Theory of Local Expenditures. Journal of Political Economy, 64, 416–424. Tilak, J.B.G. (1991). Privatization of Higher Education. Prospects: Quarterly Review of Education, 21(2), 227–239. Tilak, J.B.G. (1997). Lessons From Cost Recovery in Education. In C. Colclough (Ed.), Marketising Education and Health in Developing Countries: Miracle or Mirage? (pp. 63–89). Oxford: Clarendon Press. Tilak, J.B.G. (2005). Private Higher Education: Philanthropy to Profits. In Higher Education in the World 2006: The Financing of Universities (pp. 113–121). Barcelona: Global University Network for Innovation and Palgrave Macmillan. Tilak, J.B.G. (2006). Higher Education Between the State and the Market. In G. Neave (Ed.), Knowledge, Power and Dissent: Critical Perspectives on Higher Education and Research in Knowledge Society (pp. 235–254). Paris: UNESCO. Tilak, J.B.G. (2007). Internationalisation of Higher Education: Illusory Promises and Daunting Problems. Bhavnagar: Bhavnagar University (Tenth R. S. Bhatt Memorial Lecture). Tilak, J.B.G. (2008). Transition From Higher Education as a Public Good to Higher Education as a Private Good: The Saga of Indian Experience. Journal of Asian Public Policy, 1(2), 220–234. Tilak, J.B.G. (2009). Current Trends in Private Sector in Higher Education in Asia. Higher Education Review, 41(2), Spring. Tomasevski, K. (2005). Globalizing What: Education as a Human Right or as a Traded Service? Indiana Journal of Global Legal Studies, 12(1), 1–78. Tomasevski, K. (2006). The State of the Right to Education Worldwide: Free or Fee – 2006 Global Report. Copenhagen: Wolf Legal Publishers (Studies in Human Rights in Education). www.katarinatomasevski.com. Tomlinson, J.R.G. (1986). Public Education, Public Good. Oxford Review of Education, 12, 211–222. Tooley, J. (1994). In Defence of Markets in Educational Provision. In D. Bridges and T. McLaughlin (Eds.), Education and the Market Place (pp. 138–153). London: Falmer. Tooley, J. (2001). Reclaiming Education. London: Cassell. Tooley, J. (2004). The Global Education Industry (2nd ed.). London: Institute of Economic Affairs.

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2 Higher education between the state and the market*

In traditional societies, the value of higher education is recognised perhaps more than in their modern counterparts. Though the former made no attempt to identify and quantify the benefits of education, they rarely questioned the value of education. Education and knowledge were viewed as great riches in themselves, besides being a way to increase wealth. Even the existence of externalities was acknowledged in traditional societies and this in times ancient and modern. Accordingly they invested in education voluntarily, gladly, and often without expecting any direct economic return. Even in modern societies until the 1970s, it has been so. The benefits of education were held to be vast and widespread. In the long run, government investments in education could be recovered by society through increased productivity of the labour force and through consequent higher tax receipts for government. Hence specific measures directly to recover investments in education from students or from non-governmental sources were not felt necessary. As Mishan (1969) observed, ‘[higher] education is an investment and will pay for itself; and will increase the earnings of the beneficiary students and the government will recover its costs through consequent higher tax receipts.’ The immediate post-war years in Europe, and the post-independence period in developing countries, were dominated by a welfare state philosophy together with a philosophy of social democratic consensus. That government could do almost everything for everybody was a strongly shared belief. The organisational power of the State, following John Maynard Keynes, was recognised in planning, provision, financing and the extension of traditional functions. Education was one important sector where this was widely applied; indeed the importance of public education was highlighted in classical political economy. As Vaizey (1962, p. 23) observed, ‘there is a long and honourable tradition from Adam Smith to Alfred Marshall which assigns

36  Between the state and the market to publicly supported education a major role not only in promoting social peace and harmony, and self-improvement, but in the process of wealth-creation itself.’ The 1970s heralded a continuing financial crisis in education, characterised by high rates of inflation, shrinking public budgets for education along with rising student numbers, falling per student expenditure and grossly inadequate investment in the quality of education. Severe distortions were observed in inter-sectoral and intra-sectoral allocation of resources, together with widening inter-country and intra-country inequalities in education expenditure. By the early 1980s, strategies of neo-liberal economic reform were unveiled in several developing countries in the form of stabilisation and adjustment policies, associated with the International Monetary Fund and the World Bank. The economic policies of the Bretton Woods institutions are rightly felt by many to be synonymous with privatisation, and privatisation has become the most significant item in the agenda of the World Bank (Richardson and Haralz 1995). The eclipse of Keynesianism in the mid1970s opened the way for the entry of market principles. Until the end of the 1970s or early 1980s, the concept of a free market then current in economics was probably consistent with government dealing with ‘market failure’ and therefore constituted the basis of welfare economics; the 1980s and 1990s reversed the swing of the pendulum. Social democratic values and welfare state dimensions were ousted by the philosophy of the free market, which stressed individual economic values and gains. Individual freedom and choice are preferred to social (or public) choice. In its extreme form of free market philosophy (à la Hayek 1944), ‘social good’ or ‘social welfare’ have no meaning. ­Society – or value to society – becomes coterminous with, and inseparable from, individual gain. Public good and social justice are seen as neither possible nor necessarily desirable. Many countries, particularly developing countries, are moving from a development paradigm predominantly based on Keynesian economics to a ‘neo-liberal’ one. Markets, more clearly the private sector, now hold the centre stage. The philosophy permeated the education sector – particularly the higher education sector, and argued that government should be confined broadly to drawing up a coherent policy framework (e.g., World Bank 1994). The insinuation of market philosophy into education has come as a culture shock not only to people in developing countries, but also to several in Europe, including the United Kingdom (Bottery 1992, p. 83). Privatisation in higher education is pursued as a means of improving efficiency and as an important measure to ease the financial crisis.

Between the state and the market 37

Traditional perceptions and values in higher education Traditionally, higher education creates and diffuses knowledge, and many societies assigned high value to that knowledge for its own sake. Knowledge itself was considered as wealth. Secondly, higher education acted as an instrument of personal development, expanding individual intellectual horizons, interests and potential, empowering individuals and raising their quality of life. Higher education served as an instrument for social integration, socialising individuals into the values of society – social, ethical, cultural and political; conversely societies become more virtuous, civilised, polite and urbane as more people are educated to a higher level (as argued by sociologists such as Durkheim). Lastly, human capital theorists placed emphasis on education’s role in transforming human beings into human capital, into instruments of production and economic growth and thus forwarding the economic well-being of peoples and societies (see, for instance, Theodore Schultz 1961, and Gary Becker 1964). Many institutions of higher education in the contemporary period aimed to serve all these functions, and thus it has long been held that higher education institutions have social functions. Yet they discharge important social, cultural and economic roles too. The provide a public service and thus differ from commercial and business organisations. They produce human capital, and even specialised human capital. Their output is not necessarily tangible. But above all, it was held they were not ‘for-profit’ institutions. With the unveiling of economic reform policies, the role of higher education is being reinterpreted and redefined; market-promoting policies everywhere pose serious challenges to higher education, as new values, policies and practices replace traditional and well-established values, concepts and approaches. Social democratic visions are being replaced by market-driven policies. ‘Marketisation’ has become the buzzword; the role of the government is being ‘reinvented’. Higher education’s traditional functions of production and dissemination of knowledge are under attack, and public subsidy of higher education is increasingly criticised. Equity in higher education is no longer valued. Modern economic policies, or rather the market reforms that aim at making higher education institutions responsive to market forces, do not distinguish between education and any commercial product. Against such a backdrop, this chapter presents an analytical account of some of the prominent trends emerging in higher education. It describes how higher education moves from State to market, and the costs involved therein (see also Tilak 2004).

38  Between the state and the market

State versus market in higher education Education is provided publicly in every nation, and the dominant place of State subsidies is an outstanding feature in most. This very particular condition is shared only by a very limited range of goods and services – national defence, internal security, courts and police. Even where education is not publicly provided, it is heavily subsidised by the State in almost all countries of the world – in developing countries as in the developed. Why has education been given such treatment? There is a powerful and persuasive economic logic for this and a social, political and historical rationale as well.

The role of the state in higher education The case for education as a ‘public good’ Several arguments in the literature justify the role of the State in higher education: education is a public good, and higher education is at the very least a quasi-public good producing a wide variety and huge magnitude of externalities. Consumers of education confer external benefits on those not acquiring education. The social benefits of having a large number of highly educated people go beyond increases in GNP; they cannot be reduced to individual self-interest. By taxing those receiving such benefits and subsidising educational provision, the welfare of both groups, and thereby society as a whole, can be improved. Amongst the externalities are improvements in health, reduction in population growth, in poverty, improvement in income distribution, reduction in crime, rapid adoption of new technologies, strengthening of democracy, strengthening of civil liberties, etc. To this, one may add ‘dynamic’ externalities (Schultz 1988; Romer 1990, 1986; Lucas 1988) and ‘technological’ externalities (Behrman 1990), necessary for technical progress, for economic growth and to halt diminishing marginal returns. Such positive externalities justify the State’s crucial role in education (Nerlove 1972). The ‘externalities’ – ‘uncompensated’ benefits – derived from education are legion. Further, when viewed in terms of democracy, reduction of crime, economic growth, redistribution of resources etc., which are also public goods, clearly education helps in their advancement. Education as a ‘merit good’ A very similar aspect is that of education as a ‘merit good’ (Musgrave 1959), whose consumption needs to be promoted; people may

Between the state and the market 39 be ignorant of the benefits of education. They may not appreciate its value, or may be unable to foresee the implications of their decision to invest or not to invest in education, or indeed may be unwilling to invest at all. Still, governments are expected to be better informed than individuals or families. They should be better able to look into the future and accordingly take judicious decisions on educational investment. The important point is that the individual recipient himself/ herself benefits far more than he/she is aware of. The effect of education on wages may be known, but the likely impact on productivity in general, on family health and nutrition, and on decision making for oneself or for one’s family members about education and employment, are less likely to be grasped, foreseen or understood. Thus to argue that individuals can be represented as economic agents who unfailingly make rational choices, who are infinitely percipient about how to realise their ambitions, who are able to anticipate all the consequences of their acts, who can hit upon the best strategy to serve their chosen ends – to say the least, all this is implausible. Consumer ignorance is a typical instance that necessitates public subsidisation. Equity Thirdly, the State’s provision of higher education is justified on the grounds of underwriting equality of opportunity. Ensuring equality of opportunity in education to all irrespective of social, racial, cultural and economic background is considered an important function of the modern State. It ‘is necessary to provide free education at all levels and also to subsidise students’ living expenses in post-secondary schooling so as to guarantee “equality of educational opportunity” (Blaug and Woodhall 1979, p. 352). Education is an effective instrument of equity. In the absence of State subsidies, only those able to pay would enrol. The concern for equality of opportunity has led to a universal agreement that governments should subsidise education. Imperfections Fourth, many accept another argument in support of State funding of higher education: the presence of imperfections in capital markets. As Arrow (1993) observed, imperfections in capital markets and asymmetric information are also possible justifications for public subsidy of higher education. In several developing countries, markets are ‘incomplete’; credible markets do not exist (see, for instance, Joseph Stiglitz). Education credit markets are also incomplete (Kodde

40  Between the state and the market and Ritzen 1985). Imperfect capital markets inhibit students from borrowing against the uncertain future returns of higher education, and people may prefer not to borrow to invest in education, as the gestation period is often very long. They may not be ready to risk investing in an education whose benefits are not certain. Risk associated with human capital investments may be difficult to spread, and could be very high to society. For the individual the risks of not completing, or the possibility of higher education’s market value falling, are high indeed. Furthermore, and understandably, lenders would be reluctant to accept risk backed only by the uncertain future incomes of reluctant debtors (Arrow 1993); hence the need for State subsidies. Economies of scale Fifth, education is a sector, subject to economies of scale or increasing returns to scale. Average costs of providing education decline as enrolments increase. If a production process is characterised by decreasing average cost condition, it may be more efficient for government to operate that process. Higher levels of education can be particularly prone to this phenomenon. University systems, scientific equipment, libraries etc., cannot be used on a small scale. Hence it may be more efficient for government to provide them (Colclough 1996). Government monopoly over education, including higher education, appears desirable as against allowing many producers into the field.

The role of the state: the case against Of late, several questions have been raised about the rationale of State subsidies in general, about the subsidy of education in particular, and more particularly higher education. The arguments against public subsidy of education are essentially of three kinds: efficiency, equity and pragmatic considerations. Efficiency First, much opposition to public subsidisation, especially of higher education, sprang from estimates of rates of return to education. Social rates of return are found to be consistently lower than private rates of return to education. For this reason, it was recommended that public subsidies could be reduced, and individuals be asked to pay for their education (Psacharopoulos 1994; World Bank 1994).

Between the state and the market 41 Equity Secondly, public subsidy of education has perverse effects on distribution. Subsidising higher education, it was argued, was regressive and would increase income inequalities by transferring resources from the poor to the rich as education (particularly, but not exclusively, higher education) subsidies go more to the rich than to the poor (Psacharopoulos 1977; Jimenez 1987; World Bank 2000, p. 80). A reduction in education subsidies in general is in order so that education subsidies can be directed to the poor only (World Bank 1994). Pragmatic considerations Thirdly, governments in developing countries increasingly face a crisis in resources. Economic reforms adopted in many developing countries, including policies of stabilisation and structural adjustment, demand across-the-board cuts in public expenditure. Education appears to be one sector where State withdrawal is relatively easy. There are also other arguments. Public subsidy is not needed to promote either equity or democracy (Tooley 2000); through heavy State subsidy, educational institutions become vulnerable to government control; giving subsidies (in the form of grants to institutions) is inefficient, since it provides no incentives to allocate resources efficiently; subsides to higher education may not be desirable when basic needs such as primary education and health care are funded inadequately, in other words when public resources are misallocated, etc. Reduction in the role of the State and in State subsidies would not adversely affect the growth of higher education. Cost-recovery measures can be adopted. Since higher education very especially may not be price elastic, the belief is that cost-recovery measures would not lead to any significant fall in enrolments. On the other hand, cost-recovery measures would improve access, lead to improving quality in education by reducing the babysitting role of education and make students more diligent. Finally, given the high private rates of return, people will be willing to pay.

An assessment of the arguments The debate between the two sides, State versus market, also known as liberalism versus neo-liberalism, is intensifying. To what extent are the arguments and counterarguments valid? First, all arguments against the role of the State cannot necessarily be considered as favouring markets in higher education. Second, some arguments against the role

42  Between the state and the market of the State assume the level of efficiency of the State sector as a given; there is no scope for improvement. This is not true. Although one may marshal enough evidence to argue either way, some aspects stand out very clearly in favour of a dominant role of the State in higher education, and these are rarely questioned. There are very few (except for neo-liberals) who do not recognise the externalities of education: West (1965), for whom the externalities are ‘completely unimportant’; and Schultz (1972), who opines that many benefits go only to the student; Newman (1985, p. 24) reckons that a large proportion of the benefits of higher education go to a relatively small group of students. Even opponents of public subsidy to higher education recognise that it produces a huge magnitude of externalities. Friedman for instance (1962, p. 86) implicitly agreed that given the externalities associated with education, it should be publicly financed. Though all the social benefits cannot be identified and measured accurately, still a consensus holds that they are substantial. Other aspects – widely shared – are: its nature as a public good (and in higher education, a quasi-public good), as a merit good and as a social investment in education, its market imperfections and its economies of scale. Many arguments made against public subsidy do not command unqualified support – either from theory or from empirical evidence. As Vaizey (1962, p. 34) concluded, ‘publicly financed education is a legitimate end of public activity, even to extreme exponents of “classical” economic doctrine.’ Weighing the case against Recently, the case against public subsidies in education rests on the premise that governments in developing countries do not have adequate resources at their disposal and that scope for restructuring public budgets (and thereby increasing substantially subsidies to education) is rather limited. Per se, this is not an argument against public subsidy or in favour of markets. Except for quoting figures relating to budget deficits or external indebtedness, plus the corresponding debt service charges born by developing countries, this premise has rarely been examined critically. Arguments are made for restructuring public budgets by withdrawing resources from unproductive sectors and reallocating them to education (e.g., UNDP 1992, 1991). Some research also shows that education expenditures are affected by military expenditures, suggesting a clear trade-off between public expenditures on defence and education. Patterns of public expenditure in developing countries also show that the governments are not so much starved of resources, but rather lack priorities and political will especially in sectors like education.

Between the state and the market 43 That higher education subsidies are regressive is a general argument. It is also stated that subsides to higher education accrue to the betteroff in society, those to primary education to the masses. It is claimed that public subsidy of education produces perverse effects on distribution (Psacharopoulos 1977), a finding subsequently disproved by Ram (1982). In a cross-country analysis, Ram concluded that ‘there is little evidence in favour of the postulate of a significant dis-equalizing effect of public subsidy to higher education. If there is such an effect at all, it appears to be stronger in the DCs than in the LDCs’ (Ram 1982, pp. 45–46). Trostel (1996) further showed that public subsidy of education would even correct distortions in taxation. Hence, subsidising education is efficient. After a careful review of several studies, and after standardising their results, Leslie and Brinkman (1988, p. 118) found that ‘higher education in most cases does contribute to progressivity and moreover that when the analytical methods employed are most advanced, progressivity is found without exception.’ Also widely held is the view that any withdrawal of public subsidies would certainly make the system worse, and more regressive. Markets are cumulatively and inherently un-egalitarian in the distribution of resources in society. As Johnson (1984) demonstrated, taxing the poor to finance higher education, even that of the rich, may be justified because of the externalities associated with higher education (of the rich), which can be relatively rich in a permanent income sense. The poor (or less able) also realise a portion of the gains from the rich (or more able) receiving higher education. Are subsidies regressive? State subsidies need not necessarily be regressive per se. Much depends upon the nature, type and kind of subsidies. For instance, if subsidies expected to be universally available are targeted, or vice versa, they may produce adverse effects. The type of subsidies, e.g., grants to institutions versus grants to students, may also count in this context. The solution to regressive effects of subsidies lies in progressive taxation rather than in eliminating or reducing subsidies. The use of estimated rates of return to education to back arguments against public subsidies has also been found to be improper. First, high levels of private rates of return may not sustain themselves for long, as some countries have experienced; this reduces students’ willingness to pay. Secondly, private rates of return will decline as public subsidies are drastically reduced or eliminated, making investment in education unattractive from an individual point of view. Thirdly, and more

44  Between the state and the market importantly, it is commonly accepted that social rates of return to education are not true social returns. Except for tax benefits, no other social benefits are considered in estimating social rates of return to education. Hence rates of return cannot be used to argue against public subsidies (see Task Force on Higher Education and Society 2000, p. 39), nor on behalf of any sound public policy in education (Majumdar 1983). Properly estimated, social returns could be much higher than earlier estimates and even higher than private rates of return (see McMahon 1999; Weale 1993, 1992). A few also think that education may not qualify as a public good, since the criteria of ‘non-exclusion’ and the ‘free-rider’ do not apply. One’s admission to a school may mean denial to someone else, as the number of places in schools may be restricted (see Eicher and Chevaillier 1993, p. 478). It is important to check the applicability of the criteria of non-exclusion and free-riders not to the consumption of the service (admission in school), but to the receipt of the benefits. After all, people who have not gone to school cannot be excluded from the benefits of having an educated population in the neighbourhood. Lastly, many who argue for increased cost recovery in higher education do not oppose public subsidies per se. However, since there is limited scope for increased public spending, it is argued that additional resources can be mobilised through a variety of measures. Also, public subsidies can increase efficiency (e.g., Arrow 1993); the real issue is for the State to raise resources through tax and non-tax revenues. As Blaug (1983, p. 126) argues, market failures, consumer ignorance, technical economies of scale, externalities in production and consumption, public good and inherent imperfections in capital and insurance markets all inhibit the attainment of Pareto optimality in education investments. In the case of higher education, Blaug agreed that amongst these factors, externalities and imperfections in capital and insurance markets were relevant; hence the sense in government subsidy. Governments subsidise education, not for efficiency alone but also for reasons of equity and for other social and political objectives. Eicher and Chevaillier (1993, p. 480) argue that even if theoretical justification was weak, ‘it would probably be a mistake to curtail sharply public subsidies to education.’ In short, there is not much disagreement over the rationale behind the role of the State and State funding of higher education. As Vaizey (1962, p. 36) remarked, ‘the opposition to a publicly financed system is a political opposition to paying taxes rather than an attitude ineluctably derived from the mainstream of economic reasoning.’

Between the state and the market 45

Current trends towards the marketisation of higher education Despite abundant knowledge of the importance of the State’s role, higher education systems are changing; policies of economic reform, introduced in almost all developing countries during the last quarter century, required a drastic cut in public expenditures across the board, including higher education, and the promotion of markets in higher education. Such policies set the tone for drastic reform in higher education, and on the whole, the latter suffered severely. In many developing countries, public expenditure on higher education declined – both as a relative priority (proportion of GNP or of total government expenditure) and/or in absolute terms in real prices (and sometimes even in nominal prices), in total as well as per student. Cuts were also made in several countries specifically in public expenditure on qualityand equity-related inputs (e.g., research and scholarships). Recovering costs from students (through high- and even full-cost-equivalent fees) has been an important strategy adopted in most countries, along with raising resources from other non-governmental sources including industry through closer links. Along with these and the growing public apathy over higher education, one can note a strong emergence of forces in favour of private higher education. The lack of resources is one oft-cited reason for the growth of private higher education; but an equally important reason is the change in attitudes towards higher education and private higher education, and towards ‘for-profit’ private institutions of higher education in particular. The public and ‘merit good’ nature of higher education is being increasingly discounted. Private higher education is projected as an efficient system, which can improve access and quality as well as equity! Higher education institutions are encouraged implicitly to adopt market-relevant policies; or more explicitly, governments design policies to ease rapid privatisation. Such policies include withdrawing government grants and incentives to better mobilise funding from non-governmental sources (fees and others included); the introduction of ‘marketable’ courses to be ‘sold’ to students in place of long courses of study; and appointing industrialists as heads and/or chairpersons of governing bodies in higher education institutions. Management, including cost-recovery and profit/surplus generation, is the trait sought in such appointees. The march towards marketisation operates through a variety of measures, including financial privatisation

Serves a clear public mission as determined by the State/faculty Publicly owned

Mission/ Purpose

Source: Johnstone (1999)

Mission avowedly both public and private Ownership Public corporation or constitutional entity Sources of Public/taxpayers Mainly public, but Revenue some tuition or costsharing Control by High State control Some control by the Government State Norms of Academic norms, shared Academic norms, Management governance, antibut acceptance of authoritarianism need for effective management

High public (Traditional)

Dimension

Table 2.1  Trends towards private higher education

Almost no control by the State Operated like a business, norms from business management

High degree of autonomy; State control limited to overseeing Limited adherence to academic norms, high management control

Private non-profit; clear public accountability Mainly private, but some public All private, mainly assistance (to needy students) tuition

Mission serves private interests of students, clients and owners Private for profit

Mainly to respond to students’ private interests

High private (Modern)

Between the state and the market 47 in public universities; transfer of ownership of public institutions; establishment of private institutions – private institutions with government support, self-financing private institutions and profit-making private institutions, all focusing on short-term market considerations and immediate market relevance. The burgeoning private institutions are increasingly institutions without government recognition; universities mutate into ‘entrepreneurial universities’. Autonomy from government has become a buzzword. As Johnstone (1999) suggested, progress towards ‘high privateness’ in higher education (shown in Table 2.1) is very rapid.

The varying degrees of privatisation Varying degrees of privatisation are emerging in higher education (Tilak 1991). First, an ‘extreme’ version of privatisation involves the total privatisation of higher education, with colleges and universities managed and funded by the private sector with little government intervention. Second is a ‘strong’ degree of privatisation that entails full recovery of the costs of public higher education from users – students, their employers or both. This is a moderate form of privatisation, implying public provision of higher education but with a reasonable level of financial participation from non-governmental sources. Last is what may be termed ‘pseudo-privatisation’ – higher education institutions are privately managed but governmentassisted. Originally created by private bodies, they receive nearly the whole of their expenditure from governments. In many developing countries all forms of privatisation appear to take place rapidly, without any coherent perspective and plan, thus creating different kinds of problems. In many developing countries in transition, the emerging trends and changing public policies in higher education can be summarised in tabular form. The trends are indicative rather than exhaustive, and the two broad categories include changes already in place in some countries, slowly taking place in others, and in yet other cases taking place very fast (see Table 2.2). However neither of the two systems or approaches is final in any sense. In short, the emerging higher education system can be represented as the transformation of academic institutions into ‘entrepreneurial universities’ and ‘commercial institutions’, whose single most important objective seems to be the mobilisation of more and more resources (Raines and Leathers 2003).

48  Between the state and the market Table 2.2  Emerging trends in policy, planning and financing of higher education Conventional system

Emerging system

Welfare approach Public higher education Public financing Private: State-financed institutions Private: government-recognised institutions Private: degree-awarding institutions

Market approach Mixed and private higher education Private financing Private: self-financing institutions Private institutions requiring no government recognition Private: non-degree (diploma/ certificate) awarding institutions Private: commercial motives, profit motives Introduction of fees High levels of fees Introduction of student loan programmes Effective/commercially viable loan programmes: security/mortgage; Expected high recovery rates based more on commercial considerations Self-financing/commercially viable/ profitable disciplines of study Open/distance/part-time education

Private: philanthropy and educational considerations No fees Low levels of fees No student loans Commercially ineffective loan programmes – no security. High default rates, but based on criteria of educational qualifications and economic need Scholarly/academic disciplines of study Emphasis on formal/full-time education Selection criteria for heads of institutions: academic background

Selection criteria for heads of institutions: expertise in financial/ money management and in resource generation

Source: Tilak (1999)

Portrait of private higher education The emerging private – moderately or highly private or predominantly private – systems of higher education pose serious problems in terms of access, quality and equity. Earlier reviews (see Tilak 1991) have exploded several myths of the superiority of private higher education. For example, the claim to higher quality of private compared to public higher education is exaggerated. Graduates from private universities do not necessarily receive higher rewards in the labour market, lower unemployment rates, better-paid jobs and consequently higher earnings. Rather, the external efficiency of private higher education is no higher than that of public higher education. Nor do private institutions necessarily provide governments with any sizeable relief from

Between the state and the market 49 financial burdens. The private sector does not respond correctly to the economic needs of the individual and society; if it does so at all, it responds to short-term needs of the market. Very rarely do private firms have genuine philanthropic motives in opening private universities, and in general such institutions tend to become profit-making establishments; they create inequalities in education and in society, and are not necessarily apolitical. Developing countries require a rapid growth in higher education of good quality for their very survival in the highly competitive, globalised world. Some (Tilak 2003) argue that a threshold level of gross enrolment ratio in higher education is about 20 per cent. Only those countries with such a ratio could become economically advanced, and vice versa. Furthermore, only those societies that have developed their public systems of higher education can progress economically. Those countries that have expanded their higher education systems by relying on the private sector, or on what can be called ‘predominantly private’ higher education systems, cannot progress much. Most of the countries in South America have reached a gross enrolment ratio in higher education of 20 per cent and above, yet they remain developing countries (see García Guadilla 2006). The problem is essentially that the interests of market forces (private universities) and those of State universities are different, as Table 2.3 shows. The former may even conflict with national interests. The conflicting interests of State and markets in education are so serious that any attempt to forge a partnership between the two may be counterproductive. Some economists advocate a middle path – State-market or public-private partnerships in higher education.

Table 2.3  Conflicting interests of the State and markets in higher education State

Market

Motivation Main Concern Area of Interest Duration of Interest Team Effort Research

Service Knowledge Generic Long-term Rarely Publish/public good

Time Schedule Nature of Universities

Flexible Diversity

Profit Skills Specific Short-term Always Strict confidential/private good Rigid Uniformity

Source: Author

50  Between the state and the market This, described as ‘welfare pluralism’ (Mishra 1996), represents a middle ground, a centrist position balancing between the public and the private, the State and non-State sectors. It rests on the following premises: (a) that the limitations and limits of State-owned welfare – fiscal and administrative – are clearly recognized; (b) that the State cannot and should not be the monopoly or near-monopoly provider of social welfare; (c) that non-State providers can and should play a bigger part in the supply, and especially the delivery, of services; and (d) that the migration from a State-centred welfare towards ‘welfare pluralism’ could result in greater inequality in the distribution of social benefits, but that this is unavoidable. (Mishra 1996, pp. 229–230) But such a middle path is not really a middle path, as the power of market forces is tremendous and once unleashed the latter are not easily regulated. In effect, the middle path eventually converges with the total market system, reminiscent of the old story of the camel’s nose under the Arab’s tent flap!

Summary and concluding observations In almost all countries of the world, education is a State function. Higher education, including higher technical and professional education, is heavily subsidised by the State both in economies where development policies tilt explicitly in favour of welfare and equity, and also in developed, market economies. Traditionally the role of the State has been justified by the recognition that education produces externalities, as a public good (a quasi-public good in the case of higher education), as a merit good, as a social investment for human development and as a major instrument of equity, besides being a measure of quality of life in itself. Markets cannot ensure an optimum supply of education. Left to individuals or market mechanisms, social investment would be below optimum or socially desirable levels. Even when markets work well and students enjoy a service of quality, private institutions may yet fail to serve the public interest (Task Force on Higher Education and Society 2000, p. 28). In the wake of current market reforms, questions are being raised about the role of the State and about the rationale for public subsidies. It is also being argued that to reduce, if not totally eliminate, public subsidies in higher education is both desirable and feasible.

Between the state and the market 51 In this chapter the author has presented a succinct review of some of the arguments in favour of the State. He has restated how important it is for the State to continue to play a critical role in higher education. Any significant reduction in the role of the State in higher education is neither feasible, nor desirable even if feasible. To conclude, given the critical role the State has played in higher education in developing countries, and still plays in advanced countries, today higher education is elitist no more. It has ‘democratised’ somewhat, with a large proportion of less well-off socio-economic groups participating. In countries like India, higher education has supported self-reliance in the manpower needs of the economy (see Badat 2006). Secondly, higher education is rightly and increasingly viewed as an effective instrument (if not the only instrument) of socio-economic mobility for the more fragile groups in society. Thirdly, it is also widely recognised that higher education is an important factor of economic growth and that education makes the basic difference between developed and developing countries. All this, viewed in the broad context of relatively low standards of living for ordinary people and imperfect and incomplete markets, makes it imperative that the State plays a dominant role in the provision of higher education, and that it yields no place to market mechanisms.

Note * This chapter originally appeared as ‘Higher Education Between the State and the Market’, in G. Neave (Ed.), Knowledge, Power and Dissent: Critical Perspectives on Higher Education and Research in Knowledge Society, pp. 235–254 (Paris: UNESCO Publishing, 2006). Reproduced with permission.

References Arrow, K. J. (1993). Excellence and Equity in Higher Education. Education Economics, 11, 5–12. Badat, S. (2006). From Innocence to Critical Reflexivity: Critical Researchers, Research and Writing, and Higher Education Policy-Making. In G. Neave (Ed.), Knowledge, Power and Dissent: Critical Perspectives on Higher Education and Research in Knowledge Society (pp. 89–116). Paris: UNESCO Publishing. Becker, G. S. (1964). Human Capital. New York: Columbia University Press. Behrman, J. R. (1990). Human Resource Led Development. New Delhi: International Labour Organisation. Blaug, M. (1983). Declining Subsidies to Higher Education: An Economic Analysis. In H. Giersch (Ed.), Reassessing the Role of Government in the Mixed Economy (pp. 125–135). Kiel: Institut fur Weltwirtschaft (reprinted

52  Between the state and the market in M. Blaug (Ed.). (1987). The Economics of Education and the Education of an Economist (pp. 227–243). Aldershot: Edward Elgar. Blaug, M., and Woodhall, M. (1979). Patterns of Subsidies to Higher Education in Europe. Higher Education, 7 (November Supplement), 331–361. Bottery, M. (1992). The Ethics of Educational Management. London: Cassell. Colclough, C. (1996). Education and the Market: Which Parts of the Neoliberal Solution Are Correct? World Development, 24(4), 589–610. Eicher, J.-C., and Chevaillier, T. (1993). Rethinking the Finance of PostCompulsory Education. International Journal of Educational Research, 19(5), 445–519. Friedman, M. (1962). Capitalism and Freedom. Chicago: University of Chicago Press. Guadilla, C. G. (2006). Access to Higher Education: Between Global Market and International and Regional Cooperation. In G. Neave (Ed.), Knowledge, Power and Dissent: Critical Perspectives on Higher Education and Research in Knowledge Society (pp. 181–202). Paris: UNESCO Publishing. Hayek, F. A. (1944; reprinted 1962). The Road to Serfdom. London: Routledge & Kegan Paul. Jimenez, E. (1987). Pricing Policy in the Social Sectors: Cost Recovery for Education and Health in Developing Countries. Baltimore, MD: Johns Hopkins University Press. Johnson, G. E. (1984). Subsidies for Higher Education. Journal of Labour Economics, 2(3), 303–318. Johnstone, B. (1999). Privatization in and of Higher Education in the US. Buffalo Education, 1–3. Kodde, D. A., and Ritzen, J.M.M. (1985). The Demand for Education Under Capital Market Imperfections. European Economic Review, 28, 347–362. Leslie, L. L., and Brinkman, P. T. (1988). The Economic Value of Higher Education. New York: American Council of Education. Lucas, R. E. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1), 3–42. Majumdar, T. (1983). Investment in Education and Social Choice. Cambridge: Cambridge University Press. McMahon, W. W. (1999). Education and Development: Measuring the Social Benefits. New York: Oxford University Press. Mishan, E. J. (1969). Some Heretical Thoughts on University Reform. Encounter, March 1969. As cited in Dandekar, V. M. (1991). Reform of Higher Education. Economic and Political Weekly, 26, 2631–2637. Mishra, R. (1996). The Welfare of Nations. In R. Boyer and D. Drache (Eds.), States Against Markets: The Limits of Globalization (pp. 316–333). London and New York: Routledge. Musgrave, R. A. (1959). Theory of Public Finance. New York: McGraw Hill. Nerlove, M. (1972). On Tuition and Costs of Higher Education: Prolegomena to a Conceptual Framework. Journal of Political Economy, 80, 178–218. Newman, F. (1985). Higher Education and the American Resurgence. Princeton, NJ: Carnegie Foundation for the Advancement of Teaching.

Between the state and the market 53 Psacharopoulos, G. (1977). The Perverse Effects of Public Subsidization of Education or How Equitable Is Free Education? Comparative Education Review, 21, 69–90. Psacharopoulos, G. (1994). Returns to Investment in Education: A Global Update. World Development, 22(9), 1325–1343. Raines, J. P., and Leathers, C. G. (2003). The Economic Institutions of Higher Education: Economic Theories of University Behaviour. Cheltenham: Edward Elgar. Ram, R. (1982). Public Subsidization of Schooling and Inequality of Educational Access. Comparative Education Review, 26(1), 36–47. Richardson, R. W., and Haralz, J. H. (1995). Moving to the Market: The World Bank in Transition. Washington, DC: Overseas Development Council. Romer, P. M. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy, 94(5), 1002–1036. Romer, P. M. (1990). Endogenous Technological Change. Journal of Political Economy, 98 (Supplement), 71–102. Schultz, T. W. (1961). Investment in Human Capital. American Economic Review, 51(1), 1–15. Schultz, T. W. (1972). Optimal Investment in College Instruction: Equity and Efficiency. Journal of Political Economy, 80, 2–30. Schultz, T. W. (1988). On Investing in Specialized Human Capital to Attain Increasing Returns. In G. Ranis and T. P. Schultz (Eds.), The State of Development Economics: Progress and Perspectives (pp. 339–352). Oxford: Basil Blackwell. Task Force on Higher Education and Society. (2000). Higher Education in Developing Countries: Peril and Promise. Washington, DC: The World Bank. Tilak, J.B.G. (1991). Privatization of Higher Education. Prospects: Quarterly Review of Education (UNESCO), 21(2), 227–239. Tilak, J.B.G. (1999). Emerging Trends and Evolving Public Policies on Privatization of Higher Education in India. In P. G. Altbach (Ed.), Private Prometheus: Private Higher Education and Development in the 21st Century (pp. 113–135). Westport, CT: Greenwood Publishing. Tilak, J.B.G. (2003). Higher Education and Development. In J. P. Kleeves and R. Watanabe (Eds.), Handbook on Educational Research in the Asia-Pacific Region (pp. 809–826). Dordrecht, The Netherlands: Kluwer Academic Publishers. Tilak, J.B.G. (2004). Public Subsides in the Education Sector in India. Economic and Political Weekly, 39(4), 343–359. Tooley, J. (2000). Reclaiming Education. London: Cassell. Trostel, P. A. (1996). Should Education Be Subsidized? Public Finance Quarterly, 24(1), 3–24. UNDP. (1991). Human Development Report. New York: Oxford University Press. UNDP. (1992). Human Development Report. New York: Oxford University Press. Vaizey, J. (1962). The Economics of Education. London: Faber and Faber.

54  Between the state and the market Weale, M. (1992). Externalities From Education. In F. Hahn (Ed.), The Market: Practice and Policy (pp. 112–135). Basingstoke, UK: Macmillan (reprinted in Cohn, E., and Johnes, G. (Eds.). (1994). Recent Developments in the Economics of Education (pp. 115–138). Aldershot: Edward Elgar.) Weale, M. (1993). A Critical Evaluation of Rate of Return Analysis. Economic Journal, 103(418), 729–737. West, E. G. (1965). Education and the State: A State of Political Economy. London: Institute of Economic Affairs. World Bank. (1994). Higher Education: The Lessons of Experience. Washington, DC: The World Bank. World Bank. (1995). Priorities and Strategies for Education: A World Bank Review. Washington, DC: The World Bank. World Bank. (2000). World Development Report 2000/2001: Attacking Poverty. Washington, DC: The World Bank.

3 Are we marching towards laissez-faireism in higher education development?*

There is a place for the market, but the market must be kept in its place. —Arthur Okun (1975, p. 19)

Global policy context in higher education For a long time, higher education policies in many developing countries have been based on several questionable premises, such as: • • • •

Higher education has over-expanded in developing regions; Higher education has expanded at the cost of primary education; Higher education is heavily subsidised by the State; and Developing countries do not require higher education.

Policy prescriptions, particularly from the World Bank, have argued against the expansion of higher education, and for the exclusive focus on primary education. The unquestionable acceptance of this has led to the overall neglect of higher education. Many developing countries have shown apathy towards higher education, deliberately ignored it, reduced public investments in it, allowed laissez-faireism and even adopted policies towards marketisation of higher education. Market forces have become very active, but since the markets in developing countries are incomplete, and imperfect, the outcomes are also far from perfect, and in fact, in some cases, the market forces produced disastrous consequences. In this context, some of the developments in the arena of higher education policies are worth noting. The chronological developments of the recent period, some of which are briefly listed in Table 3.1 narrate a story of a steady drift in the development of higher education. The 1986 World Bank policy paper, which clearly recommended reallocation of

56  Laissez-faireism in higher education public resources in favour of primary education and against higher education, has had a tremendous effect on educational policies in developing countries. Second, a major positive outcome of the 1990 Jomtien Conference on Education for All was that basic education received serious attention of the national governments and the international community; but at the same time this produced an undesirable effect on other levels of education. It was widely felt that basic education goals could be reached only if the public attention was diverted rather completely away from secondary and more particularly higher education. Thirdly, the 1994 World Bank paper, Higher Education: The Lessons of Experience, reiterated the same much more eloquently. A few major developments followed, however, that did not influence much the public policies in higher education in developing countries. One was the international conference on higher education that was organised by UNESCO in 1998, after realising that in the context of global EFA activities, higher education was getting neglected. The second one was a report prepared by the Task Force on Higher Education and Society (2000), whose members include, inter alia, staff members of both World Bank and UNESCO. Both the international conference and the task force have highlighted the need to pay serious attention to higher education. In addition, the World Bank’s (2002) strategy paper on tertiary education argued in a sense a serious u-turn in the policies of the World Bank and of the governments that discouraged growth of higher education in developing countries. But they attracted little attention of the governments, which are engulfed in a ‘continuing education crisis’ and governments in developing countries continue to show apathy towards higher education, which is reflected in public sector disinvestment in higher education, and corresponding growth in private higher education. Either higher education was ignored in the policy planning exercises of the governments and of the international organisations or special measures were initiated to reduce the intensity of public efforts in higher education, or both. Many policy and plan documents, and public discourses on education policy, tend to pay at best, some lip service to higher education and to focus on preparation of plans for literacy and primary education. If, at all, the growing demand for higher education is recognised, it is assumed by the governments that such a demand can be met either by distance education programmes or by private sector, neither of which require governments to invest any substantial resources. Further, the economic reform policies that include stabilisation and structural adjustment, introduced in almost all developing countries

Laissez-faireism in higher education 57 Table 3.1 A chronology of some important events in higher education development in the recent period 1986 1990 1994 1998 2000 2002

World Bank Paper on Financing Education in Developing Countries World Conference on EFA at Jomtien World Bank Paper on Higher Education UNESCO Conference on Higher Education Task Force Report on Higher Education and Society (UNESCOWorld Bank) World Bank Report on Knowledge Societies

Source: Author

during the last quarter century, required a drastic cut in public expenditures across the board, including higher education. In fact, these policies set the tone for drastic reforms in higher education; and on the whole, higher education suffered severely (Tilak 2002). Public expenditure on higher education declined – in terms of relative priorities (proportion of GNP or of total government expenditure that is allocated to higher education), and/or in public expenditure on higher education in absolute terms in real prices (and sometimes even in nominal prices) – total as well as per student. Noticeable cuts could also be noted in several countries specifically in public expenditure on quality- and equity-related inputs in higher education (e.g., research and scholarships). Recovery of costs of higher education from the students (in the form of high and even full-cost-equivalent fees) has been an important strategy adopted in most countries, along with raising of resources from other non-governmental sources including industry, by forging close university–industry links. As a result of all this, developing countries continue to lag behind the advanced countries in development of higher education systems. Gross enrolment ratios in higher education in many developing countries continue to be low (see Table 3.2). In sub-Saharan Africa, for example, on average, hardly 4 per cent of the relevant age group youth are enrolled in higher education. In many low-income countries the ratio is less than 10 per cent, while in many high-income countries more than three-fourths, and on average more than 60 per cent, of the relevant age-group youth population goes to higher education. Along with a significant increase in public apathy for higher education, one can note a reemergence of forces in favour of private higher education. The lack of resources is one oft-cited reason for the growth of private higher education. But an equally important reason is the change in attitudes towards higher education, and towards

58  Laissez-faireism in higher education Table 3.2  Gross enrolment ratio in tertiary education (%), 1980–2000 1980 2000 High-Income Countries Low-Income countries Middle-Income Countries Lower Upper Low- & Middle-Income Countries

35 6 10 9 15 8

62 8 17 15 26 14

East Asia & Pacific Europe & Central Asia Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa

3 31 14 11 5 1

9 44 21 22 10 4

Source: World Development Indictors 2003 (World Bank)

private higher education, and towards ‘for-profit’ private institutions of higher education, in particular. The public and merit good nature of higher education is being increasingly discounted. Private higher education is projected as an efficient system that can improve access and quality as well as equity! The march towards privatisation of higher education is taking place through a variety of measures: financial privatisation of public universities, transfer of ownership of public institutions and establishment of private institutions – private institutions with government support, self-financing private institutions (with no government support) and profit-making private institutions. They also consist more of institutions without government recognition. As Johnstone (1999) described, the march towards ‘high privateness’ in higher education (shown in Table 3.3) is steady and even fast. The purpose of the universities, their ownership, sources of revenue, norms of management and the role of the government in university development have been changing very fast. The changes are not confined to newly established institutions, but even the universities established several decades ago, if not centuries ago, are affected by these changes. The role of higher education is reinterpreted and redefined. Traditionally higher education is viewed as one that creates and diffuses knowledge. Rather expansion of frontiers of knowledge was regarded as the most important function of higher education. Secondly, higher education was viewed as an instrument of personal development of

Serves as a clear public mission as determined by the State/ faculty Publicly owned

Mission/ Purpose

High State control

Academic norms, shared governance, antiauthoritarianism

Control by Government

Norms of Management

Source: Johnstone (1999)

Public/tax payers

Sources of Revenue

Ownership

High public (Traditional)

Dimension

Table 3.3  Trends towards private higher education

Academic norms, but acceptance of need for effective management

Some control by the State

Mission avowedly both public and private Public corporation or constitutional entity Mainly public, but some tuition or cost-sharing

Mainly to respond to students’ private interests Private non-protit; clear public accountability Mainly private, but some public assistance (to needy students) High degree of autonomy; State control limited to overseeing Limited adherence to academic norms, high management control

Operated like business, norms from business management

Almost no control by the State

All private, mainly tuition

Mission serves private interests of students, clients and owners Private for-profit

High private (Modern)



60  Laissez-faireism in higher education individuals, expanding intellectual horizons of the individuals, their interests and potential, and empowering the individuals to have a better quality of life, as contemporary sociologists and psychologists argue. Thirdly, higher education was viewed as an instrument of social engineering, socialising individuals to the values of the society – social, ethical, cultural and political, so that societies become more virtuous with more and more higher educated people (a la sociologists like Durkheim). Lastly, the human capital theorists placed emphasis on the role of education in transformation of human beings into human capital, an Table 3.4 Emerging trends in policy, planning and financing of higher education in developing countries Conventional system

Emerging system

Welfare approach Public higher education Public financing Private: State-financed institutions Private: government-recognised institutions Private: degree-awarding institutions Private: philanthropy and educational considerations No fees Low levels of fees No student loans

Market approach Mixed and private higher education Private. financing Private: self financing institutions Private institutions requiring no government recognition Private: non-degree (diploma/ certificate) awarding institutions Private: commercial motives; profit motives Introduction of fees High levels of fees Introduction of student loan programmes Effective/commercially viable loan programmes: security/mortgage; Expected high recovery rates based more on commercial considerations

Commercially ineffective loan programmes – no security. High default rates, but based on criteria of educational qualifications and economic needs Scholarly/academic disciplines of study Emphasis on formal/full-time education Selection criteria for heads of institutions: academic background Academic institutions Source: Tilak (1999)

Self-financing/commercially viable/ profitable disciplines of study Open/distance/part-time education Selection criteria for heads of institutions: expertise in financial/ money management and in resource generation Entrepreneurial universities and commercial institutions

31.3

1.5

4.7 6.2 72.7 76.8 35.7

9.8

Source: Education at a Glance OECD Indicators, OECD 2002, p. 233

Note: ICED5A includes long-term regular degree programmes

5.4 6.1

68.7 1.0 11.4

13.0 4.6

10.3 0.8 Non-OECD Countries Israel 12.8 Russian Federation 90.3 Uruguay 88.4 Thailand 88.3 Argentina 85.2 Jamaica 81.4 Malaysia 77.0 Jordan 69.2 Peru 62.3 Chile 33.0 Brazil 36.9 Indonesia 31.4 Philippines 26.9

69.0 72.2 95.7

Mexico Poland Turkey

100.0 95.8 38.7 100.0 100.0 100.0 89.7 89.4 100.0 100.0 87.0 95.4 95.3 93.8 27.3 23.2 64.3 100.0 31.3 99.0 88.6 100.0 94.6 92.4 100.0 68.7

4.2 61.3

Public

Australia Austria Belgium Canada Czech Denmark Finland France Germany Greece Hungary Iceland Ireland Italy Japan Korea Portugal Luxemburg Netherlands New Zealand Norway Slovak Republic Sweden Switzerland UK USA

Independent private Developing OECD Countries

Governmentsupported private

Income OECD Countries

Public

Table 3.5  Distribution of enrolments in tertiary education (ICED5A), 2000

23.0

79.6

Governmentsupported private

7.9 9.7 11.6 11.7 14.8 18.6 23.0 30.8 37.7 43.7 63.1 68.6 73.1

31.0 27.8 4.3

Independent private

62  Laissez-faireism in higher education instrument of production and economic growth and thereby economic well-being of the people and societies (a la Theodore Schultz and Gary Becker). Many institutions of higher education in the contemporary period aimed at serving all these functions. Now, with privatisation, particularly with the rapid pace of privatisation characterised by profit motive, all these functions are getting replaced by financial motives, such as financial efficiency, measured in terms of revenue generation. In short, the emerging higher education system can be summed up as a transformation of academic institutions into ‘entrepreneurial universities’ and ‘commercial institutions’, whose single most important objective seems to be mobilisation of more and more resources (Raines and Leathers 2003; Bok 2003). Today it is quite interesting to note that higher education systems in developing countries are, in a sense, more privatised than in developed countries, as can be noted from the available data presented in Table 3.5. A disproportionately larger proportion of students are enrolled in private universities in the Philippines, Indonesia, Brazil, Chile, Peru and Jordan, to quote a few, than in say, most advanced countries. The only exceptions among the advanced countries are Japan and South Korea. In fact, in many advanced countries more than 80 per cent of the students are enrolled in public institutions, and in some countries the corresponding proportion is more than 90 per cent, and in a few cases more than 95 per cent. Even in the United States, nearly 70 per cent of the students in higher education are in public institutions.

Faulty assumptions in higher education Why apathy for higher education? Why is the government unwilling to give priority to higher education? Governments’ apathy is based on certain faulty assumptions on higher education. The most important assumption that was widely held for a long time was that higher education is not important for economic growth and development. Estimates of rates of return are used in this context. But the limitations of rates of return are now widely known. Moreover, though the rate of return to higher education is less than that to primary education, it should nevertheless be noted that higher education does yield an attractive rate of return to the society (above 10 per cent) and to the individual as well (19 per cent), as shown in Table 3.6. Further, the importance of higher education for economic growth is also clearly demonstrated by the experience of many developing and developed countries. Higher education can be expected to have

Laissez-faireism in higher education 63 Table 3.6  Returns to higher education (%)

Asia* Europe/Middle East/North Africa* Latin America/Caribbean OECD Sub-Saharan Africa World average

Social

Private

11.0 9.9 12.3 8.5 11.3 10.3

18.2 18.8 19.5 11.6 27.8 19.0

Note: *Non-OECD Source: Psacharopoulos and Patrinos (2002)

Table 3.7 Regression estimates of higher education on economic development in Asia Dependent variable: ln GDP/pc Intercept Coefficient R-square Adjusted t-value Equation Higher R-square no. education variable 1

GER

3.3904

2

HEA

3.3943

0.0162 (4.005) 0.0195 (3.917)

Degrees of freedom

0.2628

0.2464

16.038 46

0.3911

0.3469

15.343 28

Note: Figures in parentheses are t-values. All coefficients are statistically significant at 99 per cent level of confidence. Notation: GDP/pc: Gross Domestic Product per capita (PPP 1999); GER: Gross Enrolment Ratio (per cent) around 1990; HEA: Higher Education Attainment (proportion of population with higher education) (latest: 1990s)

a positive effect on the level of economic growth. In the production functions, if time lag is also allowed, the results have been more meaningful. For example, regression equations on the data on 49 countries of the Asia-Pacific region show, despite the limitations such exercises carry, such as that they exhibit more of correlation than causal relationship, that the gross enrolment ratio in higher education or higher education attainment of the population (per cent of adult population with higher education) have significant effects on GDP per capita (Table 3.7). Further, in the rapidly technologically changing world, technology makes a significant difference to the economic growth of the nations.

64  Laissez-faireism in higher education The level of achievement in technology critically depends upon the level of higher education in a given economy. After all, it is higher education and research that help in developing new technology; and it is higher education and research that contributes to innovations and in their diffusion. So one can expect a very strong effect of higher education on the development of technology in any society. In fact, the level of achievement in technology may be a close indicator of economic growth itself. Most countries with high enrolment ratios in higher education became ‘leaders’ in technology, as measured by the technology achievement index1 with high levels of achievement in technology. The converse is also true: a large number of countries with low enrolment ratios (say less than 10 per cent) are ‘marginalised’ in the area of technology. Those with medium level of enrolment ratios, nearly 20 per cent, like Singapore and Hong Kong in Asia have indeed become ‘potential leaders’ in technology. The simple regression equations on Asian countries estimated in Table 3.8 and the trend line shown in Figure 3.1 do show a very strong and statistically significant effect of higher education on the level of achievement of technology. In sum, only those countries that have developed their higher education systems in terms of quantity, quality and excellence could achieve economic miracles, and not the others. Among the advanced countries there is no single country where higher education was not well expanded. In most developed countries higher education is fairly democratised, and is accessible to all. In fact, there are significant Table 3.8 Regression estimates of higher education on achievement of technology in Asia Dependent variable: In Technology Achievement Index (TAI) Intercept Coefficient R-square Adjusted F-value Equation Higher R-square no. education variable

Degrees of freedom

1

GER

2

HEA

–0.7405 0.0143 0.570 (4.749) –0.6535 0.0152 0.400 (3.055)

0.545

22.552

17

0.357

9.335

15

Note: Figures in parentheses are t-values GER: Gross Enrolment Ratio (per cent); HEA: Higher Education Attainment (proportion of population with higher education) Source: Tilak (2003)

Laissez-faireism in higher education 65 (with a logarithmic trendline) Technology Achievement Index

0.8

0.4

0.0

0

20

40

Gross Enrolment Ratio

Figure 3.1 Gross enrolment ratio in higher education and achievement in technology

trends towards massification of the base of higher education. The gross enrolment ratio in higher education in advanced countries varies between 20 per cent and as high as 90 per cent. In contrast, in most of the developing countries, it is restricted to a small fraction of youth. No country could be found in the group of high-income countries with an enrolment ratio of less than 20 per cent. Thus 20 per cent enrolment ratio in higher education seems to be the critical threshold level for a country to become economically advanced. The second important assumption that was also widely held was that developing countries couldn’t fulfil their goals with respect to primary education unless higher education is neglected. This assumption juxtaposes one level of education against another, and leads to a fragmented look at education sector. First, such an approach obviously ignored the interdependence of various levels of education: primary education provides inputs into secondary and higher education, in turn, provides teachers, administrators and others for school education. Secondly, it also ignores the fact that growth in primary education would contribute to rapid rise in demand for secondary and higher education and the corresponding need for expansion of secondary and higher education. Further, the governments seem to be sharing the widely held belief that development of primary education, at best elementary education, is enough for development; or that is the maximum that can be afforded by the developing countries. International

66  Laissez-faireism in higher education experience clearly shows that this cannot be true. Primary education is necessary for not only education development, but also social and economic development. At the same time the experience also demonstrates that primary education is not sufficient for economic growth and a sustainable development. Societies that have concentrated rather exclusively on primary education and ignored secondary and higher education could not achieve high levels of economic growth. In short, it is not adequate for fast economic growth to exclusively concentrate on primary education. In the context of globalisation and international competition, higher education also becomes critically important. Higher education cannot wait until primary and secondary education is completely universal or well expanded. The traditional sequencing of first primary education, then secondary education and then only higher education may not work anymore in the rapidly changing global system. The third important faulty assumption is: if higher education is important, this can as well be provided by the private sector and that State need not necessarily provide it; and that State can withdraw from higher education and save its resources and private sector can fill the gap in the development of higher education. But private sector rarely provides good quality education on a large scale in any country. Exceptions are very few and those are such institutions established with a motive of philanthropy, a phenomenon which is disappearing rapidly. After all, private sector, by definition and nature, is associated with profit, self-interests, and short-term considerations. Wherever private sector expanded, it created more problems than it solved in the spheres of quality and equity (Tilak 1991). Basically, it is not enough if higher education is expanded by any means, say through privatisation. Societies, e.g., Latin American countries and the Philippines in South-East Asia, that are having higher education systems which are predominantly private could not progress much – economically, socially, politically or even educationally. The exceptions are very few, e.g., Korea and Japan. It is only those societies where public higher education systems expanded well, such as those in Europe and North America, that high levels of development could be reached.

Summary and concluding observations Higher education is an important form of investment in human capital development. In fact, it can be regarded as a high level or a specialised form of human capital, contribution of which to economic growth is very significant. It is rightly regarded as the ‘engine of development in

Laissez-faireism in higher education 67 the new world economy’ (Castells 1994, p. 14). The contribution of higher education to development can be varied: it helps in the rapid industrialisation of the economy by providing manpower with professional, technical and managerial skills. In the present context of transformation of nations into knowledge economies and knowledge societies, higher education provides not just educated workers but also knowledge workers to the growth of the economy. It creates attitudes, and makes possible attitudinal changes necessary for the socialisation of the individuals and the modernisation and overall transformation of the societies. Most importantly, higher education helps, through teaching and research, in the creation, absorption and dissemination of knowledge. Public higher education also helps in the formation of a strong nation-state and at the same time helps in globalisation. Lastly, higher education allows people to enjoy an enhanced ‘life of mind’ offering the wider society both cultural and political benefits (TFHES 2000, p. 37). But a look at the current scene in higher education reveals that higher education systems in many developing countries are characterised with a crisis, rather a continuing crisis, with overcrowding, inadequate staffing, deteriorating standards and quality, poor physical facilities, insufficient equipment and declining public budgets. More importantly, higher education is subject to neglect and discrimination in public policy. Coherent long-term policies for the development of higher education for development of nations are indeed missing. National governments and international organisations have to clearly recognise the critical importance of higher education in development. It is important to note that no nation that has not expanded reasonably well its higher education system could achieve a high level of economic development. International evidence shows that all advanced countries are those that have a gross enrolment ratio of above 20 per cent. The world experience with the policies of globalisation and structural adjustment is also rich (Tilak 1997). Comparing the experiences of several countries, one may conclude that these policies succeeded only in those countries that have invested heavily in education, including specifically higher education. The converse is also true. These policies could not yield good results in those countries that have made low and inadequate levels of investment in higher education, reflected in low levels of educational levels of workforce, as in countries in South Asia, South-East Asia and many countries in sub-Saharan Africa. After all, globalisation, including international competition, to be successful, requires highly skilled manpower, produced by higher education systems.

68  Laissez-faireism in higher education But for a couple of exceptions (e.g., Korea and Japan), large-scale cross-country evidence shows that higher education systems which are predominantly private may not produce significant economic pay-offs, and certainly will not be able to contribute to the transformation of the developing economies into developed/advanced economies. The example of the Philippines in Asia, and, in general, the Latin American countries collaborate to this. The role of the state is very important in providing and financing education everywhere. Excessive reliance of the governments on private sector for the development of higher education may lead to strengthening of class inequalities and even produce new inequalities, besides adding to the problems of quality. Of all, the absence of a clear coherent long-term policy perspective on higher education in developing countries is the hallmark of the present higher education. As a result, either ad hocism continues to prevail, or in the absence of even ad hoc policies chaos is created by the several actors of higher education – government, institutions of higher education, and most importantly the private sector. Market forces have become very active; but since the markets in developing countries are ‘incomplete’ and ‘imperfect’, the outcomes are also far from perfect, and in fact, in some areas, are disastrous. In sum, the recent trends indicate a growing public apathy for higher education, followed by reduction in public expenditures on higher education. Along with all these, absence of any policy on development of higher education, that is helping erratic and unregulated growth of private higher education, may lead us to argue that we are rapidly marching towards laissez-faireism in higher education in developing countries. The doctrine of laissez-faireism, which means minimum State intervention and allowing of activities to take their own natural course, was described by Thomas Carlyle as ‘anarchy plus the constable’. Since the constable is weak, we have only anarchy in the higher education scene in developing countries.

Notes *  This chapter originally appeared as ‘Are We Marching Towards Laissez-­ Faireism in Higher Education Development?’, Journal of International Cooperation in Education, 8(1), 153–165, 2005. Reproduced with permission. A revised version of the paper was presented at the 12th General Conference of the International Association of Universities on the Wealth of Diversity, held in Sao Paulo, Brazil (July 25–29, 2004). 1  The technology achievement index (TAI) is based on the degree of creation of technology in a given economy, the extent of diffusion of old and recent innovations, and human skills (UNDP 2001).

Laissez-faireism in higher education 69

References Bok, D. (2003). Universities in the Marketplace: The Commercialization of Higher Education. Princeton, NJ: Princeton University Press. Castells, M. (1994). The University System: Engine of Development in the New World Economy. In J. Salmi and A. M. Verspoor (Eds.), Revitalizing Higher Education (pp. 14–40). Oxford: Pergamon. Johnstone, B. (1999). Privatization in and of Higher Education in the US. Buffalo Education, 1–3. Okun, A. (1975). Equality and Efficiency: The Bing Trade off. Washington, DC: Brookings Institution. Psacharopoulos, G., and Patrinos, H. (2002). Returns to Investment in Education: A Further Update. World Bank Policy Research Working Paper 2881, Washington, DC. http://econ.worldbank.org/ files/18081_wps2881.pdf Raines, J. P., and Leathers, C. G. (2003). The Economic Institutions of Higher Education: Economic Theories of University Behavior. Cheltenham: Edward Elgar. Task Force on Higher Education and Society (TFHES). (2000). Higher Education in Developing Countries: Peril and Promise. Washington, DC: The World Bank. Tilak, J.B.G. (1991). Privatization of Higher Education. Prospects: Quarterly Review of Education (UNESCO), 21(2), 227–239. Tilak, J.B.G. (1997). Effects of Adjustment on Education: A Review of Asian Experience. Prospects, 27(1), March, 85–107. Tilak, J.B.G. (1999). Emerging Trends and Evolving Public Policies on Privatisation of Higher Education in India. In P. G. Altbach (Ed.), Private Prometheus: Private Higher Education and Development in the 21st Century (pp. 113–135). Westport, CT: Greenwood Publishing. Tilak, J.B.G. (2002). Higher Education Under Structural Adjustment. In P. Banerjee and F. Richter (Eds.), Economic Institutions in India (pp. 289– 341). London: Palgrave Macmillan. Tilak, J.B.G. (2003). Higher Education and Development. In J. P. Kleeves and R. Watanabe (Eds.), Handbook on Educational Research in the Asia Pacific Region (pp. 809–826). Dordrecht, The Netherlands: Kluwer Academic Publishers. UNDP. (2001). Human Development Report 2001. New York: Oxford University Press. World Bank. (1986). Financing Education in Developing Countries. Washington, DC: World Bank. World Bank. (1994). Higher Education: The Lessons of Experience (Development in Practice). Washington, DC: World Bank. World Bank. (2002). Constructing Knowledge Societies: New Challenges for Tertiary Education. Washington, DC: World Bank.

4 Lessons from cost recovery in education*

In policy terms, neo-liberals and structuralists differ primarily in the extent to which they advocate state involvement in market processes (see Colclough 1991a, p. 1). This chapter attempts to assess the arguments of these two schools as they have been applied to education. Specifically, it examines the several approaches to cost recovery in education, particularly focusing upon their effects on equity and efficiency.

Cost recovery in education Discussion of cost recovery is of relatively recent origin. It was long held that the benefits of education are large and widespread, and that the investments made in education are eventually recovered by society through increased labour productivity and higher tax receipts by the government, suggesting no need for specific measures to directly recover the investments made in education. As Mishan (1969) observed of higher education, ‘[it] is an investment that will pay for itself; [it] will increase the earnings of the beneficiary students and the government will recover its costs through consequent higher tax receipts.’ However, over the last two decades, economic adversity and a growing disillusionment with the role of the state have together prompted a search for new ways of financing education, particularly in countries of the South (see Shaw 1991). The case for cost recovery While revenue considerations form the most important rationale for imposing user fees, some advocates also argue that they improve quality, quantity and equity in education (World Bank 1986, 1988; Psacharopoulos and Woodhall 1985; Thobani 1984a; McMahon 1988). The

Lessons from cost recovery in education 71 main arguments in favour of cost recovery in education can be briefly summarised as follows. 1 In the light of recession and the need to constrain public spending, public budgets will not be able to meet the social demand for education without significant levels of cost recovery. In its absence, education is likely to be characterised by underinvestment (Psacharopoulos 1986, p. 563). Cost-recovery measures will thus allow an increase in access to education (Mingat and Tan 1986b; Jimenez 1989). 2 It is held that public subsidisation of higher education is often regressive. Owing to the fact that tertiary students are often from richer households, such subsidies increase inequalities, via the positive impact they have on students’ future earnings. Cost-recovery measures can reduce this regressive tendency in the public financing of education, and can improve equity in the distribution of public resources (Psacharopoulos 1977; Blaug 1982, 1992; Mingat and Tan 1986a; Jimenez 1994). 3 As the price elasticity of demand for education is estimated to be less than unity (Handa 1972; Chutikul 1986), it is argued that cost-recovery measures will not lead to a significant fall in enrolments, and accordingly are capable of generating substantial resources for education (Jimenez 1986, 1987, 1989). 4 However, to the extent that demand for higher education is priceelastic, cost-recovery measures could contribute to a fall in graduate unemployment, by reducing demand (Muta 1990, p. 35). Differential fees can be used as a tool for planning higher education by influencing demand for various courses/subject specialisms (Panchamukhi 1983). 5 Some advocates argue that cost-recovery measures can contribute to an improvement in the quality of education, by providing better and more serious students in the system who will be diligent about their studies and vigilant about costs. Resulting pressures on teachers and educational administrators can help to improve the internal efficiency of education. It is further argued that goods or services provided free are not valued by consumers, and that fees make people value education, and ensure regular attendance by students.1 By making education expensive from the students’ point of view, the ‘babysitting’ role of education will be reduced, discouraging students from wasting time (McMahon 1988), and ‘excessive consumption’ of higher education may be reduced (Stiglitz 1986, p. 316).

72  Lessons from cost recovery in education 6 Another argument used in favour of cost-recovery policies points to the evidence for high private rates of return to education (Psacharopoulos 1993), which suggests that students would be willing to pay. More generally, several modelling approaches have suggested that households are willing to pay modest fees – even for primary and secondary schooling – and that this willingness is not adequately tapped (Gertler and van der Gaag 1988; Gertler and Glewwe 1990). Hence cost recovery is not only desirable, but also feasible. The case against cost recovery Important arguments against cost recovery include the following: 1 The benefits of education are not restricted to the students; the neighbourhood or externality effects of education are so large (see Blaug 1970, p. 108) that measures to achieve high levels of cost recovery are inappropriate. State funding of education is necessary to capture these externalities. In its absence, social investment in education would remain suboptimal. 2 Education is not only a quasi-public good2 (Blaug 1970, p. 107; Levin 1987; Tomilinson 1986), but also a merit good, consumption of which is socially beneficial, but provision of which in a free market would be at suboptimal levels (Musgrave 1959; Arcelus and Levine 1986). This is because consumers may not be aware of the full benefits received from such goods, and hence their provision may need to be financed by the state. Cost-recovery approaches here would be counterproductive. 3 Some have argued that, since any method of cost recovery restricts demand for education, and since education is a merit good, it should not be rationed on the basis of ability to pay by the consumers (Weisbrod 1988). Exclusion of the poor from the consumption of education will reduce both equity and efficiency in society. 4 The price elasticity of demand for education differs according to income. If fees were imposed contemporaneously with an increase in the supply of places, total enrolments might even rise (e.g., Tan et al. 1984). But this result could still be consistent with enrolments among the poor being reduced. Thus, the introduction of cost-recovery measures may result in a significant, and undesirable, change in the social composition of the student population (see Colclough 1996).

Lessons from cost recovery in education 73 5 The argument that cost recovery in higher education will reduce (both present and future) income inequalities is based on the evidence that a substantial number of such students is drawn from higher-income groups. But one reason why poor students do not gain access in large numbers to higher education is precisely because it is already costly: there are high non-tuition costs to students, including opportunity costs, even if tuition costs are nil. The introduction of cost-recovery measures would, therefore, aggravate the high-income bias in the distribution of enrolments. 6 With respect to the improvement in the quality of education, some have argued that, since the ability to pay and the ability to learn are not necessarily positively correlated, the introduction of charges need not lead to higher cognitive achievements, even if the diligence of students were, in general, to increase (see Colclough 1991b, p. 202). An assessment of claims and counterclaims The debate between the two sides has intensified in recent years (Hinchliffe 1993). How far are the claims and counterclaims valid? Although evidence exists on each side, some points stand out clearly, which may help in making an objective assessment. The case for cost recovery in education is centrally based on the premise that governments, particularly those in developing countries, do not have adequate resources at their disposal, and that the scope for restructuring public budgets, so as to increase substantially the allocation to education, is limited. This premise has rarely been critically examined, although the possibility of restructuring public budgets by withdrawing public resources from less productive sectors, and their reallocation towards human development sectors, has been stressed by some (e.g., UNDP 1991, 1992). Others (e.g., Looney 1990; Hess and Mullan 1988) have focused on military expenditure, pointing to the trade-off between public spending on the military and on education. Early evidence from several countries (Table 4.1) suggested that the distribution of education subsidies was on the whole equitable, with the distribution of primary education subsidies being highly progressive, and the distribution of secondary subsidies being somewhat progressive. However, the distribution of higher education subsidies was largely skewed in favour of the richer groups. It can be seen that in almost all countries the richest 20 per cent of the population captured far more than 20 per cent of the available education subsidies. An exception is given by India, where positive discriminatory policies and

Table 4.1  Distribution of education subsidies by income group (%) Country

Year Education level

Shares of the population Bottom 40% Middle 40% Top 20%

India

1978 Elementary Secondary Higher All levels Uruguay 1982 Basic Secondary Higher All levels Argentina 1980 Basic Secondary Higher All levels Costa Rica 1982 Basic Secondary Higher All levels Malaysia (1) 1974 Primary Secondary Higher All levels Malaysia (2) Higher Chile 1982 Basic Secondary Higher Colombia 1974 All levels Primary Secondary Higher All levels Dominican 1980 Basic Republic Secondary Higher All levels Indonesiaa 1978 Primary Junior secondary Senior secondary Higher AH levels AH levels

61 51 33 45 77 46 14 52 64 47 17 48 62 45 17 42 50 38 10 41 30 65 49 12 48 59 39 6 40 31 22 2 24 51 45 22 7 46 46

31 34 49 40 22 43 52 34 27 39 45 35 31 43 41 38 40 43 38 41 35 30 42 34 34 36 46 35 39 48 46 22 43 27 21 23 10 25 25

8 15 18 15 7 12 34 14 9 U 38 17 7 11 42 20 9 18 51 18 35 5 10 54 18 6 16 60 21 21 32 76 33 22 33 55 83 28 28

 Indonesia: under ‘Middle 40%’ it is middle 30%, and under ‘Top 20%’ it is top 30%

a

Source: Tilak (1989a, p. 55)

Lessons from cost recovery in education 75 a relative democratisation of higher education have brought greater access to middle-income groups. Elsewhere, Table 4.1 suggests a bias in access to higher education among the rich. On the other hand, after a careful review of several studies, and after standardising their results, Leslie and Brinkman (1988, p. 118) found that ‘higher education in most cases does contribute to progressivity and moreover when the analytical methods employed are most advanced, progressivity is found without exception.’ The claim that cost-recovery measures will improve internal efficiency in education is also unlikely. Students and households already incur significant costs of education (non-fee direct and opportunity costs) in developing countries. Several estimates (Tilak 1991, 1993a; World Bank 1993) revealed that student household expenditure on education already equalled or exceeded that spent by governments.3 Further, in the case of poorer students, fees may compel them to take up part-time work (Eisemon 1992, p. 14), resulting in less time being left for their studies. As a result, the overall internal efficiency of education may actually decline. The relationship between cost-recovery measures and the supply of education is least well supported by empirical evidence. Political economy factors may prevent the supply of education facilities being increased with cost recovery, and, even if that happened, ‘higher supply strongly biased toward more privileged groups may be worse than lower supply’ (Stern 1989, p. 145). The use of rate of return estimates to support arguments for cost recovery is also questionable. First, there is a fairly consistent trend, noticeable from a range of countries, for private returns to fall – as illustrated for higher education in Table 4.2. Such returns would fall more sharply with the introduction of cost-recovery measures,4 bringing unpredictable implications for demand. Second, the estimated social rates of return to education are not true social returns: except for tax revenues, none of the benefits received by society at large are taken into account in their estimation; i.e., the externalities associated with education are not included.5 Hence the difference between estimated public and private rates cannot be used as a valid justification for cost-recovery policies (see also Leslie 1990). Arguments for cost-recovery measures underplay the externality and quasi­public good benefits of education,6 and emphasise the role of the price mechanism, the private sector in general and the putative need for a reduced role of the state. But the externalities, or spillover benefits, of education are likely to be large (Summers 1987). The presence of an educated labour force increases the productivity of the less

76  Lessons from cost recovery in education Table 4.2 Declining private returns to higher education in selected countries (%) Country

Year

Rate of return

Japan

1967 1980 1963 1984 1975 1979 1962 1977 1985 1988 1970 1972 1979 1989 1957 1989

10.5 8.3 29.0 21.7 27.0 6.3 14.0 5.5 14.0 11.6 18.4 15.8 20.0 12.8 27.0 11.0

Mexico Pakistan Greece Philippines Taiwan Uruguay Venezuela

Source: Psacharopoulos (1993, pp. 55–56)

educated as well (Johnson 1984; Lucas 1988), which is an important externality. Besides, a large body of evidence exists on the effects of education on income distribution, infant mortality, life expectancy, health conditions, fertility rates and population control.7 In addition, in the case of higher education, ‘dynamic externalities’, associated with increasing the stock of knowledge in society (Stewart and Ghani 1992), may be very important.8 Further, that education is a merit good is also well recognised. Some people may be ignorant of the benefits of education, but even where not they may be influenced negatively by its long gestation period, and may not be ready to take the risk of investing in education, whose benefits are not certain to them. The experience of developing countries with respect to the universalisation of first level of education confirms this. Some poor households are reluctant to invest even in primary education, as they fail to foresee its benefits. It is widely held that fullcost recovery in the case of merit goods is not justified, as it would result in suboptimal levels of social investment. To conclude, it seems that the general case against cost recovery is very strong. However, there may be a case for its limited use where it is partial, confined to higher levels of education, and supplemented by measures to protect access by the poor. In the following section we

Lessons from cost recovery in education 77 concentrate on a few methods of cost recovery, and critically examine evidence from a selection of countries on their relative effects.

Methods of cost recovery: fees, loans and earmarked taxes Student fees One of the most important methods of cost recovery in education is the introduction of student fees. During the 1980s, fees were introduced in several countries, even in primary education – some on the basis of the recommendations of international institutions like the World Bank (e.g., Malawi from 1984 to 1994),9 and some based upon entirely domestic considerations (e.g., China).10 Criticism of the social and economic consequences of such policies led some to retract their earlier positions, arguing that user charges should be applied only at higher education levels (Jimenez 1989, p. 112). However, fees and charges at primary and secondary levels remain in place in many countries of the South. Low price elasticities of demand for education (Jimenez 1987, pp. 80–81; 1989, p. 116) are quoted in support of fees, but very few detailed estimates are available.11 Jimenez (1989) referred to estimates in Peru, Mali and Malawi. In all three cases, and in others (e.g., ­Chutikul 1986 for Thailand), demand was found to be relatively inelastic to price (fee, or distance to school in Mali). However, several studies found serious adverse demand effects of fees in lower levels of schooling: falls in gross enrolment ratios, and even in overall enrolments, were reported in response to increased fees in Nigeria (­Hinchliffe 1989), Mali (­Stewart 1994) and Jamaica (Comia et al. 1987), and reduced growth in enrolments was detected in Ghana (Lavy 1992)12 and Malawi (Bray 1987). By the same token, the positive effects of a reduction or abolition of fees on enrolments have also been documented for Botswana and Malawi (Colclough 1996, pp. 17–18). Income elasticities of demand are additionally important. Generally, the demand for education is found to be highly income-elastic, even in the absence of direct cost-recovery measures. The elasticity is evident even from frequency tables such as that for India given in Table 4.3.13 The table suggests that demand for secondary and higher education is a clear increasing function of household income – particularly so since household size declines with income. Although precise estimates of income elasticities are not available, Appleton et al. (1990) showed that income is an important determinant of enrolling in, and completing,

78  Lessons from cost recovery in education Table 4.3 Distribution of enrolments in education in India, by household expenditure quintiles, 1986–87 Quintile Government Private group (%) Primary Secondary Post­ Primary Secondary Post­ secondary secondary Rural 0–20 20–40 40–60 60–80 80–100

22.6 23.6 22.2 19.1 12.5

15.2 18.1 20.9 24.2 21.7

11.2 12.7 18.6 23.6 34.0

21.0 19.7 21.1 20.3 17.9

13.7 16.5 20.7 24.8 24.3

9.2 12.3 15.8 26.3 35.4

Urban 0–20 20–40 40–60 60–80 80–100

31.8 32.9 19.3 11.9 4.1

19.9 26.6 24.5 19.3 9.6

9.4 14.1 19.4 25.4 31.8

18.4 22.5 22.0 21.7 15.4

13.2 19.3 23.0 25.4 19.1

8.1 10.4 17.3 27.5 36.7

Source: NSSO (1991, pp. S-34 and S-89)

the primary, lower secondary, and upper secondary schooling in Cote d’Ivoire. A high income elasticity obviously raises further questions about the wisdom of increasing the fees faced by the poor. It is interesting to note that, while the earlier international declarations and conventions sought to ensure free and compulsory education for all, the term ‘free’ began to be used more sparingly in the 1980s.14 Organisations like the World Bank favoured, in the earlier years, the introduction of fees in primary education,15 simultaneously opposed and supported the same later,16 and subsequently distanced itself from the practice.17 However, the introduction of fees in higher education became an important condition for securing loans to the sector from the World Bank (Hinchliffe 1993, p. 185).18 These changes in policy stance were, in turn, reflected in fairly frequent policy reversals over fees by national governments.19 They also resulted in a mushrooming of private schools charging high fees – mostly in (but not necessarily confined to) urban areas – and in the introduction of various kinds of fees in public schools.20 While most observers and agencies now agree on the need to provide free primary education, there remains more debate about the postprimary levels (Johnstone 1992b). But the intra-sectoral dependencies are rarely acknowledged: if fees are high in secondary education,

Lessons from cost recovery in education 79 enrolments in primary education may fall, since the latter may be demanded in order to secure entry into secondary education rather than to lead directly to the labour market. High fees in higher education may reduce demand for secondary education in a similar fashion. A majority of countries now charge fees for higher education – some very small nominal amounts, and some reasonably large. For example Spain, Belgium and Switzerland charged up to US$5,000 per student in 1987 (see Eicher and Chevaillier 1993, p. 465).21 Fees also vary by discipline, by region and by socio-economic categories of the student population. International evidence on fees given in Tables 4.4 and 4.5 shows that among public higher education systems where data are available only South Korea and Chile recover more than a quarter of their total public expenditure on higher education through fees. In many of the countries shown, including several OECD member states, the proportion of fees in total expenditure is negligible. Rates of cost recovery are low, too, even among private institutions in some countries – although more than 80 per cent of costs are recovered in private universities in Venezuela, Colombia, Chile and South Korea.22 Second, quite apart from the incidence of tuition fees, the private costs of education – particularly at tertiary levels – are often high.23 For example, in India, while tuition fees are a small proportion of the total costs of higher education, the addition of other fees – in particular those paid to undertake examinations – causes fee income to represent a sizeable proportion of total recurrent costs. Furthermore, non-tuition costs, such as those for textbooks, transport, and other out-of-pocket expenses, are usually significant, as are opportunity costs. The available evidence suggests that students and/or families incur considerable costs on both counts, particularly in developing countries.24 For example, in India, of the total social costs of higher education (comprising students’ plus institutional costs, net of transfers), students’ direct costs account for about 30 per cent, and opportunity costs a further 40 per cent. Thus, private costs form about 80 per cent of the total social costs of higher education in India, compared with about 43 per cent in the United States (Table 4.6). Some cross-country data are presented in Table 4.7 which shows household educational expenditure, as a proportion of total (public plus private) expenditure on education. It can be seen that in India households incur as much expenditure on education as the government.25 More generally, in the poorer countries (e.g., Thailand, Zimbabwe, Colombia and India), households shoulder a greater part of the expenditure on education than in the more developed countries

Table 4.4  Share of fees in costs of higher education in selected countries (%) Developing countriesa

Share

Sri Lanka

b

Tanzania Bolivia Pakistan Philippines Public (1985) Private (1977) Nepal (1986–87) PNG (1988–89) Brazil

b 1.0 2.1

Malaysia Thailand Costa Rica Guatemala Nigeria Indonesia Turkey India (1984–85) South Korea (1985) Public Private Chile (1990) Public Private Philippines Private (1987) Public (1985) All (1985–87) Pakistan (1987–88) Colleges Universities (general) Universities (technical) Colombia Public universities (1987) Private universities (1989) Venezuela (1986) Public Private

10.9 85.0 4.4 4.4–9.0 5.0 5.8 6.9 8.0 10.0 12.4 13.0 15.0 15.0 49.6 82.3 34.2 38.5 95.0 2.3–2.5 10.9

Developed countries

Share

Norway (public institutions) (1987) Australia (1987) France (1975) (1984) Germany (1986) Canada (mid-1980s) Netherlands (1985) Spain (mid-1980s) Japan Private 4-yr institutions (1971) (1985) Public institutions (1970) (1987) All institutions (1971) (1985)

0.0

65.8 2.0 8.8 31.7 35.8

UK Universities (1970–71) (1988–89) Polytechnics (1982–83) (1987–88)

12.6 6.4 15.0 14.0

2.1 2.9 4.7 0.0 12.0 12.0 20.0 75.8

38.7 15.1

7.4 1.9

USA Private institutions (1969–70) (1984–85) Public institutions (1969–70) (1984–85) All institutions (1969–70)

1.3

(1986)

22.4

9.6

Soviet Union (early 1980s)

 0.0

2.5–5.0

81.0 3.8 83.0

38.6

14.5 20.5

Hong Kong (1988–89)

 6.3–12.2

Singapore (1992)

< 20.0  

 Around 1980 unless specified  Nil or negligible

a

b

Sources: Hong Kong: Bray (1993, p. 37); Korea: Eicher and Chevaillier (1993, p. 462); Singapore: Selvaratnam (1994, p. 81); UK: Williams (1992, pp. 6–7); Chile: Brunner (1994, p. 230); others: Tilak (1993b, p. 20)

Lessons from cost recovery in education 81 Table 4.5 The contribution of students/families (fees) to the recurrent budgets of selected African universities University (country)

Year

Share (%)

Botswana Ghana Lesotho Malawi Swaziland Zimbabwe Kenyatta (Kenya) Ibadan (Nigeria) Nsukka (Nigeria) Obafemi Awol (Nigeria) Makerere (Uganda) Copperbelt (Zambia) Witwatersrand (South Africa)

1991 1990 1991 1991 1991 1991 1991 1990 1991 1991 1991 1991 1991

12.6 1.2 14.0 4.0 0.0 6.0 0.0a 5.3b 2.0c 0.0 2.0c 8.0 27.9

 Fees were to be introduced in 1991–92  Fees are for postgraduate students only c  Fee is raised, but ‘paid’ by the state a

b

Source: Blair (1992, p. 20)

Table 4.6 Private and social costs of higher education in India and the United States (%) Private costs

India (1978) Higher education General Professional USA (1988) Higher educationa

Institutional costs

Total social costs

Direct costs

Forgone earnings

Total

31.0 54.5

56.4 28.8

87.5 83.3

12.5 16.7

100 100

 3.9

39.1

43.0

57.0

100

 College and universities/institutions of higher education (public and private) Sources: India: Tilak (1987); USA: Cohn and Geske (1990)

a

shown (Netherlands, France, United Kingdom, Australia and the United States). Accordingly, whereas there may be scope for increased fees in higher education in the South, such changes may be counterproductive unless the magnitude of direct costs already met by households is recognised.

82  Lessons from cost recovery in education Table 4.7 Share of household expenditure in total national expenditure on education in selected countries Country

Year

Share (%)

Netherlands France UK Australia USA Zimbabwe Thailand Colombia India

1986 1985 1986 1986 1986 1985 1986 1983 1985–86

 3.5  5.1 10.1 16.4 24.1 26.5 26.5 28.6 50.3

Source: United Nations (1989a, tables 2.1 and 2.5)

An important question, in this context, concerns whether or not fees, where they are introduced/increased, should be uniform for all. In countries like India, where the proportion of students from lowerand middle-income groups combined is roughly half of the total (Tilak 1993a), a discriminatory fee structure may be preferred.26 Such a mechanism minimises the perverse effects of public subsidisation of higher education and can be based upon the costs of education, the ability to pay and future lifetime earnings associated with a given type of education. Discriminatory pricing may also be more efficient than uniform fees since it is capable of providing additional resources in comparison with unitary pricing approaches. Student loans Loans are an important measure to accompany increases in fees, so that poor students are not forced out of higher education. Loans provide an important equity measure as well as a strategy to improve efficiency (Blaug 1970; Woodhall 1983; Psacharopoulos and Woodhall 1985; Mingat and Tan 1986c). But their use has increased well beyond the 50 or so countries having loans schemes in the 1980s (Albrecht and Ziderman 1991, p. 3), partly as a consequence of widespread constraints on public spending.27 Loans shift the fee burden from the present generation (government or parents) to future direct beneficiaries. There are two main types. Mortgage-type loans involve repayment of fixed equal amounts in regular instalments, irrespective of the earnings levels of graduates; on the other hand, income-contingent loans require payment of a given proportion of graduates’ income as loan repayment, based on the principle of the ability to repay.

Lessons from cost recovery in education 83 In an important study, Woodhall (1983) argued that, among other benefits, loans increase access to higher education, reduce the extent of redistribution of resources from the poor to the rich, increase the diligence and efficiency of students and provide flexibility in financing full-time or part-time studies in government or private institutions. She later argued (Woodhall 1989) that income-contingent loans do not necessarily discourage low-income students or women from pursuing higher education. They are often said to provide a fair and cheap means of expanding the tertiary sector (Barr 1988, 1991). There are, however, several problems associated with student loans. First, the uncertainty associated with the returns to investment in higher education acts as a deterrent to borrowing, particularly among the poor. Also, the introduction of loans increases both actual and perceived costs, in comparison with grants (Colclough and Lewin 1993, p. 172), which further reduces the demand for higher education, particularly among poor families (e.g., as in Jamaica; World Bank 1993), thereby exacerbating inequalities in access to education. These incentive effects are hardly desirable, as warned long ago by the Robbins Committee (1963, para 647). Second, the credit market in many developing countries is not developed enough to easily sustain an educational loans scheme (Arrow 1993, p. 9). Even where this is not so, private lending institutions may seek security, or collateral, which poorer students, for whom the programme is mainly meant, may not be able to provide (Nerlove 1975; Stiglitz 1986, p. 309). Thus, loan schemes may not easily or sharply change the socio-economic background of tertiary students. The third, and most important, problem faced with respect to student loans in most developed and developing countries relates to their nonrepayment. In India, of the total investment of Rs.869 million made on student loan programmes during 1963–64 to 1987–88, only 5.9 per cent was recovered. In recent years recovery rates have improved somewhat, but to at most around 15 per cent (Tilak 1992). High default rates and losses to governments are well documented (Woodhall 1990, 1991a, b, 1992). In recent years, for example, every student in Kenya has received a loan, 94 per cent of which have not been subsequently recovered. The costs of administration of loans – for personnel and office expenses and attempts at recovery – are also high. Although there is some evidence that the costs of administration of income-contingent loans may be small (as in Australia and Sweden), the administrative costs of mortgage-type loans can represent up to one-fifth of the value of loans made (Table 4.8). If such costs are added to the loss to the government because of defaulters, the total loss amounts to 103 per cent in Kenya and 108 per cent in Venezuela (i.e., it would actually have

84  Lessons from cost recovery in education Table 4.8  Student loan programmes and government losses in selected countries Country

Year Students Government loss (%) with on account of: loans (%)

Rate of recoveryd (%)

Default Admini­ Default and stration Administration Mortgage Loansa Colombia I Colombia II Sweden I Indonesia USA Hong Kong UK Norway Denmark Finland Brazil I Brazil II Jamaica I Jamaica II Barbados Kenya Canadac Chile Japan Venezuela Honduras

1978 – 1985 6 1988 – 1985 3 1986 28 1985 26 1989 7 1986 80 1986 – 1986 – 1983 – 1989 25 1987 20b 1988 – 1988 – 1989 100 1989 59 1989 – 1989 19 1991 1 1991 1

76 38 62 61 41 43 30 33 56 46 94 65 84 62 18 94 31 69 51 98 53

11 9 8 10 12 4 11 15 6 6 4 6 8 8 15 9 6 13 9 10 20

87 47 70 71 53 47 41 48 62 52 98 71 92 70 33 103 37 82 60 108 73

13 53 30 29 47 53 59 52 38 48 8 21 8 30 67 –3 63 18 40 –8 27

Income-contingent loansa Australia 1990 81 Sweden II 1990 –

52 30

5 3

57 33

43 67

 I and II refer to situations where the loan programmes underwent reform  1985 c  Quebec d  Rate of cost recovery refers to average loan recovery ratios as a percentage of loan amount, default, and administration costs Sources: Albrecht and Ziderman (1991, pp. 5, 15; 1993, p. 80) and World Bank (1994a, p. 47) a

b

been cheaper for those countries to provide tertiary education free). Even Colombia, where its second-generation scheme was believed to be yielding adequate returns, the rate of recovery was scarcely more than 50 per cent. Although reforms have improved rates of cost recovery in Colombia, Brazil and Jamaica, default rates remain high.28 Further, Albrecht and Ziderman (1993, p. 83) estimated that, in some countries

Lessons from cost recovery in education 85 where rates of cost recovery are among the highest in the world, only between 2 per cent (Colombia) and 14 per cent (Quebec, Canada) of instructional costs are recovered from loan recipients. Worries about student indebtedness led to a reduction in interest rates in Sweden, where all students receive loans. Other countries often provide interest-free loans. But very low rates of interest make student loans ‘inefficient’: where inflation is significant, repayment terms in excess of ten years (which are common) result in efforts to recover loans being highly cost-ineffective.29 These problems have led to growing pressures to move away from loans, and to reconsider grants, in Sweden and elsewhere (Morris 1992; Shackleton 1993). Finally, over the short and medium terms, expenditure savings to the public sector arising from student loans are particularly elusive. Colclough (1993, pp. 209–210) has estimated that, if loans were typically taken out to cover four years of study with a 20-year pay-back period, the government would not recover even 50 per cent of the initial generation of student loans until 14 years after the start of the scheme. This is exclusive of rebates for unemployment (etc.) and defaults. Barr (1993, p. 725) estimated that the loans programme in the United Kingdom will produce ‘no cumulative net savings for at least 25 years’. After a thorough review of 24 loan programmes in 20 countries, Albrecht and Ziderman (1991, p. iii) concluded that, ‘in general, developing country loan programmes to date have not reduced significantly the government’s fiscal burden for higher education’ and that the scope for increased effectiveness of the programme is also restricted. Hence student loans cannot be a short-term or a medium-term solution to the problems of resource scarcity in higher education, and given, inter alia, the levels of default, loans can never become self-financing. Thus, there are at least two basic inherent weaknesses underlying the philosophy of loans. First, the idea of a loan scheme presupposes a fairly strong relationship among education, employment and earnings. When higher education does not guarantee employment, students may be dissuaded from borrowing to finance their studies, particularly those from relatively poorer sections of the community. Second, financial returns to the government are undermined by high costs and low repayment rates. On the whole, it seems that although investment in higher education may yield high returns, investment in loans for higher education may not. Earmarked taxes As an alternative to the public financing of higher education from general tax revenues, various forms of earmarked taxes can be used. At least three kinds of such taxes can be identified.

86  Lessons from cost recovery in education Payroll tax Whereas in the cases of fees and loans, the costs of higher education are planned to be recovered from the students or their parents, other measures aim at recovering costs from the users of the graduates. Payroll tax, for example, can be designed as an education-specific tax levied on those who employ educated workers. The basic argument is that those who employ a highly educated labour force, and profit therefrom, should be required to pay for part of the costs of production of this ‘human capital’. Such taxes would be some proportion of the wage bill paid to graduates, or other categories of educated labour, with tax rebates being payable if firms contributed directly to the education of these employees. The amount of tax levied would be based on the cost of education and (in the case of a graduate payroll tax) the number of graduates employed (Colclough 1990). Resources accruing to the fiscus would provide a contribution to higher education costs on an annual basis. Payroll taxation has not been widely used, and where it has it has usually been for the purpose of financing training rather than higher education (see Ziderman 1989; Middleton et al. 1994, pp. 121–126). Albrecht and Ziderman (1991) cite two cases which are close to being an education-specific payroll tax. In Ghana, employers of graduates who have taken student loans contribute 12 per cent of wages paid to a national security fund, which, in turn, is redirected to the education budget. And, in China, employers repay the loans taken out by their employees when they were students. Further, Eicher and Chevaillier (1993, p. 467) point out that in France payroll tax arrangements allow firms to pay a proportion of their due tax in the form of an unrestricted grant to institutions of their choice. Although the tax is compulsory, choice exists as regards the method of payment and its ultimate beneficiary. One effect of payroll taxation on graduates is that it might work as a disincentive to employ them. Depending upon the elasticity of substitution between different levels of worker, employers would have an additional incentive to employ less expensive skills (or skills which were embodied in people who had acquired them by a different route). In countries with unemployment of graduates, this may not be desirable. However, in the relatively large number of developing countries having a shortage of graduates, the incentives to economise on their use provided by payroll taxation may well be beneficial.30 Graduate tax An alternative approach – similar in principle to income-contingent loans – is a graduate tax. First proposed by Glennerster et al. (1968),

Lessons from cost recovery in education 87 graduates would pay a proportion of their incomes for a part or whole of their working lives as partial repayment for the costs of their education. Such a tax has useful features. Unlike loans, there would be no capital indebtedness, and therefore minimal disincentive effects for individuals; equally, the tax could be progressive, with the tax rates rising for the higher paid.31 Colclough (1990) and Albrecht and Ziderman (1991) show that the possibility of revenue generation is higher in cases of payroll and graduate taxes respectively than in the case of loans, in addition to their being more equitable. Ziderman (1989) argues that in the case of training such a tax may be relatively more efficient than most alternatives. The experience with graduate and payroll taxes is as yet limited. Their appeal is strong, although budget administrators do not in general favour earmarked taxes owing to the lack of flexibility they impose upon public spending patterns.32 On the other hand, the difference between graduate taxation and a well-designed income tax seems to be not great, except for the fact of earmarking of the graduate tax. For example, Arrow (1993, pp. 9–10) suggests a higher income tax rate for higher educated workers, on the grounds of its being ‘the most practical way of securing repayment’. Friedman (1962, p. 105) argued similarly that the graduate should be required to pay a specified proportion of his earnings, in excess of a specified sum, which could be combined with income tax. Furthermore, some graduate taxes and fees are rather similar in both their nature and effects. For example, the deferred fee charges introduced in 1986 in Australia amounted to a graduate tax; whereas the graduate tax introduced in 1989 provided a choice to pay an ‘up-front’ fee on entering higher education instead of paying tax. Education cess/taxes Education cess/taxes have been used by several countries. A cess is an earmarked levy, payable by all households in a given locality, the revenues from which would be used for a specific purpose, such as education. An educational cess tax is not restricted to the households with past or present students enrolled in schools. Usually a cess is levied as a small fraction of some other tax. For example, a cess for public financing of libraries may be attached to a professional tax or to an urban property tax. In rural areas a cess may be levied as a proportion of land revenue. China introduced an education levy33 in 1986, which financed 16–17 per cent of total expenditure on basic education in China in 1988 (Ahmed et al. 1991). India has levied education cess taxes in several states. These were imposed, collected and used by local

88  Lessons from cost recovery in education governments, largely as a surcharge on land revenue, for the development of school education. However, the revenue generated was not satisfactory and the taxes were subsequently abolished. An advantage sometimes claimed by proponents of education cess taxes is that, since the revenues are generated and used at local levels, the potential for their efficient utilisation is high. This characteristic helps to ensure community participation in education, thereby improving the internal efficiency of the system by making teachers more accountable to the community. Nevertheless, education cess taxes imposed on all households would be regressive – even if the effects were small in practice. In general, these and other earmarked taxes link decisions about raising resources and decisions regarding their allocation in ways that risk rigidity in the allocation of resources, and a less flexible prioritisation of public choices. On the other hand, as traditional funding sources have become threatened, revenue assigned from specific sources in these ways can help education spending to increase. An alternative would be to impose them selectively, for example on the households whose children go to schools; however, the distinction between fees and earmarked taxes would then disappear. Generally, earmarked taxes for education and cesses have a limited tax base, and with some, such as graduate tax, revenues build up only slowly. Hence revenue from these sources would remain supplementary to, rather than substitutes for, general tax revenue, as a means of financing of education. Furthermore, such taxes often incur significant costs of administration and collection which, given limited revenues, may substantially undermine their efficiency (McCleary 1991).

Conclusion Cost-recovery measures risk increasing inequalities in society. Such risks can be reduced by properly designing loans and scholarships, albeit at the cost of reducing revenues raised. There can, of course, be a case for scholarships/grants, even where education is provided free, in order to help poor (or otherwise disadvantaged) students to meet the direct and opportunity costs of education. The case for targeted scholarships becomes stronger with the introduction of cost-recovery measures. However, fees are levied (or made known) at the time of entry into higher education, whereas scholarships are awarded only after admission has been gained. Thus, unless scholarship programmes are imaginatively designed, they will be unable to correct the access of poor students to higher education – or, indeed, to other levels.

Lessons from cost recovery in education 89 Furthermore, the targeting of scholarships has been administratively difficult and inefficient in many developing countries. Hence universal subsidisation is often preferred to targeting subsidies. An attempt is made to provide a summary ‘balance sheet’ of costrecovery measures, based upon the arguments examined in this chapter, in Table 4.9. It shows that some measures (e.g., full-cost fees) have high potential for resource generation, but their adverse effects on equity are significant. Some (e.g., loans and graduate taxes) are easily feasible in terms of implementation, but their potential for resource generation is not high. Full-cost fees and loans may improve internal efficiency, but their impact on equity is mixed, as is their feasibility. Among the various measures discussed here, discriminatory fees are to be preferred to uniform levels of fees, from the perspectives of both equity and resource generation. But administrative problems are more severe with respect to discriminatory, as opposed to uniform, fees. Both are also likely to meet with student and parent resistance, although less so in the case of discriminatory fees. Student loan programmes are attractive since cost recovery is postponed until the graduates are able to pay, although the experience of several countries with loan programmes is not encouraging as regards repayment. But graduate/payroll taxes appear superior to both loans and fees, with respect to efficiency in administration, scope for introducing progressiveness and generating revenues. Nevertheless, revenues may remain Table 4.9  Efficiency of alternative measures of cost recovery

Fees Token fees Substantial levels of uniform fees Discriminatory fees Full-cost fees Student loans Payroll tax Graduate tax Education cess/tax

Potential resource generation

Internal efficiency

Equity

Feasibility

Current use

.. +

.. ..

+ −

++ ++

++ ++

+ ++ + ++ ++ +

+ ++ + .. .. ..

++ − + + + ..

+ − + ++ ++ +

+ + ++ − .. +

+ Reasonably high ++ Very high − Reasonably low − Very low .. Not significant or doubtful Source: Author

90  Lessons from cost recovery in education limited compared with the total needs of higher education, unless tax rates are high. Such taxes can be earmarked, to prevent the revenues disappearing into the general revenue pool. Accordingly, a strategy of funding general education out of general tax revenues based upon a progressive scale, and of financing higher education out of a mix of general and specific tax instruments, is likely to remain the best option in many developing countries for some time to come.

Notes * This chapter originally appeared as ‘Lessons From Cost Recovery in Education’, in C. Colclough (Ed.), Marketizing Education and Health in Developing Countries: Miracle or Mirage? pp. 63–89 (Oxford: Clarendon Press, 1997). Reproduced with permission of Oxford University Press © Oxford University Press, 1997. Also, see www.oup.com. Without implicating any with the opinions expressed here, the author gratefully acknowledges the helpful comments and suggestions on earlier versions of the chapter made by Malcolm Adiseshiah, V. N. Kothari, N. V. Varghese, Christopher Colclough and by other participants at the IDS Workshop, particularly Mark Bray, David Theobald, Keith Lewin, Charles Griffin and Martin Greeley. 1 Note that these arguments are not new: the Woods Despatch in nineteenthcentury British India made the same arguments. 2 In a strict sense, education is not a public good, but its associated externalities bring some ‘public good’ characteristics. See Blaug (1970, p. 107). 3 For example, Tilak (1991) found that household expenditures on education in India were sizeable and comparable to public expenditures on education; household costs, including opportunity costs, exceeded the government (institutional) costs by two to four times. In the case of higher education, household expenditure per student in Kerala was Rs. 5566, compared with public institutional expenditure of Rs. 5718 in 1985–86 (Tilak 1993a, p. 60). In Jamaica, household expenditures per student (about US$205) were much higher than public unit expenditures (about US$100) in 1990. In Jamaican community colleges, household expenditures are about 3.5 times higher than public expenditures (World Bank 1993, p. 38). More evidence is discussed later in this chapter. 4 See Creedy (1995) for a theoretical analysis of the varying effects of surcharges on rates of return to education. 5 This was Schultz’s (1971, p. 172) argument for the need to ‘repair’ the estimates of social rates of return. It remains valid today. 6 Further, Bates (1993, p. 10) argues that cost-recovery measures remove the ‘social’ nature from the economics of social goods. 7 Weale (1993, p. 736) argues that these externalities are particularly important in developing countries. See Bowen (1988) and Leslie (1990) for recent elaborate descriptions of externalities in education. 8 See Schultz (1990) and Birdsall (1988) on the externalities of higher education. Very few believe that externalities in higher education are negligible (see Arrow 1993).

Lessons from cost recovery in education 91 9 See Thobani (1983, 1984a, b) and Klees (1984); see also Tilak (1989). 10 In China the laws were changed in favour of introduction of fees. After the change, as much as 7.9 per cent of the total expenditure on basic education was generated through student fees by l988. See Ahmed et al. (1991). 11 Birdsall (1982) has reviewed several studies on determinants of enrolment or educational attainment, but many of these studies have not included a price variable. Jimenez (1989) also reported only three estimates. Further, the elasticities were measured in response to small changes in fees. But substantial levels of increases in fees might well produce high elasticity coefficients. For instance, Jimenez (1987, p. 82) calculated that significant increases in fees in Malawi would lead to a decline in enrolments by 22–57 per cent in primary schools and by 52–91 per cent in secondary schools. Their subsequent removal in 1994 led to increased enrolments of one-third (Colclough 1996). 12 Logistic regressions of school enrolment in rural Ghana (Lavy 1992, p. 18) produced clearly negative and statistically significant coefficients for fees in primary and middle schools, after controlling for student, household, community and school factors, though the absolute levels of fees were believed to be ‘negligible’ from the perspective of Western standards (US $0.40 in primary and US$1.00 in middle-level schools). 13 For comparable data for Brazil, see Birdsall (1982, p. 6). 14 For example, compare the World Declaration on Education for All (WCEFA 1990) and the Delhi Declaration (EFA 1993) with the United Nations Declaration of Human Rights (UN 1948) and the Convention on the Rights of the Child (UN 1989b), among many other UN and UNESCO resolutions. 15 Initially using Mali as an example, the World Bank (Birdsall 1983a, b) stressed that there existed considerable scope to increase cost recovery in primary education in several countries. This was further developed in the case of Malawi (see Thobani 1983). See also Bray (1987, p. 122), Bray and Lilis (1988) and Jones (1992, p. 248). 16 For example, the World Bank (1986, p. 23) observed that, ‘in general, increased private financing at the primary level is not recommended since it might interfere with universal coverage – a socially desirable goal,’ but also argued that it ‘could increase efficiency within schools’ (p. 23) and ‘improve the future distribution of income’ (p. 24). Around this time, the bank gave its support to fees in primary education in Malawi, Mali, Lesotho and other countries. 17 For example, most recently the bank has not only advocated fee-free primary schooling, but also targeted subsidies to households unable to support the other direct or indirect costs of sending their children to school (World Bank 1994b, p. 105). 18 Fewer and fewer bank loans by the end of the 1980s were free of the obligations imposed by loan conditionalities to promote privatisation and expansion of user charges (Jones 1992, p. 249). 19 See Bray (1987) for a description of such shifts in Nigeria, Ghana and Kenya. 20 The World Bank (1986) showed that, in 21 out of 36 countries on which information was available, there were user charges in primary education. 21 Some countries first abolished and then reintroduced fees in higher education; e.g., tuition fees were phased out in Australia in 1974 but were reintroduced in 1989.

92  Lessons from cost recovery in education 22 Lee (1987) estimated that tuition fees in private higher education in South Korea formed about 75 per cent of the costs. In the education system as a whole, students and parents met about 25 per cent of the total costs of public schools, and 79 per cent of those in private schools in 1988. See also Dong-Kun and Jooing-Ryul (1990, p. 54). 23 See Johnstone (1992a, pp. 31–39) for some evidence on a few developed countries. 24 See n. 3 for India, Tilak (1994) for Cambodia and Kotey (1992) for Ghana. 25 These data were confirmed in a more recent study (Tilak 1991). 26 See McMahon (1988), Johnstone (1992b) and Tilak and Varghese (1985) for further discussion of discriminatory pricing models. 27 See Woodhall (1990, 1991a, b, 1992) for details on several countries. 28 Based on simulations of behavioural responses, Mingat and Tan (1986c, p. 282) argue that the potential rate of cost recovery, under what appear to be bearable terms of repayment, is substantial in Asia and Latin America, but not in Africa. In fact, it may never be feasible to recover all of the investments made in loans. For example, the World Bank (1993, p. 183) estimated that, given the need for subsidisation of interest rates and longer periods of repayment, the recovery of loans in Latin America and Caribbean countries could at best be in the range of 40–75 per cent. 29 This leads some (e.g., Johnstone 1986) to argue in favour of using grants or direct subsidies rather than interest-subsidised loans. 30 This argument is developed by Colclough (1990). 31 One example of such a tax is the proposed, but as yet not implemented, graduate income tax in Argentina; see Gertel (1991, pp. 76–77). 32 See McCleary (1991) for a recent survey. 33 This was a surcharge on the amount of product tax, value added tax and business tax paid by work units and individuals.

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Lessons from cost recovery in education 93 Barr, N. (1988). Student Loans: The Next Steps. Aberdeen: Aberdeen University Press. Barr, N. (1991). Income-Contingent Student Loans: An Idea Whose Time Has Come. In G. K. Shaw (Ed.), Economics: Culture and Education: Essays in Honour of Mark Blaug (pp. 155–170). Aldershot, Hants: Edward Elgar. Barr, N. (1993). Alternative Funding Sources for Higher Education. Economic Journal, 103, 718–728. Bates, R. (1993). Education Reform: Its Role in the Economic Destruction of Society. Australian Administrator, 14(2–3), 1–12. Birdsall, N. (1982). Child Schooling and the Measurement of Living Standards. LSMS Working Paper No. 14, World Bank, Washington, DC. Birdsall, N. (1983a). Strategies for Analyzing Effects of User Charges in the Social Sectors. CPD Discussion Paper No. 1983–9, World Bank, Washington, DC. Birdsall, N. (1983b). Demand for Primary Schooling in Rural Mali: Should User Fees Be Increased? Washington, DC: World Bank. Birdsall, N. (1988). Public Spending on Higher Education in Developing Countries: Too Much or Too Little? World Bank, Washington, DC, August 23. Blair, R. (1992). Financial Diversification and Income Generation at African Universities. A FTED Technical Note No. 2, World Bank, Washington, DC. Blaug, M. (1970). An Introduction to Economics of Education. London: Allen Lane. Blaug, M. (1982). The Distributional Effects of Higher Education Subsidies. Economics of Education Review, 2(3), 209–231. Blaug, M. (1992). The Overexpansion of Higher Education in the Third World. In D. J. Savoie and I. Brecher (Eds.), Equity and Efficiency in Economic Development: Essays in Honour of Benjamin Higgins (pp. 232–244). London: Intermediate Technology Publications. Bowen, H. R. (1988). Investment in Learning. San Francisco, CA: Carnegie Council. Bray, M. (1987). Is Free Education in the Third World Either Desirable or Possible? Journal of Education Policy, 2(2), 119–129. Bray, M. (1993). Financing Higher Education: A Comparison of Government Strategies in Hong Kong and Macau. In M. Bray (Ed.), Economics and Financing of Education: Hong Kong and Comparative Perspectives (pp. 32–50). Hong Kong: University of Hong Kong (Education Paper No. 20). Bray, M., and Lillis, K. (Eds.). (1988). Community Financing of Education: Issues and Policy Implications in Less Developed Countries. Oxford: Pergamon. Brunner, J. A. (1994). Chile: Government and Higher Education in Government. In G. Neave and F.A.V. Vught (Eds.), Government and Higher Education Relationships Across Three Continents (pp. 225–240). Oxford: Pergamon. Chutikul, S. (1986). The Effect of Tuition Fee Increases on the Demand for Higher Education: A Case of a Higher Education Institution in Thailand. Sussex: Institute of Development Studies (mimeo).

94  Lessons from cost recovery in education Cohn, E., and Geske, T. G. (1990). Economics of Education (3rd ed.). Oxford: Pergamon. Colclough, C. (1990). Raising Additional Resources for Education in Developing Countries: Are Graduate Payroll Taxes Preferable to Student Loans? International Journal of Educational Development, 10(2–3), 169–180. Colclough, C. (1991a). Structuralism Versus Neo-Liberalism: An Introduction. In C. Colclough and J. Manor (Eds.), States or Markets? NeoLiberalism and the Development Policy Debate (pp. 1–25). Oxford: Clarendon Press. Colclough, C. (1991b). Who Should Learn to Pay? An Assessment of NeoLiberal Approaches to Education Policy. In C. Colclough and J. Manor (Eds.), States or Markets? Neo-Liberalism and the Development Policy Debate (197–213). Oxford: Clarendon Press. Colclough, C. (1996). Education and the Market: Which Parts of the Neo Liberal Solution Are Correct? World Development, 24(4), 589–610. Colclough, C., and Lewin, K. (1993). Educating All the Children: Strategies for Primary Schooling in the South. Oxford: Clarendon Press. Colclough, C., and Manor, J. (Eds.). (1991). States or Markets? NeoLiberalism and the Development Policy Debate. Oxford: Clarendon Press. Comia, G. A., Jolly, R., and Stewart, F. (1987). Adjustment With a Human Face. Oxford: Clarendon Press. Creedy, J. (1995). The Economics of Higher Education: An Analysis of Taxes Versus Fees. Aldershot, Hants: Edward Elgar. Dong-Kun, J., and Jooing-Ryul, K. (1990). Education in Korea: Equity vs. Effiiciency. Korean Journal of Policy Studies, 5, 53–68. EFA. (1993). Education for All: Summit of Nine High Population Countries. New Delhi: EFA. Eicher, J.-C., and Chevaillier, T. (1993). Rethinking the Finance of PostCompulsory Education. International Journal of Educational Research, 19(5), 448–470. Eisemon, T. O. (1992). Private Initiatives and Traditions of the State Control in Higher Education in Sub-Saharan Africa. PHREE Background Paper, World Bank, Washington, DC. Friedman, M. (1962). Capitalism and Freedom. Chicago: University of Chicago Press. Gertel, H. P. (1991). Issues and Perspectives for Higher Education in Argentina in the 1990s. Higher Education, 21(1), 63–81. Gertler, P., and Glewwe, P. (1990). The Willingness to Pay for Education in Developing Countries: Evidence From Rural Peru. Journal of Public Economics, 42(3), 251–275. Gertler, P., and van der Gaag, J. (1988). Measuring the Willingness to Pay for Social Services in Developing Countries. LSMS Working Paper No. 45, World Bank, Washington, DC. Glennerster, H., Merrett, S., and Wilson, G. (1968). A Graduate Tax. Higher Education Review, 1(1), 26–38.

Lessons from cost recovery in education 95 Handa, M. L. (1972). Toward a Rational Educational Policy. Toronto: Ontario Institute for Studies in Education. Hess, P., and Mullan, B. (1988). The Military Burden and Public Education Expenditures in Contemporary Developing Nations: Is There a Trade-off? Journal of Developing Areas, 22(4), 497–514. Hinchliffe, K. (1989). Economic Austerity, Structural Adjustment and Education: The Case of Nigeria. IDS Bulletin, 20(1), 5–10. Hinchliffe, K. (1993). Neo-Liberal Prescriptions for Education Finance: Unfortunately Necessary or Inherently Desirable? International Journal of Educational Development, 13(2), 183–187. Jimenez, E. (1986). Public Subsidization of Education and Health in Developing Countries: A Review of Equity and Efficiency. World Bank Research Observer, 1(1), 111–129. Jimenez, E. (1987). Pricing Policy in Social Sectors: Cost Recovery for Education and Health in Developing Countries. Baltimore, MD: Johns Hopkins University Press. Jimenez, E. (1989). Social Sector Pricing Policy Revisited: A Survey of Some Recent Controversies. Proceedings of the World Bank Annual Conference on Development Economics (pp. 109–138). Jimenez, E. (1994). Financing Public Education: Practices and Trends. In T. Husen and T. N. Postlethwaite (Eds.), The International Encyclopedia of Education (pp. 2310–2316). Oxford: Pergamon. Johnson, G. E. (1984). Subsidies for Higher Education. Journal of Labor Economics, 2(3), 303–318. Johnstone, D. (1986). Sharing the Costs of Higher Education: Student Financial Assistance in the United Kingdom, the Federal Republic of Germany, France, Sweden and the United States. New York: College Entrance Examination Board. Johnstone, D. (1992a). International Comparisons of Student Financial Support. Higher Education, 23(4), 24–44 [special issue guest edited by M. Woodhall (Ed.), Student Loans in Developing Countries]. Johnstone, D. (1992b). Tuition Fees. In B. Clark and G. Neave (Eds.), The Encyclopedia of Higher Education (pp. 1501–1509). Oxford: Pergamon. Jones, P. W. (1992). World Bank Financing of Education: Lending, Learning and Development. London and New York: Routledge. Klees, S. (1984). The Need for a Political Economy of Education: A Response to Thobani. Comparative Education Review, 28(3), 424–440. Kotey, N. (1992). Students Loans in Ghana. Higher Education, 23(4), 451–459. Lavy, V. (1992). Investment in Human Capital: Schooling Supply Constraints in Rural Ghana. LSMS Working Paper No. 93, World Bank, Washington, DC. Lee, K. (1987). Past, Present and Future Trends in the Public and Private Sectors of Korean Higher Education. In Public and Private Sectors in Asian Higher Education (pp. 49–70). Hiroshima: Research Institute for Higher Education, Hiroshima University.

96  Lessons from cost recovery in education Leslie, L. L. (1990). Rates of Return as Informer of Public Policy With Special Reference to the World Bank and Third World Countries. Higher Education, 20(3), 271–286. Leslie, L. L., and Brinkman, P. T. (1988). The Economic Value of Higher Education. New York: Macmillan. Levin, H. J. (1987). Education as a Public and a Private Good. Journal of Policy and Management, 6(4), 628–641. Looney, R. E. (1990). Defense Expenditures and Human Capital Development in the Middle East and South Asia. International Journal of Social Economics, 17(10), 4–16. Lucas, R. E. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1), 3–42. McCleary, W. (1991). The Earmarking of Government Revenue: A Review of Some World Bank Experience. World Bank Research Observer, 6(1), 81–104. McMahon, W. (1988). Potential Resource Recovery in Higher Education in the Developing Countries and the Parents’ Expected Contribution. Economics of Education Review, 1(1), 135–152. Middleton, J., Ziderman, A., and Adams, A. V. (1994). Skills for Productivity. New York: Oxford University Press. Mingat, A., and Tan, J.-P. (1986a). Who Profits From Public Funding of Education? A Comparison of World Regions. Comparative Education Review, 30(2), 260–270. Mingat, A., and Tan, J.-P. (1986b). Expanding Education Through User Charges: What Can Be Achieved in Malawi and Other LDCs? Economics of Education Review, 5(8), 273–286. Mingat, A., and Tan, J.-P. (1986c). Financing Public Higher Education in Developing Countries: The Potential Role of Loan Schemes. Higher Education, 15(3–4), 283–297. Mishan, E. J. (1969). Some Heretical Thoughts on University Reform. Encounter, March. Morris, M. (1992). Student Aid in Sweden. Higher Education, 23(4), 85–119. Musgrave, R. A. (1959). The Theory of Public Finance. New York: McGraw-Hill. Muta, H. (Ed.). (1990). Educated Unemployment in Asia. Tokyo: Asian Productivity Organisation. National Sample Survey Organisation (NSSO). (1991). Participation in Education. Sarvekhsana (New Delhi), 14(46). Nerlove, M. (1975). Some Problems in the Use of Income-Contingent Loans for the Finance of Higher Education. Journal of Political Economy, 83, 157–183. Panchamukhi, P. R. (1983). Education and Employment: Problems and Prospects in the International Order. In J. V. Raghavan (Ed.), Education and the New International Order (pp. 50–64). New Delhi: Concept for National Institute of Educational Planning and Administration.

Lessons from cost recovery in education 97 Psacharopoulos, G. (1977). The Perverse Effects of Public Subsidization of Education, or How Equitable Is Free Education? Comparative Education Review, 21(1), 69–90. Psacharopoulos, G. (1986). The Planning of Education: Where Do We Stand? Comparative Education Review, 30(4), 560–573. Psacharopoulos, G. (1993). Returns to Investment in Education: A Global Update. PPR Working Paper No. 1067, World Bank, Washington, DC. Psacharopoulos, G., and Woodhall, M. (1985). Education for Development. New York: Oxford University Press. Robbins Committee. (1963). Report of the Committee on Higher Education. London: HMSO. Schultz, T. W. (1971). Investment in Human Capital: The Role of Education and Research. New York: Free Press. Schultz, T. W. (1990). Restoring Economic Equilibrium: Human Capital in the Modernizing Economy. Oxford: Basil Blackwell. Selvaratnam, V. (1994). Innovations in Higher Education: Singapore at the Competitive Edge. Technical Paper No. 222, World Bank, Washington, DC. Shackleton, J. R. (1993). Student Assistance in Sweden: Lessons for the UK. Higher Education Review, 26(1), 54–63. Shaw, G. K. (Ed.). (1991). Economics, Culture and Education: Essays in Honour of Mark Blaug. Aldershot, Hants: Edward Elgar. Stern, N. (1989). Comment on Social Sector Pricing Policy Revisited. Proceedings of the World Bank Annual Conference on Development Economics (pp. 139–142). Stewart, F. (1994). Education and Adjustment: The Experience of the 1980s and Lessons for the 1990s. In P. Prendergast and F. Stewart (Eds.), Market Forces and World Development (pp. 128–159). New York: St Martin’s Press. Stewart, F., and Ghani, E. (1992). How Significant Are Externalities for Development? World Development, 19(6), 569–594. Stiglitz, J. (1986). Economics of the Public Sector. New York: W. W. Norton. Summers, A. A. (1987). Comment (on Education as a Public and Private Good by Henry Levin). Journal of Policy Analysis and Management, 6(4), 641–643. Tan, J. P., Lee, H. K, and Mingat, A. (1984). User Charges for Education: The Ability and Willingness to Pay in Malawi. Staff Working Paper No. 661, World Bank, Washington, DC. Thobani, M. (1983). Charging User Fees for Social Services: The Case of Education in Malawi. Staff Working Paper No. 572, World Bank, Washington, DC. Thobani, M. (1984a). Charging User Fees for Social Services: Education in Malawi. Comparative Education Review, 18(2), 107–121. Thobani, M. (1984b). A Reply to Klees. Comparative Education Review, 18(3), 441–443. Tilak, J.B.G. (1987). Economics of Inequality in Education. New Delhi: Sage, for the Institute of Economic Growth.

98  Lessons from cost recovery in education Tilak, J.B.G. (1989a). Education and Its Relation to Economic Growth, Poverty and Income Distribution: Past Evidence and Further Analysis. Discussion Paper No. 46, World Bank, Washington, DC. Tilak, J.B.G. (1989b). Financing and Cost Recovery in Social Sectors in Malawi. Washington, DC: World Bank. Tilak, J.B.G. (1991). Family and Government Investments in Education. International Journal of Educational Development, 11(2), 91–106. Tilak, J.B.G. (1992). Student Loans in Financing Higher Education in India. Higher Education, 23(4), 389–404. Tilak, J.B.G. (1993a). Financing Higher Education in India: Principles, Practice and Policy Issues. Higher Education, 26(1), 43–67. Tilak, J.B.G. (1993b). International Trends in Costs and Financing of Higher Education: Some Tentative Comparisons Between Developed and Developing Countries. Higher Education Review, 25(3), 7–35. Tilak, J.B.G. (1994). Financing Education in Cambodia. Manila: Asian Development Bank, and Brisbane: Queensland University of Technology. Tilak, J.B.G., and Varghese, N. V. (1985). Discriminatory Pricing in Education. Occasional Paper No. 8, National Institute of Educational Planning and Administration, New Delhi (mimeo). Tomilinson, J.R.G. (1986). Public Education, Public Good. Oxford Review of Education, 12, 211–222. UNDP. (1991, 1992). Human Development York: Report. New York: Oxford University Press. United Nations (UN). (1948). Declaration of Human Rights. New York: UN. United Nations (UN). (1989a). National Accounts Statistics. New York: UN. United Nations (UN). (1989b). Conventions on the Rights of the Child. New York: UN. Weale, M. (1993). A Critical Evaluation of Rate of Return Analysis. Economic Journal, 103(418), 729–737. Weisbrod, B. A. (1988). The Non-Profit Economy. Cambridge, MA: Harvard University Press. Williams, G. (1992). Changing Patterns of Finance in Higher Education. Buckingham: Open University Press, for the Society for Research into Higher Education. Woodhall, M. (1983). Student Loans as a Means of Financing Higher Education: Lessons From International Experience. Staff Working Paper No. 599, World Bank, Washington, DC. Woodhall, M. (1989). Loans for Learning: The Loans Versus Grants Debate in International Perspective. Higher Education Quarterly, 43(1), 76–87. Woodhall, M. (1990). Student Loans in Higher Education: 1, Western Europe and the JJSA. Paris: UNESCO-International Institute for Educational Planning (IIEP). Woodhall, M. (1991a). Student Loans in Higher Education: 2. Asia. Paris: UNESCO-IIEP. Woodhall, M. (1991b). Student Loans in Higher Education: 3, EnglishSpeaking Africa. Paris: UNESCO-IIEP.

Lessons from cost recovery in education 99 Woodhall, M. (Ed.). (1992). Student Loans in Developing Countries. Special Issue of Higher Education, 23(4). World Bank. (1986). Financing Education in Developing Countries: An Exploration of Policy Options. Washington, DC: World Bank. World Bank. (1988). Education in Sub-Saharan Africa: Policies for Adjustment, Revitalization and Expansion. Washington, DC: World Bank. World Bank. (1993). Caribbean Region: Access, Quality, and Efficiency in Education. Washington, DC: World Bank. World Bank. (1994a). Higher Education: The Lessons of Experience. Washington, DC: World Bank. World Bank. (1994b). Priorities and Strategies for Education. Washington, DC: World Bank (Education and Social Policy Department) (draft). World Conference on Education for All. (WCEFA). (1990). World Declaration on Education for All. New York: WCEFA. Ziderman, A. (1989). Payroll Taxes for Financing Training in Developing Countries. Working Paper No. 141, World Bank, Washington, DC.

5 Financing of higher education Traditional versus modern approaches*

The ‘structuralists’, welfare economists and specialists in public finance who believe in the philosophy of ‘welfare state’ and in the role of the government in promoting welfare of the people in general, and in the externalities associated with education in particular, on the one hand, and the ‘neo-liberal’ economists who have staunch faith in market philosophy on the other side, constitute two distinct schools of thought on issues relating to financing higher education. The debate between the two sides is intense. The structuralists argue in favour of a dominant, if not a monopolistic role of the state in financing of higher education. On the other hand, the neo-liberals argue for drastic cuts in state finances and increasing reliance on markets, on private finances and even privatisation and commercialisation of higher education. In more recent years, a third school is emerging, which argues for seemingly a middle path, a method of mixed financing. While mixed financing is not altogether new, new forms of public-private partnerships are being proposed. The new modes of public-private partnerships often described as a business deal, involve mainly the transfer of public resources to private sector in higher education. In fact, the third school is not much distinct from the neo-liberal school of thought. Its arguments are a part of the main arguments of the neo-liberals, though there is one major difference. When one argues for mobilisation of private finances and privatisation of higher education, the role of the state is visualised to be one of a facilitator, providing an enabling framework for the private sector to grow, and to eventually replace the public system. Those who argue in favour of public-private partnership (PPP), argue for the State to go beyond and provide finances to the private sector for it to grow. The arguments of these schools need to be critically examined.

Financing of higher education 101

Public funding of higher education: the welfare state approach Education, including higher education, has been heavily, if not totally, subsidised by the state in almost all the countries of the world for a long period (see Blaug and Woodhall 1979; Tilak 1997b). Higher education is financed out of tax revenues that the government mobilises through its taxation system, and is provided to the students either free or at highly subsidised fees. This approach, the traditional approach practiced for centuries, is more explicitly embedded in the welfare state policies adopted by the newly independent countries and other countries after the Second World War. This has been the dominant pattern until recently. There exists a powerful persuasive economic logic and a social, political and historical rationale for this (Tilak 2004). Education is a public good, and higher education is at least a quasipublic good (Vaizey 1962; Eckaus 1964; Blaug 1970; Levin 1987; Tomilinson 1986) producing a wide variety and huge magnitude of externalities. Students in higher education confer external benefits on those not acquiring education. The social benefits of having a large higher educated population go beyond the increase in gross national product. Social benefits of education cannot be reduced to individual self-interest. The positive externalities constitute a powerful justification for public financing of higher education (Tilak 2008). A closely similar aspect is that education is also a social merit good (Musgrave 1959; see also Arcelus and Levin 1986). It is a merit good, consumption of which needs to be promoted. People could be ignorant of the benefits of higher education, or may not be appreciative of the value of education, or may not be able to foresee the implications of their investment decisions in education, and thereby may be unwilling to invest adequately in education. But governments are expected to have better information than individuals or families, and should be wiser in understanding the implications of making long-term investments and more able to look into the future and accordingly take wise decisions regarding investment in education which itself is a long-term activity. The important aspect is that not the others but the individual recipient him/herself benefits to a greater extent than he/she is aware of. Consumer ignorance is a typical case that necessitates public subsidisation of higher education. Additionally, public financing of higher education is advocated on the grounds of providing equality of opportunity. Ensuring equality of opportunity in education to everyone irrespective of social and economic background is considered an important function of the modern

102  Financing of higher education State. It is held for a long time and by many that ‘it is necessary to provide free education at all levels and also to subsidise students’ living expenses in higher education so as to guarantee “equality of educational opportunity” ’ (see Blaug and Woodhall 1979, p. 352). As an effective instrument of equity, higher education needs to be financed by the state. A strong argument accepted by many in support of public subsidies is the existence of imperfections in capital markets. As Arrow (1993) observed, imperfections in capital markets and asymmetric information are possible justifications for the public subsidisation of higher education. In several developing countries markets are ‘incomplete’ and credible markets do not exist. Education credit markets are also incomplete (Kodde and Ritzen 1985). Imperfect capital markets inhibit students from borrowing against the uncertain future returns of higher education. Problems of offering human capital as collateral, lead to under investment in education, especially among the poor families. People may not prefer to borrow to invest in education, whose gestation period is relatively very long, and may not be ready to take risk of investing in education, whose benefits are not certain. Even more importantly, the lenders would be understandably reluctant to accept risk backed only by uncertain future incomes of the reluctant debtors (Arrow 1993). Hence the need for public finances. Also, higher education is a sector which is subject to economies of scale, or increasing returns to scale. Average costs of providing education declines as enrolments increase. If a production process is characterised with decreasing average cost conditions, it may be more efficient for government to operate this process. University systems, scientific equipment, libraries, etc., cannot be used on a small scale. Hence it may be more efficient for government to produce it and provide it free (or at a price equal to the marginal cost) (Colclough 1996). So government monopoly of higher education is viewed desirable, compared to allowing many producers in the field. There are several other arguments: public financing is necessary to protect democratic rights, to promote cooperation instead of competition, to promote national values, and so on. Given all this, it is natural that governments in most countries of the world liberally financed higher education for a long time, without relying on private finances. Higher education is provided to the people free or almost free with token levels of fees and even offering liberal scholarships and stipends.

Neo-liberal models of funding Of late, several questions are being raised on the rationale of state financing of higher education and alternative methods of financing are

Financing of higher education 103 being increasingly searched for and practiced. Important ones among them include the levy of high levels of fees, introduction of student loans, raising of private finances and, finally, privatisation of higher education. All these are adopted simultaneously in many countries. The first three and sometimes all four are also referred to as ‘cost recovery measures’. The most popular one among these cost-recovery measures is introduction of tuition and other fees where it is not levied and substantial enhancement of fees so that the fee revenues form a large proportion of costs of higher education. The second most important cost-recovery measure is student loans, which is being increasingly advocated as a reliable method of financing higher education. It is held that an elaborate method of student loans would make higher education systems totally self-funding with the revolving fund created out of loan repayments. The neo-liberals also recommend performancebased funding in lieu of block grants system of funding higher education institutions, and also funding students in the form of vouchers rather than grants to institutions, etc. Besides, higher education institutions are also required to generate resources for non-governmental sources, from industry, through consultancy, sale of services, renting of buildings, etc., and even by ‘going abroad’, attracting foreign students who were levied higher levels of fees. Another measure often suggested in this context is building university–industry relations. The other measure that finds strong encouragement from the neo-liberals is to allow private sector to set up and run universities and institutions of higher education either as not-for-profit or as for-profit institutions. The neo-liberals favour growth of private institutions at such a rate that private institutions dominate the higher education scene and eventually displace the whole public system of higher education. Lastly, a variety of forms of public-private partnerships – some familiar, and some not so familiar is being proposed. It is argued that PPP provides an avenue to tap the untapped private resources and it will ease financial constraints, private sector making huge investments on its own. Given the limited public resources, PPPs are seen as not only unavoidable but desirable. It is felt that with PPP, total resource base will increase, there will be improved access to education, and with competition, efficiency and quality will increase, and unit costs will come down. Rather it is argued that private and public sectors complement each other. It is further argued that PPP will provide flexibility in relaxing restrictions associated with public sector with respect to salary structure, recruitment policies, admissions, fees and resource mobilisation, management and governance and will enable the system to respond to market signals promptly and efficiently (Patrinos et al. 2009).

104  Financing of higher education The several arguments put forth by neo-liberals are essentially of three kinds: efficiency arguments, equity arguments and pragmatic considerations. First, the social rates of return are found to be consistently lower than private rates of return to higher education, and hence it was recommended that public subsidies could be reduced, and individuals could be asked to pay for their higher education. Besides, the returns to higher education are much less than those to school education (Psacharopoulos 1994; World Bank 1994). So on grounds of efficiency, it is suggested that governments should not finance higher education and it needs to be financed through student tuition and other measures of cost recovery. Secondly it is argued that public funding of higher education produces perverse effects on distribution, increasing income inequalities by transferring the resources from the poor to the rich, as the education (particularly, but not exclusively higher education) subsidies accrue more to the rich than to the poor; and further it is argued that cost-recovery measures can reduce this regressive nature in public financing of education, and thus may in fact contribute to equity in distribution of public resources (Psacharopoulos 1977; Blaug 1982; Mingat and Tan 1986; Jimenez 1987, 1989; World Bank 2000, p. 80). Reduction in education subsidies in general is also advocated arguing that subsidies in higher education could be targeted to the poor only (World Bank 1994). Thirdly, governments in developing as well as advanced countries are increasingly facing resource crunch. Economic reform policies adopted in many developing countries, broadly known as structural adjustment policies, also necessitate cuts in public expenditures across the board. Higher education is viewed as one sector where public expenditures can be reduced relatively easily. Then without significant levels of cost recovery, public budgets will not be able to meet the social demand for higher education, and higher education may suffer from a severe degree of under-investment (Psacharopoulos 1986, p. 563). Cost-recovery measures will allow an increase in the supply of and access to education (Mingat and Tan 1986; Jimenez 1989). It is also claimed by some that cost-recovery measures also contribute to improvement in the quality of education, by providing better and more serious student inputs into the system. It is assumed students will be diligent about studies and vigilant about costs, and accordingly demand seriousness from teachers and educational administrators that results in improvement in internal efficiency of education. It is also argued that any good or service provided free or at a heavily subsidised price is not valued by the consumers, and cost-recovery

Financing of higher education 105 measures like fees make the people to appreciate the value of higher education. By making higher education expensive from the students’ point of view, the ‘babysitting’ role of higher education will be reduced, thereby students’ wasting of time in education (McMahon 1988) and their ‘excessive consumption’ of higher education would be reduced (Stiglitz 1986, p. 316). There are also several other arguments. Public subsidisation is not needed to promote equity or to promote democracy (Tooley 2000). It is also contended that with heavy subsidisation by the State, higher education institutions become vulnerable to government control and they lose autonomy which is important for higher education institutions to flourish; it is inefficient to give subsidies (in the form of grants to institutions) since it offers no incentives to allocate the resources efficiently; it may not be desirable to subsidise higher education, while basic needs such as basic education and health care are not adequately funded; in other words, public resources get misallocated; etc. (see World Bank 1995).

An assessment of the arguments The debate between the two sides, familiarly known as welfarist versus neo-liberal groups, is intensifying in the recent years. How far are the arguments and counterarguments valid? Although it may be possible to marshal enough evidence to argue on either side, there are some aspects that stand out very clearly in favour of public financing of education, which are rarely questioned. For example, even those who oppose public subsidisation of education recognise that education produces a huge magnitude of externalities. Even Friedman (1962, p. 86) implicitly agreed that because of externalities associated with education it should be publicly financed. Though all the social benefits cannot be identified and measured accurately, there is still a consensus that they are substantial. The other aspects widely shared are: public and quasi-public good nature of higher education, its merit good nature, market imperfections and economies of scale. Further, many arguments made against public subsidisation do not have unqualified support either from theory or empirical evidence. Based on sound economic reasoning, Vaizey (1962, p. 34) concluded that ‘publicly financed education is a legitimate end of public activity, even to extreme exponents of “classical” economic doctrine.’ The case against public financing of higher education in the recent years was first developed in developing countries, countries that do not have adequate resources at their disposal, and where the scope for

106  Financing of higher education restructuring the public budgets, and thereby for increasing the subsidies substantially to education is rather limited. Now, the argument is no more confined to developing countries, as rich countries too face severe shortage of public resources for higher education. The argument in any place is not an argument per se against public subsidisation. There is a general argument that higher education subsidies are regressive in effect. It is also stated that public subsidies to higher education accrue to the better-off sections of the society, while those to primary education accrue to the masses and hence public subsidisation of education produces perverse effects on distribution (Psacharopoulos 1977), a finding that was proved wrong by Ram (1982). Ram has concluded in a cross-country analysis, ‘there is little evidence in favor of the postulate of a significant disequalizing effect of public subsidy to higher education. If there is such an effect all, it appears to be stronger in the DCs than in the LDCs’ (pp. 45–46). Torstel (1996) further showed that public subsidisation of education would even correct distortions in taxation and hence it is efficient to subsidise education. In a careful review of several studies, and after standardising their results, Leslie and Brinkman (1988, p. 118) found that ‘higher education in most cases does contribute to progressivity and moreover that when the analytical methods employed are most advanced, progressivity is found without exception.’ Further, as Johnson (1984) demonstrates, it may be justified to tax the poor to finance higher education of even the rich, because of the externalities associated with higher education (of the rich), which can be relatively rich in a permanent income sense. The poor (or less able) also realise a portion of the gains from the rich (or more able) receiving higher education. Public financing of higher education need not necessarily be regressive. It depends upon the nature, type and kind of public subsidies. It is also shown that the solution to regressive effects of subsidies lies in progressive taxation system, rather than in eliminating or reducing public subsidies. The argument that cost recovery in higher education will reduce income inequalities is based on the evidence that a substantial number of the students in higher education is from higher income groups. But poor students do not come in large numbers to higher education, as higher education is costly: high non-tuition costs of the students, including opportunity costs of higher education, even if tuition costs are nil. Introduction of cost-recovery measures would only aggravate the bias in the distribution of enrolments in favour of the rich. Thus any attempt to reduce subsidies would exacerbate this problem further. Moreover, essentially due to public subsidisation of higher education, today higher education in many developing

Financing of higher education 107 countries is no more elitist; it is somewhat democratised with a large proportion of students belonging to lower socio-economic strata of the society participating in higher education. That cost-recovery measures on their own restrict the access to education of the poor, and result in increased levels of inequities in education, is least challenged. For the same reason, the advocates of cost recovery suggest introduction of scholarships and loan programmes along with cost-recovery measures to reduce the ill effects. But the ill effects of the cost-recovery measures, even if supplemented by scholarships and loans cannot be eliminated altogether. With respect to the argument relating to the quality of education, it can be noted that as ability to pay and student motivation or ability to learn are not necessarily positively correlated, the students need not necessarily be more diligent as claimed by the advocates of cost recovery (see Colclough 1991, p. 202). All the measures of cost recovery are associated with major problems that neo-liberals do not necessarily acknowledge. A major trend in the recent years has been increased efforts on cost recovery through introduction of tuition fees in those societies where higher education used to be provided by charging no fees, and increase in fee rates in others where fees already existed. Though earlier a good number of countries used to provide higher education free, now except for a few countries (e.g., Brazil, Sri Lanka, Tanzania and some eastern and western European countries) a majority of countries charge fees in higher education, some small and some reasonably large amounts. Even in those very few countries changes are taking place. Tuition fee was introduced in higher education in China in 1997, in Britain in 1998, and in 2001 in Austria. It was to be introduced in Sweden in 2011. Still in a very few countries such as Finland, tuition fee is not allowed in higher education by national constitution. But such countries are very few. Some countries (e.g., India) have also hiked tuition fee selectively to equal the costs, while providing free or subsidised higher education to some or many students. This dual track system of tuition fees is common now in many countries of the former Soviet Union. This dual track of fee systems is able to generate as much as 50 per cent of the total revenue of the universities in the most recent years in Russia. On the whole, steep increases in tuition fees in the recent past have been the common feature in most countries – developing and even in advanced countries such as the United States and the United Kingdom. For example, in China, tuition fees increased between 1996 and 1999 at a rate of 40 per cent! Though tuition fees alone may not form a significant proportion of income of the universities, fees that include

108  Financing of higher education all kinds of charges collected from students, seem to be accounting for higher and higher proportions. For example, in some public universities in India, corresponding figures are found to be as high as 50–60 per cent (Tilak and Rani 2002). In South Korea and Chile all types of student fees in public universities accounted for nearly 40 per cent of the costs. The suggestion for fee reforms – mainly steep increases in fees to a very high rate of cost recovery – is based on the premise that demand for higher education is not fee-elastic and hence increases in fees would not result in decline in enrolments in higher education; and that students, given high private returns, are willing to pay for higher education. Further, it is argued that given the inadequacy of public resources, the ‘willingness to pay’ has to be tapped to the greatest extent possible. But steep increases in fees in public institutions are indeed problematic, as fees are basically regressive in nature. The adverse effects on demand for higher education of the poor are also being felt by many. Strong social protests against fee hikes are seen not only in developing countries, but also in countries such as England. Exclusion of the poor in having education will result in loss in overall equity as well as efficiency of the economy. For the same reason, very few developed countries charge fees above 15–20 per cent of costs of higher education, on average. Loan as a method of financing of higher education was introduced in recent years in many countries such as China and Thailand where it did not exist earlier, and was revitalised in many other countries where it existed with a view to increase the rates of recovery of loan amounts. Several loan programmes were changed into income-contingent loans (e.g., in Australia and the United Kingdom). Income-contingent loans were also introduced in New Zealand and South Africa; and governmentoperated loan schemes were replaced by commercial bank-­operated loan schemes in India. Loans are slowly becoming popular among students, particularly among those belonging to better-off sections of the society. But loans as a mechanism of financing education are associated with certain inherent weaknesses, apart from poor rates of recovery. First, in many societies, psychologically, loans in general are not welcome. When needed, poor people may not mind borrowing for investment in physical capital, or other productive sectors that have shorter gestation periods, or consumer durable goods (Maynard 1975), or even for necessary consumption activities like marriages, but not for ‘invisible’ human capital formation, whose benefits cannot be identified, if identified cannot be comprehensively quantified, even if they can be quantified, they are

Financing of higher education 109 not certain, and whether they are certain or not, they flow after a long gestation period. Concerns about increased levels of student indebtedness have both psychological and socio-economic dimensions, which led to reforms in Sweden where every student over the age of 16 years gets a loan. Further, the view that grants to students need to be preferred to loans is also receiving appreciation in Sweden and other countries (see Morris 1989; Shackleton 1993). Secondly, loans involve both higher perceived and higher actual personal costs than others (like grants) (Colclough and Lewin 1993, p. 172), which would affect the demand for education, particularly of the poor families, as students from lower socio-economic backgrounds would be reluctant to saddle themselves with debt burden (e.g., as reported in case of Jamaica; World Bank 1993), thus entrenching further the inequalities in access to education. As the Robbins Committee (1963, para 647) warned long ago, the loans would have ‘undesirable incentive effects’. As Alfred Marshall (1890) noted, imperfect capital markets lead to under-investment in education. As most types of loans require collateral provisions that provide lenders compensation in the event of default of loan, loans may not be available to the poor due to problems of repayment particularly in economies characterised by imperfect capital markets on the one hand and low standards of living on the other. Though a capital market does exist to some extent in some countries, it is not adequate to float educational loans efficiently. It is also feared that student loans would work as a ‘negative dowry’, and accordingly will have serious adverse effects on enrolment of girls in higher education not only in the United Kingdom (Robbins Committee 1963, p. 211), but also in many other developed and developing countries where dowry is an important social phenomenon, and also in those countries where it is not, but husbandal obligations are an accepted phenomenon. Loans also contribute to further increases in tuition and other fees, as loan amounts are related to fees, and might even contribute to vulgar forms of commercialisation of higher education. Finally, even in advanced countries, the rate of recovery of loan amounts is very low. The fundamental assumption underlying loan programmes is that higher education is not a public good, nor a social merit good, but is a highly individualised private good, as the mechanism of loans shifts the responsibility of funding higher education from the society to the families, and more importantly within families from the parents to the individual students themselves. This is indeed a dangerous assumption (see Tilak 2009b). Thirdly, generation of non-governmental resources. Governments began insisting on the public universities to generate resources from

110  Financing of higher education ‘third parties’ such as corporate sector and the community at large. Accordingly, public universities in many countries have developed various kinds of mechanisms of generating funds from the corporate sector by selling their services, mainly consultancy and sale of physical products and patents. Generation of revenues from alumni also comes close to this category, as only those alumni who are well placed in corporate sector are able to contribute to their alma mater. Corporate sector also finds it convenient to provide research funds to universities and research institutions, if such projects benefit their business. An increasing reliance on corporate funds by the universities may shift the balance of higher education in favour of those activities where the commercial possibilities are the greatest, finally changing even the very character of higher education institutions. Traditional academic disciplines of study and research give way to market-­relevant, resource-generating studies. Reliance on corporate funds may lead to distortions in research priorities and even the research outcomes (Bok 2003). Fourthly, privatisation has become the mantra of the day everywhere. Many modes of generation of funds for higher education, some of which are described earlier, do mean privatisation of public higher education. More directly, governments in many countries seem to be increasingly wedded to the neo-liberal philosophy that exemplifies the role of markets in every sphere, and they promote the growth of private higher education institutions, most of which can be described as ‘for-profit’ institutions. The wave of privatisation of higher education has become so strong that even those higher education systems that were predominantly public, began to emerge ‘predominantly private’ in a very short period, making the relative presence of the public higher education sector almost invisible (Tilak 2006, 2009a). The newly emerging private sector is not based on the principle of philosophy, but on the considerations of profit. As such, they widen inequalities in access to higher education and cause serious damage to the public good nature of higher education. It is also important to note that economies with predominant private higher education systems have not necessarily developed much – educationally or economically, or even socially and politically. Further, privatisation leads to commercialisation. In fact, it is difficult to make any distinction between the two. Both depend on profits and lead to rising costs and a decline in quality (Bok 2003; Kirp 2005; Weisbrod 1998). The shifting rationales of PPPs have always been highly dubious. Earlier they were advocated for academic reasons, improvement of curricular relevance and graduate employment. Nowadays it is argued

Financing of higher education 111 essentially for mobilisation of financial resources and to ease managerial burden on government bodies. Most of the presently talked about PPP models involve transfer of public resources to private bodies, and less public control and accountability. It is widely recognised that public and private sectors have different rather conflicting objectives and hence they are incompatible partners. Hardly any happy marriage between the two can be expected. Most often, the PPPs end up as business deals, between the weak state and the strong private sector, benefiting the private sector more. While risks and rewards are to be shared by public and private sectors under PPP, it is argued that risks are borne by the public sector and rewards accrue to private sector in these deals. In short, they mean that ‘the public shoulders all the risk, and the private sector gets all the profit’ (Stiglitz 2008; see also Loxley and Loxley 2010). As the Canadian comic politician Greg Malone puts it: PPPs ‘should be called P12s – Public-Private Partnerships to Plunder the Public Purse to Pursue Policies of Peril to People and the Planet for all Posterity’.1 Moreover, what is ex-ante visualised as a middle path, PPPs often end up being dominated by private sector and with an immensely shrunk public sector. The term ‘PPP’ is used ­nowadays mainly as a way of avoiding the negative ethos of privatisation. There exists limited robust evidence on well-functioning PPP modes in higher education. The use of the estimates on rates of return to education in support of arguments against public subsidies is found to be not proper. First, the high levels of private rates of return may not even sustain themselves long, as already experienced by some countries, reducing the students’ willingness to pay. Secondly, private rates of return will decline if public subsidies are drastically reduced or altogether withdrawn, making investment in education unattractive from individual point of view. Thirdly, and more importantly, it is now well noted that the social rates of return to education are not true social returns; except for tax benefits, no other social benefits are considered in the estimation of social rates of return to education. Hence, it is contended that rates of return cannot be used to argue against public subsidies in higher education (e.g., see Task Force on Higher Education and Society 2000, p. 39) or even for any sound public policy in education (Majumdar 1983). Further, properly estimated social returns could be much higher than not only the earlier estimates on social rates of return, but also the private rates of return (see, e.g., McMahon 1999; see also Weale 1992). There are also a few who feel that education may not qualify to become a public good, as the criteria of ‘non-exclusion’ and the

112  Financing of higher education ‘free-rider’ do not apply. It is mentioned that one’s admission to a school may mean denial to somebody else, as the number of places in schools could be restricted (see Eicher and Chevaillier 1993, p. 478). What is important is to check the applicability of the criteria of nonexclusion and free-rider, not to consumption of the service (admission in school), but to receipt of the benefits of education. After all, people who have not gone to schools cannot be excluded from getting benefits of having educated population in the neighborhood. In the overall context of globalisation, under the name of internationalisation, many universities have been following aggressive policies of attracting foreign students, and the foreign students are charged fees above the costs, so that they cross-subsidise the higher education of the native students, if not help in making surpluses. It is unfortunate that even some of the best universities of the world, such as Oxford and Cambridge also seem to be adopting the same approaches, contrary to what they used to do earlier, viz., offering scholarships to foreign students to attract and promote best talent. In the framework of the WTO, many countries find it convenient further to sell cheap higher education degrees to gullible students in developing countries by adopting different modes under the GATS (Tilak 2011). Universities are fast becoming entrepreneurial institutions both domestically and internationally. Lastly, it has to be noted that many of those who argue for increased cost recovery in higher education do not oppose public subsidisation per se; on the other hand, since there is ‘limited scope for increased public spending’, it is argued that additional resources have to be mobilised through a variety of measures (e.g., Mingat and Tan 1986). Some of them also recognise that public subsidies can increase efficiency (e.g., Arrow 1993). Unfortunately, the neo-liberal prescriptions underplay the externalities and the quasi-public good benefits of higher education. Further, Bates (1993, p. 10) argues, cost-recovery measures remove the ‘social’ nature from the economics of social goods. These measures also emphasise the role of market (and price) mechanism, private sector in general, and on the need for reduced role of the state. But the externalities or spillover benefits of education are indeed very large. Even if externalities cannot be quantified, it is clear that they do exist (Summers 1987), and so one should refrain from being dogmatic (Hope and Muller 1988, p. 40). The presence of an educated labour force increases the productivity of the less educated as well (Johnson 1984; Lucas 1988), which is an important externality. Besides, large evidence exists on the effects of education on economic growth, income

Financing of higher education 113 distribution, infant mortality, life expectancy, health conditions, fertility rates, population control, etc. (Tilak 2003). Weale (1992, p. 736) argues that these externalities are particularly important in developing countries. In addition, in case of higher education, ‘dynamic externalities’ (Stewart and Ghani 1992) may be very important. Higher education adds to the stock of knowledge of the society, which is an important externality. The externalities of education cross over generations. Higher education is also viewed as a major instrument of social mobility in developing countries like India. In short, as Snower (1993, p. 706) noted, ‘the uncompensated benefits from education are legion.’ To conclude, if examined thoroughly, many of the arguments of the neo-liberals do not stand valid. They have neither theoretical nor empirical support. As Vaizey (1962, p. 36) observed, ‘the opposition to a publicly-financed system is a political opposition to paying taxes rather than an attitude ineluctably derived from the mainstream of economic reasoning.’

Summary and conclusions Higher education policies have been in a state of ferment in many countries of the world. Conventionally, higher education, including higher professional education, is heavily subsidised by the state in almost all countries. This has been justified by the recognition of education as capable of producing externalities, as a public good (and as a quasi-public good in case of higher education), as a merit good, as a social investment for human development, and as a major instrument of equity, besides as a measure of quality of life in itself. It is well noted that markets cannot ensure optimum supply of education, and that left to the individuals or the market mechanism, social investment would be below optimum or socially desirable levels. Recent trends in funding higher education are associated with changing perceptions on the role of higher education. As a result, modern approaches begin to replace the long-cherished traditional and time-tested approaches; and business models are adopted in setting and running universities. Private universities, commercial universities, corporate universities and entrepreneurial universities are becoming the order of the day (see Tilak 2010). The several basic characteristic features of higher education, such as higher education as a public good, merit good, social investment and as a human right are under attack. In the current wave of market reforms, the long-cherished and well-established role of the State in higher education is being increasingly questioned. Most importantly, the launching of neo-liberal economic reforms in most

114  Financing of higher education developing and developed countries of the world has led to shrinking the public budgets for higher education. The reform policies clearly involved drastic cuts in public expenditures across the board, including higher education, and introduction of neo-liberal approaches to financing of higher education. Questions are being raised on the rationale of public subsidies, and it is also being indicated that it is both desirable and feasible to reduce, if not eliminate altogether, the public subsidies in the education sector. Recent evidence shows that many universities are experimenting with cost-recovery measures, generating resources from student fees, and other non-governmental sources. The effects of these cost-recovery measures on the quantity, quality and equity in higher education could be disastrous for sustainable development of a strong higher education system. I have presented in this paper a quick review of some of these arguments being made in favour of and against public financing of higher education and restated how important it is for the state to finance higher education. It is argued that significant reduction in public subsidies to education is neither feasible, nor desirable even if feasible. Basically, it has to be noted that any method of cost recovery restricts demand for education, and as education is a social merit good it is argued that it should not be rationed on the basis of ability to pay by the consumers (Weisbrod 1988). The traditional methods of funding higher education recognise these aspects. To conclude, the UNESCO World Conference on Higher Education in 1998, the Report of the International Task Force on Higher Education and Society (2002) sponsored by the World Bank and the UNESCO or the World Bank (2002) policy paper on higher education, which underscored the importance of public higher education in national development, have not made any significant impact on the policies of the governments or of the international development organisations relating to funding higher education, which tend to forget the golden rule in education, viz., the best method of financing higher education is financing by the State out of its tax and non-tax revenues. In short, it is imperative that the State shoulders a major responsibility in financing higher education. Progressive taxation, and funding higher education out of general tax revenues, may still be the best option. All other sources of finances, including fees, should at best be viewed only as peripheral ones, supplementing public expenditures. Very specifically it has to be noted that increasing reliance on modern methods of funding higher education that are rooted in the market philosophy may produce regressive effects in the system.

Financing of higher education 115

Notes * This chapter originally appeared as ‘Financing of Higher Education: Traditional Versus Modern Approaches’, Journal of Higher Education, 2(1), 28–37, 2012. Reproduced with permission. This article is the revised version of the keynote paper, presented in the International Higher Education Congress: New Trends and Issues, Turkish Council of Higher Education, Istanbul (27–29 May 2011). 1 Quoted in: Beware of those Public-Private Partnerships! KAIETEUR News, March 30, 2014. www.kaieteurnewsonline.com/2014/03/30/beware-of-thosepublic-private-partnerships/

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118  Financing of higher education Tilak, J.B.G. (2010). Universities: An Endangered Species? Journal of the World Universities Forum, 3(2), 109–127. Tilak, J.B.G. (2011). Trade in Higher Education: The Role of the General Agreement of Trade in Services (GATS). Fundamentals of Educational Planning No. 95, UNESCO International Institute for Educational Planning, Paris. Tilak, J.B.G., and Rani, G. (2002). Changing Pattern of University Finances in India. Journal of Services Research, 2(2), 5–46. Tomilinson, T.R.G. (1986). Public Education, Public Good. Oxford Review of Education, 12, 211–222. Tooley, J. (2000). Reclaiming Education. London: Cassell. Torstel, P. A. (1996). Should Education Be Subsidized? Public Finance Quarterly, 24(1), 3–24. Vaizey, J. (1962). The Economics of Education. London: Farber and Farber. Weale, M. (1992). Externalities from Education. In F. Hahn (Ed.), The Market: Practice and Policy (pp. 112–135). Basingstoke: Macmillan. Weisbrod, B. A. (1988). The Non-Profit Economy. Cambridge, MA: Harvard University Press. Weisbrod, B. A. (Ed.). (1998). To Profit or Not to Profit: The Commercial Transformation of the Nonprofit Sector. Cambridge: Cambridge University Press. World Bank. (1993). Caribbean Region: Access, Quality, and Efficiency in Education. World Bank Country Study. Washington, DC: World Bank. World Bank. (1994). Higher Education: The Lessons of Experience. Washington, DC: World Bank. World Bank. (1995). Priorities and Strategies for Education: A World Bank Review. Washington, DC: World Bank. World Bank. (2000). Attacking Poverty: World Development Report 2000/2001. New York: Oxford. World Bank. (2002). Constructing Knowledge Societies: New Challenges for Tertiary Education. Washington, DC: World Bank.

6 The privatisation of higher education*

The context Privatisation of higher education is not a new phenomenon in the world economy. In many countries of the world, the private sector has come to play either a limited or predominant role in higher education. In some countries, the origin of privatisation can be traced back a few centuries. But privatisation has assumed greater significance as a policy strategy of the development of education in recent times, essentially, but not wholly, due to stagnating – and in some countries ­declining – public budgets for education, on the one hand, and on the other, increasing social demand for higher education, manifested in slogans like ‘higher education for all’ (Roderick and Stephens 1979). There has been remarkable growth in privatisation during the last two to three decades in several countries of the world, as shown in Table 6.1. The number of private colleges and universities has increased, and enrolments in private institutions increased at a much faster rate than in public institutions. Enrolments in private institutions increased by several times in many countries – for example, in Colombia, by 1.7 times the rate of growth of public education and 2.03 times in Peru from the mid-1960s to the mid-1970s (Brodersohn 1978, p. 176). In a good number of countries the share of enrolments in private education and the number of private institutions as a proportion of the total number of institutions are more than half of the total (see Tables 6.2 and 6.3).1 Private education has grown for several reasons, which can be summed up in two categories: excess demand and differentiated demand for higher education (James 1987). First, the social demand for higher education exceeds the public supply, and the private market seeks to meet the unsatisfied demand.2 Secondly, demand for different quality (presumably high quality) and content in education (such

Table 6.1 Privatisation trends in selected countries (percentage of enrolments in private higher education) Country/region

Earlier year

Colombia Japan Republic of Korea Latin America Thailand Argentina United States

1953 1950 1955 1955 1967–71 1970 1950

Latest year 33.6 57.0 55.2 14.2 1.9 14.6 49.7

1983 1980 1986 1975 1977–81 1987 1988

Change 60.4 81.3 76.9 33.7  5.5  9.8 24.7

+26.8 +24.3 +21.7 +19.5 +3.6 −4.8 −25.0

Sources: Colombia: Patrinos (1990, p. 163); Japan and United States: Kaneko (1987, p. 27) and Cohn and Geske (1990, p. 73); Republic of Korea: Lee (1987, p. 56); Latin America: Levy (1985); Thailand: Malakul (1985, p. 56); Argentina: Balan (1990, p. 14)

Table 6.2  Enrolments in public and private higher education (%) Country

Year

Public

Private

Totala

Philippines Republic of Korea Japan Indonesia Colombia Cyprus Burma Bangladesh India Pakistan Chile Brazil Malaysia United States Argentina Papua New Guinea Thailand Spain China Sri Lanka

1984–85 1986 1989 1985–86 1983 1986–87 mid-1980s mid-1980s mid-1980s 1968 1986–87 1983 mid-1980s 1988 1987 mid-1980s mid-1980s 1981–82 mid-1980s mid-1980s

15.3 23.1 24.4 33.3 39.6 41.9 42.0 42.0 43.0 49.0 54.5 64.8 76.0 75.3 91.2 94.0 94.0 97.0 100.0 100.0

84.7 76.9 72.6 66.7 60.4 58.1 58.0 58.0 57.0 51.0 45.5 35.2 24.0 24.7 9.8 6.0 6.0 3.0 0.0 0.0

1,504 1,262 2,067 900 356 3.5 –b – – 151 233 693 – 8,500 7,531 – – – – –

 In thousands  Not available

a

b

Sources: Philippines: Elequin (1990, p. 312); Republic of Korea: Lee (1987, p. 56); Japan: Nishihara (1990, p. 26); Indonesia: Toisuta (1987, p. 73); Colombia: Patrinos (1990, p. 163); Cyprus: Koyzis (1989); Pakistan: Jimenez and Tan (1987b, p. 178); Chile: Schiefelbein (1990); Brazil: Schwartzman (1988, p. 100); United States: Cohn and Geske (1990, p. 73); Argentina: BaJan (1990); Spain: McKenna (1985, p. 461); other (Asian) countries: Tan and Mingat (1989, p. 202)

Privatisation of higher education 121 Table 6.3  Percentages of public and private sectors in higher education institutions Country

Year

Public

Private

Totala

Republic of Korea Philippines Japan Brazil United States Pakistan

1986 1985–86 1985 1983 1980 1976–77

19.6 27.6 28.8 83.9 84.5 96.l

80.4 72.4 71.2 16.l 15.5  3.9

256 1,158 1,103 124 –b 433

 Actual numbers  Not available

a

b

Sources: Republic of Korea: Lee (1987, p. 56); Philippines: Elequin (1990, p. 340); Japan and United States: Kaneko (1987, p. 23); Brazil: Schwartzman (1988, p. 100); Pakistan: Jimenez and Tan (1987a, p. 178)

as, for example, religious education) also contributes to the growth of privatisation. On the supply side, private entrepreneurs are ready to provide higher education either for philanthropic or other altruistic motives, or for profit. The dividends could be social and political gains, or quick economic profits.

Diversities in privatisation Higher education systems in the world present enormous diversity. Two major categories of higher education can be found in this context: predominantly public higher education systems, where higher education is provided and funded by the state (as it is in socialist countries, for example), and mixed higher education systems with varying roles by both public and private sectors (as found in the rest of the world). Again under the latter category, there is significant diversity from country to country. Some systems are dominated by the private sector, which can be termed as ‘mass private and restricted public sectors’ as in several market economies (e.g., Japan, Republic of Korea, Philippines and Latin American countries such as Colombia). Then there are mixed systems dominated by the state sector, as in several developing countries of South Asia (including India), Africa, and Western Europe. These systems can be aptly described as ‘parallel public and private sectors’. In some welfare states such as the Netherlands and Belgium, both coexist under state funding. Systems where the private sector has a very limited role, as in Sweden, the United Kingdom, France, Spain, Thailand, etc., can be described as ‘peripheral private sector’ (Geiger 1987a).

122  Privatisation of higher education In practice, the public/private distinction of a higher education institution is not very clear. If the criterion used to define it is its source of funding, a private university may be receiving substantial financial resources from the government and a public university may generate large amounts of resources from private sources. On the other hand, if it is to be defined on the basis of management, a private institution may be effectively controlled by the state, and may be administered according to government regulations. Alternatively, we may prefer to define institutions in terms of their character, that is, whether they be ‘profit-making’ or ‘non-profit making’. All this shows how ambiguous the term ‘privatisation’ can be. Several forms of ‘privatisation’ of higher education may be noted and classified into four categories (Tilak 1991). First, an extreme version of privatisation implying total privatisation of higher education, colleges and universities being managed and funded by the private sector, with little government intervention. These pure or ‘unaided’ private institutions do provide financial relief to the government in providing higher education, but at huge longterm economic and non-economic cost to the society. Second, there is ‘strong’ privatisation, which means recovery of full costs of public higher education from users – students, their employers or both. Due to the externalities associated with higher education, privatisation of this type may not be desirable, and of course not empirically feasible. Third, there is a moderate form of privatisation implying public provision of higher education but with a reasonable level of financing from non-governmental sources. Since higher education is a quasipublic good, 100 per cent public financing of education can be seen as economically unjustified. Since private individuals also benefit, it is reasonable that they share a proportion of the costs. So the state, students/families and the general public pay for higher education. This will be discussed in more detail later in the chapter. Lastly, there is what can be termed ‘pseudo-privatisation’, which cannot be really called privatisation. Higher education institutions under this category are private but government ‘aided’. They were originally created by private bodies, but receive nearly the whole of their expenditure from governments. Thus these institutions are privately managed but publicly funded. A substantial number of private higher education institutions in several countries belong to this category, and they receive government aid to meet almost all their recurrent expenditure. Hence strictly from the financial point of view, such private colleges do not play any significant role.3

Privatisation of higher education 123 Despite these diversities, a broad generalised analysis of the role of the private sector in higher education can be made. However, the following generalisations refer mostly to the first and the fourth categories of privatisation, as described earlier. Some of the following general features may also fail to take account of certain particularities of some private institutions which are exceptions to the rule.4

Myths and facts about privatisation The case for privatisation of higher education exists mostly on the basis of financial considerations. Public budgets for higher education are at best stagnant, and are indeed declining in real terms, more particularly in relation to other sectors of the economy. Privatisation is also favoured on the grounds that it would provide enhanced levels of internal and external efficiency of higher education, and higher quality of education; and as the private sector would have to compete with the public sector, the competition would result in improvement in quality and efficiency of not only private education but also even public higher education. In the long run, due to economies of scale, private institutions provide better-quality education at lower cost than public institutions, as in Japan. Furthermore, by reducing public subsidies to higher education, the ‘perverse effects’ of public subsidisation of higher education on income distribution could be reduced, and, through privatisation, inequities in funding education would be substantially reduced (see Psacharopoulos 1986; Psacharopoulos and Woodhall 1985; Roth 1987; James 1987). On the other hand, privatisation is opposed on at least three sets of grounds. The existing market system does not ensure optimum social investment in higher education, as externalities exist in the case of

Table 6.4 Expenditure per student in higher education (private/public) Country

Year

Ratio

Thailand Republic of Korea Japan United States

1977–81 1985 1980 1988

0:25 0:71 0:72 1:60

Sources: Thailand: Malakul (1985, p. 59); Republic of Korea: Kim (1990, p. 240); Japan: Kaneko (1987, p. 29); United States: Cohn and Geske (1990, p. 73)

124  Privatisation of higher education higher education, which is a ‘quasi-public good’ (Tilak 1991). The market system also fails to keep consumers well informed of the costs and benefits of higher education. It is likely that the costs of private education are much higher than public education as in the United States and the Republic of Korea. Finally, a private system of higher education is also insensitive to distributional considerations, and in fact contributes to socio-economic inequalities. Accordingly, public education is not only superior to private education, but private institutions cannot even survive without state support. All these arguments for and against privatisation, by its defenders as well as its opponents, are open to empirical verification, without which they may be brushed aside by the opposing side as merely politicoideological arguments. Sophisticated arguments based on hard-core evidence are rarely made in favour of privatisation (Breneman and Finn 1978, p. 6). Without empirical evidence, all the arguments, however well-formulated and articulated, remain as ‘myths’. With this in mind, a few of these myths are empirically examined in the following sections, by examining the scanty evidence available, with examples drawn from diverse countries.

The first myth There is huge demand for private higher education, as private education is qualitatively superior to public education. The facts The evidence shows that the higher quality of private education compared with public higher education is exaggerated. In Japan, public higher education provides better facilities, which are significantly related to quality, than private universities and colleges. The number of pupils per teacher in public universities is only eight, compared with 26 in private universities (James and Benjamin 1988). Although more than 75 per cent of students enrolled in higher education in the country are in the private sector, teachers in this sector constitute less than half the total. The pupil/teacher ratio in private institutions is three times the ratio in state institutions in Indonesia and the Philippines, and more than double in Thailand. The difference is not as high in Brazil, but the ratio clearly favours public higher education, the ratios being 14 and ten, respectively, in private and public universities. Private universities are found to employ more retired, part-time, and under-qualified teachers in Japan, Colombia, Brazil, Argentina,

Privatisation of higher education 125 Indonesia and in several other countries. The teachers are also paid less. Only government subsidies could raise the salary levels of teachers in private universities in Japan. On the whole, teachers in private institutions have less academic prestige. Even the availability of space per student and other facilities are reasonably higher in public universities than in private universities in Japan. In all, private universities spend less than half of what public universities spend per student (see Table 6.4). For example, in Japan, in 1980, expenditure per student was 1,982,000 yen in public universities, compared with 848,000 yen in private universities (Kaneko 1987). It is only in the United States that the difference is in favour of private universities.5 All this should indicate that quality differences are indeed more favourable to public than to private universities. Yet private universities may sometimes show better results in final examinations, as essentially they admit only the best-prepared students. However, ‘graduation of the “best” graduates is not by itself proof of the “best” education’ (Levy 1985, p. 454). Even if the quality of output is taken into consideration, that is, internal efficiency, measured in terms of academic achievement, success rates, dropout rates, failure rates, etc., private education does not compare favourably with public education. The large body of evidence available on this issue refers to the school sector, and not to higher education. Even with respect to the school sector, studies (e.g., Willms 1987) have found that the advantage of private schooling with respect to academic achievement for an average student is not significant, as reported earlier (Coleman et al. 1981; Haertel et al. 1987). The limited information available on higher education leads us to question the beliefs regarding the superiority of private education. Dropout rates are higher in private colleges than in government colleges in Thailand (NEC 1989, p. 287) and in the Philippines (Arcelo and Sanyal 1987, p. 154), and the rates of failure are high in Colombia (Patrinos 1990). The productivity of private universities in Indonesia is found to be much lower than public universities (Pramoetadi 1985, p. 33). In the Philippines, though the private sector increased accessibility to education to the people, it was found to have contributed to a deterioration in the quality and standards of higher education to such an extent that many people argued for a halt of the public laissez-faire policy in the growth of higher education and for the expansion of state-supported institutions (Tan and Alonzo 1987, p. 159). In Brazil and Peru, the quality of private higher education was described as ‘disgraceful’ (Levy 1985, p. 453).

126  Privatisation of higher education In India, except for those institutions recognised by the public sector, private colleges, which receive no aid from the government, have been increasing in number essentially due to the existence of excess demand for higher education, particularly from the upper classes and those who fail to gain admission to government colleges. Rarely is the quality of these institutions regarded as superior. Their growth also has to do with the fact that people tend to equate high fees with a high quality of education (Breneman 1988). Above all, many non-elite private universities and colleges were created, as is the case in some Latin American countries, to provide job-related training rather than higher education per se. It is also argued that as the private sector has to compete with the public sector, the efficiency of the former and, equally important, the efficiency of all higher education, including public, improves significantly. But in countries where mass private sectors prevail, or in countries where private sectors play a peripheral role, there is little scope for competition, and as a result, the private sector may turn out to be very inefficient, and even economically corrupt.6 Thus the arguments on efficiency and quality of private higher education do not withstand close scrutiny.

The second myth It is widely believed that graduates from private universities receive higher rewards in the labour market in the form of lower unemployment rates, better-paid jobs and consequently higher earnings (Jimenez and Tan 1987b; Patrinos 1990). In short, the external efficiency of private higher education is argued to be greater than public higher education, which would explain the growth of privatisation. The facts The empirical evidence does not support these assumptions. Unemployment rates among graduates from private universities are about 2.8 times higher than those from public universities in the Philippines (Arcelo and Sanyal 1987, p. 190). This is also the case in Thailand where 27 per cent of graduates from private universities are unemployed during the first year after graduation, compared with 13.3 per cent of the graduates from national universities (Setapanich et al. 1990, p. 420). Private universities in Cyprus are found to be fuelling

Privatisation of higher education 127 Table 6.5 Percentage rates of return to private versus public higher education

United States Private rates of return Thailand Private rates of return Social rates of return Philippines Japan Private rates of return Social Sciences Engineering All higher* Social rates of return Social sciences Engineering All higher*

Private

Public

15.0

18.0

10.46 9.75 8.75

19.51 9.48 12.55

7.5 7.0 6.7

9.0 9.0 7.1

7.8 7.1 6.9

7.6 6.6 5.4

Note: *Yano and Maruyama 1985, p. 80 Sources: United States: Leslie and Brinkman (1988, p. 64); Thailand: National Education Commission (1989, p. 169); Philippines: Arcelo and Sanyal (1987, p. 169); Japan: James and Benjamin (1988, ­pp. 77, 106)

the diploma-inflation problem, leading to a serious problem of graduate unemployment (Koyzis 1989, p. 18). Estimated rates of return, a summary statistic of the external or labour-market efficiency of education (presented in Table 6.5), show that public higher education pays better than private higher education, particularly from the point of view of individuals in several countries, including Japan, the Philippines and Thailand. Social rates of return for public and private university education are close in Thailand, showing little significant advantage for private higher education, even from the point of view of the society.7

The third myth Private institutions provide considerable relief from financial burden to the governments, as they are self-financing. The facts States such as Malaysia allocate huge investments – more every year – to prop up dubious private institutions, while growth and expansion of public institutions are frozen. In Thailand, while 30 per cent of

128  Privatisation of higher education students attend private institutions, the ratio of government expenditure to private expenditure on higher education is 97:3 (Malakul 1985). Explicit appropriations may be not be very high; but implicit subsidies or indirect government support to the students to purchase higher education is an important source of funding for private universities in the United States. State scholarships have exposed the myth of the pure privateness of universities like Harvard, Columbia, Yale, etc. (Levy 1986b, p. 171).8 Around 85 to 90 per cent of scholarship money in California goes to students in private universities, while private enrolments form only 10–12 per cent of the state’s total (Levy 1986b, p. 174). In Japan, 21.5 per cent of private higher education expenditure is covered by state subsidies (this figure was nil in 1951). State subsidisation of private institutions in Japan originated due to the bankruptcy of private higher education. The resources of the private institutions are boosted ‘through infusion of significant amounts of public funds’ in several countries (Geiger 1987b, p. 18). In many countries, state subsidies cover more than 90 per cent of the recurrent expenditure of private institutions. In Sweden and Canada, the government provided the capital needs of the private institutions. More than 77 per cent of the government budget on higher education in Uttar Pradesh in India goes as aid to private colleges (Muzamil 1989, p. 247). Whatever the reasons, private and public universities in Belgium and the Netherlands receive equal funding from the state (Geiger 1988). All this leads us to conclude that most private institutions are not totally private, at least from a financial standpoint.

The fourth myth The private sector responds to the economic needs of the individual and society, and provides relevant types of education. ‘The major advantage of private universities has been in responding more quickly or efficiently to market demands’ (Balan 1990, p. 17). The facts In most countries, private higher education institutions offer mainly low capital-intense disciplines of study. It is true that not only are there few private universities involved in research activities, but they are also involved in providing cheap commercial and vocational training as in the case of several Latin American countries, or in the case of ‘parallel’ colleges in Kerala in India (Nair and Ajit 1984). As can be seen in Table 6.6, no private institutions in Bolivia offer higher education

Privatisation of higher education 129 Table 6.6 Percentage of specialisation of private and public sectors in higher education in Latin America

Commercial Private Public Humanities Private Public Law Private Public Medicine Private Public Exact Sciences Private Public Engineering Private Public

Bolivia

Colombia

Ecuador

Mexico

Peru

Argentinaa

58 10

37 10

23 18

35 20

47 23

–b –

12 2

5 7

9 6

2

7 0

9

0 8

16 4

6 6

6 9

5 4

2

0 21

4 9

11

20 20

1 7

7 –

0 15

4 12

3 5

1 4

6 4

– –

0 23

17 26

8 17

17 24

8 29

– –

 Balan (1990, p. 16)  Not available

a

b

Source: Levy (1985, p. 456)

in law, medicine, exact sciences or engineering; 58 per cent specialise in ‘commercial’ courses, and 12 per cent in the humanities. In Peru, Colombia and Ecuador, a negligible proportion of private institutions offer courses in medicine and exact sciences. However, when the potential for economic profit is high, the private sector entered into professional fields and opened engineering and medical colleges, as in India (Kothari 1986). On the whole, research and broad educational needs of the economy are barely served by the private sector. Private institutions tend to provide more personal and fewer social benefits to students. The private sector responds to market demands, but only in the short term, while ‘improvement of schools requires long-term planning – not the quick alteration of a commodity to meet changing fashions’ (Ping 1987, p. 21).

The fifth myth It is generally believed that private enterprise has genuine philanthropic motives in opening private colleges and universities, which

130  Privatisation of higher education are by definition part of the ‘non-profit sector’. They also make huge investments in higher education. The facts Private institutions are largely funded either from students’ tuition fees and charges or from public subsidies. Very few private institutions make any investment from their own resources. These institutions are in fact operated in a kind of seller’s market, recovering the full costs plus profits from some source or other. For instance, in Japan 70 per cent of the costs of higher education in private institutions are met from tuition fees, while the corresponding proportion is 82 per cent in the Republic of Korea. The role of private finances other than fees, such as donations, endowments, etc., is not at all significant. In the United States, however, tuition charges account for only slightly more than one-third of the total costs. Private institutions are involved in disguised profitmaking operations in almost all countries, including Brazil and India. The private colleges that receive little public support in India expect huge donations and capitation fees, and charge abnormally high fees, ten to 20 times higher than those charged by government colleges. Though universities and colleges are, by definition, non-profit institutions, these private institutions do not merely cover their costs, they also make huge ‘quick profits’, which are not necessarily reinvested in education. Educational considerations hardly figure in this context (Tilak 1990). As a result, higher education is subject to vulgar commercialisation.

The sixth myth It is generally noted that private education is elitist, and caters to the needs of the wealthy. For example, I have hypothesised earlier (Tilak 1986), largely based on evidence on the school sector, that the benefits of education in private institutions – costly and presumably of high quality – accrue largely to the elite (as the private sector caters mainly to the needs of the elites), while the benefits of education in public schools – which are generally compelled to choose quantity rather than quality and, accordingly, provide inexpensive education – mostly for the masses. The facts Private universities generally serve a privileged clientele. In Colombia, private universities are dominated by high-income groups. Barely

Privatisation of higher education 131 2 per cent of the students are from the bottom quintile and 13 per cent from the bottom 40 per cent of the income group population. The picture is similar in Japan. In Thailand, students in private universities have parents with, on average, one and a half times the income of those of students in public universities. The democratisation of public higher education has reduced considerably the elitist character of higher education. The social elitism attached to private higher education was found to be one of the most important factors in the growth of an elite private sector in higher education in Latin American countries (Levy 1985). The private institutions lent an elitist or secular-elitist character to higher education. In countries characterised by ‘mass private and restricted public sectors’ such as Japan, the Philippines and Brazil, the evidence is not clear cut, as there are significant diversities within private universities. Some private universities are highly elitist and selective, whereas others are not. In these countries, there are a few elite private universities, and a large number of low-quality, low-cost private universities and colleges – for example, in Colombia and Brazil. On the whole, however, as fees in private universities are very high compared with public universities, only the relatively well-to-do opt for private higher education. In the United States and Thailand, for example, fees per student in private universities are five times those in public institutions; the corresponding ratio in Japan is 2.5:1. But as access to public higher education is restricted, students from the upper and professional classes are more or less forced to go to private universities. However, ‘public universities continue to be the first choice for many’ for educational and financial reasons (Levy 1985, p. 454).

The seventh myth Most public higher education institutions are politicised. Only private institutions are apolitical. The facts Basically the inadequacy of public policies results in the growth of the private sector. In some Latin American countries, as public policies favoured leftist political activism in public universities, private universities have grown to counter these forces. But to argue that private institutions are free of political forces is not true. Private education has been found to strengthen a given political ideology and to help in reproduction of class structure (Salter and Tapper 1985). In several

132  Privatisation of higher education countries, state support to private universities is based on political and ideological factors, which can be called ‘political­economic’ factors. In India, for example, more than half the private engineering colleges in Maharashtra are owned by politicians, and used for political purposes. Motives of profit, influence and political power explain the growth of these private colleges (Rudolph and Rudolph 1987, p. 296; Kothari 1986).

The eighth myth Privatisation of higher education improves income distribution, as public funding of higher education, with all its ‘perverse effects’ is generally found to be regressive (Psacharopoulos 1977; Blaug 1982). The facts As evidence from Japan – one of the few countries to have carried out elaborate investigations on this issue – shows, public universities seem to have slightly higher redistributive effects than private universities in transferring resources from the top income quintile to the others. The advantage enjoyed by public institutions is greater in the school sector (James and Benjamin 1988, p. 127). In the case of India, it has been found that the private education system contained forces that contribute to disparities, and that the state sector was not adequate enough to counteract these forces. As a result, the whole education system was found to be a contributing factor towards accentuating income inequalities (Dasgupta 1979).

An assessment of pros and cons Previously, I classified privatisation into four categories: (1) extreme privatisation (total or pure private institutions), (2) strong privatisation (full cost recovery), (3) moderate privatisation (partial cost recovery), and (4) pseudo-privatisation (government-aided private sector). The preceding analysis largely refers to the first and last forms of privatisation only. Based on available evidence on a few major countries of the world, this analysis has exploded some of the myths. In many countries, the growth of privatisation can be attributed largely to the failure of public universities, while private universities have certainly made positive contributions. Private universities in some countries, such as the United States, have contributed in important and unique ways to diversity, independence, quality, efficiency

Privatisation of higher education 133 and innovation (Breneman and Finn 1978, p. 6). In countries like Japan, each private university has its own identity, tradition, culture, etc. In contrast, public universities hardly offer any diversity or individual choice. In this sense, privatisation increases the possibilities for individual choice in the type and quality of higher education. But ‘the stress upon individualism – upon individual preference – at the expense of social responsibility and cohesiveness must be a matter of concern’ (Ping 1987, p. 291). In many countries private higher education eases the impending financial burden faced by the public authorities. One noteworthy example is Chile, where total public expenditure on higher education was reduced from $171 million in 1981 to $115 million in 1988 (Schiefelbein 1990) as private education grew. Without this, governments would either have to suppress the huge demand for higher education or find themselves in deeper financial deficit. In fact, political and economic stability would have been threatened in some Latin American countries, if it were not for the role of private sector (Levy 1985, p. 451). In most cases, however, resources come from students, not from other private sources. Private institutions supplied manpower not only to the private but to the public sector of the economy as well. Private universities are also believed to reduce the number of students going to foreign universities, as in the case of Greece (Psacharopoulos 1988). But the goals and strategies of the private sector in higher education are on the whole highly injurious to the public interest. First, the private sector has turned the ‘non-profit sector’ into a high profitmaking sector not only in terms of social and political power, but also in terms of financial returns, and as profits are not allowed in educational enterprises in several countries, private educational enterprises have resorted to illegal activities in education. When governments attempted to regulate profits by allowing state subsidies and restricting fee levels, all the private institutions found they had one thing in common – a demand for subsidies. In the first instance, state subsidies eased the financial crisis of the private universities, as in Brazil, and in the long run contributed to ‘private enrichment at public expense’. As a result of all this, many countries today have ‘bastard’ private-sector colleges, either illegally set up to do legal business, or legally created to do illegal work (Singh 1983). Secondly, by concentrating on profit-yielding, cheap, career-related commercial studies, the market-oriented private universities provide vocational training under the name of ‘higher education’ and ignore ‘broader higher education’. Private universities also totally ignore

134  Privatisation of higher education research, which is essential for sustained development of higher education. Thirdly, by charging high fees, private institutions create irreparable socio-economic inequities between the poor and rich income groups of the population. As a World Bank study noted, private education turns out to be ‘socially and economically divisive’ (Psacharopoulos and Woodhall 1985, p. 144). Access to higher education by lower-income groups is negatively affected by the rapid growth of privatisation. It is generally felt that ‘even if one assumes that the private sector is generally superior to the public sector, it does not logically follow that proportional expansion of the private sector would make for a better system’ (Levy 1985, p. 458). In short, private education is not found to be economically efficient, qualitatively superior and socially equitable. Accordingly, it is feared that increased privatisation of higher education would present more problems than solutions, as in case of Colombia (Patrinos 1990, p. 169). Thus the inappropriateness of the market metaphor in higher education is abundantly clear.

Towards a desirable pattern of privatisation Privatisation of the second and third categories mentioned earlier may not be characterised by so many problems. As higher education is a quasi-public good, 100 per cent cost recovery may not be desirable. In other words, the second type is neither desirable nor practically feasible. At the same time, since individuals do benefit from higher education, it is natural that they are required to pay for their education (Tilak 1991). The dwindling economic abilities of governments also make it necessary. Hence the notion of choice relates only to the third category. Under this category, privatisation implies provision of public education, but with reasonable levels of costs recovered from the users. In other words, it means private purchase of public education at less than full cost. In this context, there are a few major proposals being discussed in several countries, such as increase in fees, student loans, graduate tax, etc. (World Bank 1986). Some of these are being tried out in a few countries. The experience of those countries makes it clear that each of these alternatives has its own strengths and weaknesses (see, for example, Tilak and Varghese 1991). A tax on graduates would be efficient if there were a strong relationship among education, occupation and productivity, and a low degree of substitution between different layers and types of higher education, so that those with higher education do not find themselves unemployed. Student loans transfer

Privatisation of higher education 135 Table 6.7  Fees as percentage of total expenditure on higher education Country

Year

Public

Private

Total

Colombia Republic of Korea Japan United States

mid-1980s 1985 1980 1986–87

 5.0 49.6 13.3 14.5

85.0 82.3 70.4 38.7

– 73.4 54.0 22.4

Sources: Colombia: Jimenez and Tan (1987b, p. 134); Republic of Korea: Lee (1987, p. 61); Japan: Kaneko (1987, p. 24); United States: Williams (1990, p. 9)

the burden from the present to the future, and for the loan schemes to work effectively, well spread credit markets to float educational loans are required, without which the recovery of loans would be a serious problem. Of these three measures, fees seem to be the most effective. The experience of the Republic of Korea is encouraging in this regard: nearly half the costs of public higher education are met by students in the form of fees (Table 6.7). However, instead of a uniform increase in fees, selective pricing (Tilak and Varghese 1985; Jimenez 1987; Tilak 1990) may be more efficient and equitable. Under selective pricing, students belonging to different socioeconomic groups would be required to pay different rates of fees, which would be related to the ability of the students to pay and the costs of courses. Privatisation of this type would be more efficient, generating additional private resources for higher education, and also more equitable, as it would not create dual structures of higher education, as do the other forms described earlier – one for the elite and another for the masses. As Ping (1987, p. 291) noted, ‘all children matter, not just those whose parents have learnt to play the market effectively.’ In fact, privatisation of this form will be free from most of the evils of other forms discussed previously, and may assimilate the diverse strengths of privatisation.

Notes * This chapter originally appeared as ‘The Privatization of Higher Education’, Prospects: Quarterly Review of Education, 21(2), 227–239, 1991. Reproduced with permission. 1 However, even though the private market mechanism is, in general, strong, the share of the private sector in higher education in enrolments in the United States decreased from about half in 1950 to a quarter in 1988. Yet the private challenge to public system remains. See Levy (1986a). See also Levy (1986c, d).

136  Privatisation of higher education 2 For example, in 1988 the rapid growth of demand, including overseas demand, for higher education in Australia, led to privatisation of hitherto public higher education (Stone 1990). 3 Other types of classification have been proposed (see, for example, Khadira 1990). Walford (1989) refers to different types of private schools in as many as ten countries. 4 Universities, colleges and other higher education institutions, either public or private, vary in size and other characteristics. Here they are referred to as if they were homogeneous. 5 The private higher education system in the United States seems to be distinct from others with respect to several other characteristics. See Geiger (1990). 6 While Latin American countries may present an excellent example of the first kind, countries like India provide examples for the second category. 7 In Kenya, government schools are found to yield returns 50 per cent higher than private (harambee) schools, both to the individual and to society (Knight and Sabot 1990, p. 291). See also Psacharopoulos (1987) for similar data on Colombia and Tanzania. See also Samoff (1990) on Tanzania. 8 Voucher schemes also come under the same category. Many financial issues are discussed in this context by Nelson (1978).

References Arcelo, A. A., and Sanyal, B. C. (1987). Employment and Career Opportunities After Graduation: The Philippine Experience. Manila: Fund for Assistance to Private Education, for IIEP. Balan, J. (1990). Private Universities Within the Argentine Higher Educational System, Trends and Prospects. Higher Education Policy, 3(2), 13–17. Blaug, M. (1982). The Distributional Effects of Higher Education Subsidies. Economics of Education Review, 2(3), 209–231. Breneman, D. W. (1988). College Cost and Tuition, What Are the Issues? Proceedings From a National Conference, National Center for Postsecondary Governance and Finance, Washington, DC. Breneman, D. W., and Finn Jr., C. E. (1978). An Uncertain Future. In D. W. Breneman and C. E. Finn Jr. (Eds.), Public Policy and Private Higher Education (pp. 1–61). Washington, DC: Brookings. Brodersohn, M. S. (1978). Public and Private Financing of Education in Latin America: A Review of Its Principal Sources. In The Financing of Education in Latin America (pp. 146–176). Washington, DC: Inter-American Development Bank. Cohn, E., and Geske, T. G. (1990). Economics of Education (3rd ed.). Oxford: Pergamon Press. Coleman, J. S., Hoffer, T., and Kilgore, S. (1981). Public and Private Schools. Chicago: National Opinion Research Center. Dasgupta, A. (1979). Income Distribution, Education and Capital Accumulation. Washington, DC: World Bank (Draft). Elequin, E. T. (1990). Survey Report – Philippines. In H. Muta (Ed.), Educated Unemployment in Asia (pp. 305–372). Tokyo: Asian Productivity Organization.

Privatisation of higher education 137 Geiger, R. L. (1987a). Private Sectors in Higher Education, Structure, Function and Change in Eight Countries. Ann Arbor, MI: University of Michigan Press. Geiger, R. L. (1987b). Patterns of Public-Private Differentiation in Higher Education, an International Comparison. In RIHE (Ed.), Public and Private Sectors in Asian Higher Education Systems: Issues and Prospects (pp. 7–20). Hiroshima: Hiroshima University. Geiger, R. L. (1987b). Selecting the Brightest for Post Secondary Education in Colombia: The Impact of Equity. Economics of Education Review, 6(2), 129–135. Geiger, R. L. (1988). Public and Private Sectors in Higher Education, a Comparison of International Patterns. Higher Education, 17(6), 699–711. Geiger, R. L. (1990). The Dynamics of Private Higher Education in the United States, Mission, Finance and Public Policy. Higher Education Policy, 3(2), 9–12. Haertel, E. H., James, T., and Levin, H. M. (Eds.). (1987). Comparing Public and Private Schools. Vol. 2: School Achievement. New York: Falmer. James, E. (1987). The Public/Private Division of Responsibility for Education, an International Comparison. Economics of Education Review, 6(1), 1–14. James, E., and Benjamin, G. (1988). Public Policy and Private Education in Japan. London: Macmillan. Jimenez, E. (1987). Pricing Policy in the Social Sectors. Baltimore, MD: Johns Hopkins University Press. Jimenez, E., and Tan, J.-P. (1987a). Decentralized and Private Education: The Case of Pakistan. Comparative Education, 23(2), 173–190. Kaneko, M. (1987). Public and Private Sectors in Japanese Higher Education. In RIHE (Ed.), Public and Private Sectors in Asian Higher Education Systems, Issues and Prospects (pp. 21–34). Hiroshima: Hiroshima University. Khadira, B. (1990). Privatization of Higher Education. Main Stream, 28, 24–25, 7–14, April, 25–26, 35, and 24–28. Kim, T. C. (1990). Survey Report – Republic of Korea. In H. Muta (Ed.), Educated Unemployment in Asia (pp. 223–304). Tokyo: Asian Productivity Organization. Knight, J. B., and Sabot, R. H. (1990). Education, Productivity and Inequality, the East African Natural Experiment. New York and Oxford: World Bank. Kothari, V. N. (1986). Private Unaided Engineering and Medical Colleges: Consequences of Misguided Policy. Economic and Political Weekly, 21(14), 593–596. Koyzis, A. A. (1989). Private Higher Education in Cyprus: In Search of Legitimacy. Higher Education Policy, 2(2), 13–19. Lee, K. (1987). Past, Present and Future Trends in Public and Private Sectors of Korean Higher Education. In RIHE (Ed.), Public and Private Sectors in Asian Higher Education Systems, Issues and Prospects (pp. 49–70). Hiroshima: Hiroshima University. Leslie, L. L., and Brinkman, P. T. (1988). The Economic Value of Higher Education. New York: Macmillan, American Council on Education.

138  Privatisation of higher education Levy, D. C. (1985). Latin America’s Private Universities, How Successful Are They? Comparative Education Review, 29(4), 440–459. Levy, D. C. (1986a). Higher Education and the State in Latin America – Private Challenges to Public Dominance. Chicago: University of Chicago Press. Levy, D. C. (1986b). ‘Private’ and ‘Public’, Analysis amid Ambiguity in Higher Education. In Private Education: Studies in Choice and Public Policy (pp. 170–192). New York: Oxford. Levy, D. C. (1986c). Alternative Private-Public Blends in Higher Education, International Patterns. In D. C. Levy (Ed.), Private Education: Studies in Choice and Public Policy (pp. 195–213). New York: Oxford. Levy, D. C (Ed.). (1986d). Private Education: Studies in Choice and Public Policy. New York: Oxford. Malakul, P. (1985). Prospects and Problems in Higher Education Expansion in Thailand. In RIHE (Ed.), Higher Education Expansion in Asia (pp. 52–65). Hiroshima: Hiroshima University. Mckenna, J. B. (1985). University Reforms in Spain. Comparative Education Review, 29(4), 460–470. Muzamil, M. (1989). Financing of Education. New Delhi: Ashish. Nair, R. G., and Ajit, D. (1984). Parallel Colleges in Kerala. Economic and Political Weekly, 19(42/43), 1840–1847. National Education Commission (NEC). (1989). Costs and Contributions of Higher Education in Thailand. Bangkok: NEC. Nelson, S. C. (1978). Financial Trends and Issues. In D. W. Breneman and C. E. Finn Jr. (Eds.), Public Policy and Private Higher Education (pp. 63–142). Washington, DC: Brookings. Nishihara, H. (1990). Private Colleges and Universities in Japan, Glittering Prizes. Higher Education Policy, 3(2), 26–30. Patrinos, H. A. (1990). The Privatization of Higher Education in Colombia, Effects on Quality and Equity. Higher Education, 20(2), 161–173. Ping, R. (1987). Privatization in Education. Journal of Education Policy, 2(4), 289–299. Pramoetadi, I. S. (1985). Higher Education Development in Indonesia. In RIHE (Ed.), Higher Education Expansion in Asia (pp. 13–35). Hiroshima: Hiroshima University. Psacharopoulos, G. (1977). Perverse Effects of Public Subsidization of Education or How Equitable Is Free Education? Comparative Education Review, 21(1), 69–90. Psacharopoulos, G. (1986). Welfare Effects of Government Intervention in Education. Contemporary Policy Issues, 4(3), 51–62. Psacharopoulos, G. (1987). Public versus Private Schools in Developing Countries: Evidence From Colombia and Tanzania. International Journal of Educational Development, 7(1), 59–67. Psacharopoulos, G. (1988). Efficiency and Equity in Greek Higher Education. Minerva, 26(2), 119–137.

Privatisation of higher education 139 Psacharopoulos, G., and Woodhall, M. (1985). Education for Development. New York and Oxford: World Bank. Roderick, G., and Stephens, M. (Eds.). (1979). Higher Education for All? London: Falmer. Roth, D. C. (1987). The Private Provision of Public Services in Developing Countries. New York and Oxford: World Bank. Rudolph, L. I., and Rudolph, S. (1987). In Pursuit of Lakshmi: The Political Economy of the Indian State. Chicago: University of Chicago Press. Salter, B., and Tapper, T. (1985). Power and Policy in Education, the Case of Independent Schooling. London: Falmer. Samoff, J. (1990). The Politics of Privatization in Tanzania. International Journal of Educational Development, 10(1), 1–15. Schiefelbein, E. (1990). Chile: Economic Incentives in Higher Education. Higher Education Policy, 3(3), 21–26. Schwartzman, S. (1988). Brazil, Opportunity and Crisis in Higher Education. Higher Education, 17(1), 99–119. Setapanich, N., Prasatvetayakul, V., Kohengkul, S., and Chang-Jai, K. (1990). Survey Report – Thailand. In H. Muta (Ed.), Educated Unemployment in Asia (pp. 373–442). Tokyo: Asian Productivity Organization. Singh, N. (1983). Education Under Siege. New Delhi: Concept. Stone, D. L. (1990). Private Higher Education in Australia. Higher Education, 20(2), 143–159. Tan, E. A., and Alonzo, R. P. (1987). The Philippine Experience in Manpower Planning and Labour Market Policies. In R. Amjad (Ed.), Human Resource Planning: The Asian Experience (pp. 151–180). New Delhi: ARTEP, International Labour Office. Tan, J. P., and Mingat, A. (1989). Educational Development in Asia. Washington, DC: World Bank (Report No. IDP51). Tilak, J.B.G. (1986). A Comment on ‘Differences in the Role of the Private Educational Sector in Modern and Developing Countries’ by Estelle James. International Conference on Economics of Education, IREDU, Dijon. Tilak, J.B.G. (1990). Political Economy of Education in India. Buffalo: State University of New York. Tilak, J.B.G. (1991). Financing Higher Education: Research Seminar on Reform and Innovation in India Higher Education. Buffalo and Bombay: State University of New York/SNDT Women’s University. Tilak, J.B.G., and Varghese, N. V. (1985). Discriminatory Pricing in Education. Occasional Paper No. 8, National Institute of Educational Planning and Administration, New Delhi. Tilak, J.B.G., and Varghese, N. V. (1991). Financing Higher Education in India. Higher Education, 21(1). Toisuta, W. (1987). Public and Private Sectors in Indonesian Higher Education. In RIHE (Ed.), Public and Private Sectors in Asian Higher Education Systems, Issues and Prospects (pp. 71–79). Hiroshima: Hiroshima University.

140  Privatisation of higher education Walford, G. (Ed.). (1989). Private Schools in Ten Countries, Policy and Practice. London: Routledge. Williams, G. (1989/90). Changing Patterns of Finance. OECD Observer, No. 161. Willms, J. D. (1987). Patterns of Academic Achievement in Public and Private Schools, Implications for Public Policy and Future Research. In E. H. Haertel, T. James, and H. M. Levin (Eds.), Comparing Public and Private Schools. Vol. 2: School Achievement (pp. 113–134). New York: Falmer. World Bank. (1986). Financing of Education in Developing Countries, an Exploration of Policy Options. Washington, DC: World Bank. Yano, M., and Maruyama, J. (1985). Prospects and Problems in Japanese Higher Education. In RIHE (Ed.), Higher Education Expansion in Asia (pp. 68–84). Hiroshima: Hiroshima University.

7 Current trends in the private sector in higher education in Asia*

The logic of the market is rapidly becoming the only logic on the university campus. Shumar (1997, p. 94)

The issue of modern private sector in higher education has been the most dominant feature of the growth of higher education in several Asian countries during the last quarter century. Private education is not a new phenomenon in the Asian region,1 though modern private education is of a recent origin. There has been rapid growth in private higher education in many countries of the Asian region during the last two to three decades. In fact, in some countries of the region, it is a new phenomenon and rather sudden too. Even in those countries where private higher education existed earlier, governments hardly expected that it would grow so dramatically in such a short time. The wave of privatisation of higher education has been sweeping all over, covering market economies, communist societies, mixed economies and the welfare state as well. By the beginning of the twenty-first century, no country in the Asian region seems to have been spared by the private surge in higher education. Growth of private higher education can be explained generally in terms of the phenomenon of ‘excess demand’ or the phenomenon of ‘differentiated demand’ (James 1993). When the public higher education system is not able to meet the growing demand for higher education, the private sector enters to meet the excess demand. That the governments do not have resources to provide enough places of higher education has been a common argument in recent days, though some argue that it is not the lack of resources, but lack of political will and lack of faith in higher education as an instrument of development that matter in this regard. On the other hand, if people demand education

142  Private sector in higher education in Asia of a different type and quality (say, e.g., religious education), which is not provided by the public higher education system, people opt for private education that meets their specific demand. This is known as the phenomenon of differentiated demand. Both phenomena are related to some extent. In general, the growth of private education in developing countries can be largely attributed to the phenomenon of excess demand, though it is more the excess demand phenomenon than the other that is believed to be explaining the growth of private education in advanced societies. But as the distinctive role of private institutions disappear (such as private institutions providing secular education instead of religious education), it is the excess demand that becomes the only phenomenon that explains demand for private education. In addition, in recent years, the neo-liberal argument that private education is inherently more efficient and equitable than public provision of education and hence government should disinvest in sectors such as higher education, has provided further momentum to the growth of private education. It is further argued that the private sector or markets in education, contributes to overall improvement in efficiency, reduction in costs and improvement in access, by introducing and enhancing competition. These arguments, applicable to normal goods and services, are being applied to higher education, which is a public good and a social merit good. It produces a huge set of externalities, which have not only economic, but also social, political and cultural implications and an ‘experience good’ (McPherson and Winston 1993), whose product characteristics, such as quality and price, are difficult to observe in advance and can be ascertained only upon consumption. The international environment, characterised by the emergence of the World Trade Organization (WTO) and the General Agreement on Trade in Services (GATS) as a strong force in education and the structural adjustment loans provided by multilateral organisations such as the World Bank and International Monetary Fund, is also contributing to the rapid growth of private education. Because of these national and international forces, public policies are formulated in favour of private higher education either out of compulsion, or, rarely, out of conviction. Although some countries in Asia have adopted policies that are strongly supportive of the public sector and are anti-private, some adopted policies in favour of the private sector, some intend to regulate (and also deregulate) the growth of the private sector, and policies in many countries can be described as laissezfaire policies, which, in effect, work as pro-private (Tilak 2005a). Yet, one may note that very few governments in Asian countries have been active initiators of private emergence in education. The private sector

Private sector in higher education in Asia 143 entered the education arena and grew; and governments very often responded to it as a fait accompli. In most countries, the wave of privatisation is so strong and sweeping that governments appear to be losing the ideological and political and fiscal wherewithal to be the primary custodian of higher education and/or withstand the private wave. In all, we find that the Asian region is highly diverse in terms of the extent of private higher education. Geiger (1987) has classified higher education systems, based on the size of the private sector, in three categories: having a massive private sector, a parallel private sector and a peripheral private sector.2 In a system characterised by a massive private sector, public institutions of higher education are very limited in number, like in Japan and South Korea. Japan and South Korea have highly developed, strong private higher education systems, and public institutions seem to be only complementing the private ones. Systems that can be described as having a parallel private sector are those where the size of the private sector is considerable compared to the size of the public sector. Governments have even supported private sector essentially to meet the needs of varied ethnic and cultural groups of population. The private sector is complementary to the public sector in this case. The private sector of the third category is much smaller in size. However, these categories can be regarded as transitional phases: a peripheral private sector may become a parallel private system, which may eventually dominate the public sector and become a predominant private sector, subject to public policies and the overall environment. Besides Japan and South Korea, quite a few countries in South-East Asia, including Indonesia and Malaysia, have widely spread private higher education systems, which are also highly regulated by the state; in China,3 India and Pakistan there has been an unbridled growth of private higher education. In contrast, private higher education is extremely marginal in Singapore and Hong Kong, and almost nil in Sri Lanka. While Singapore, Hong Kong and Sri Lanka can be regarded as economies with peripheral private sectors, Indonesia, Malaysia and the Philippines, along with Japan and Korea, can be regarded as having massive private sectors. Even in countries like Viet Nam and Cambodia, private institutions grew in number and today exceed the number of public institutions. Private institutions in the Asian region, like in many other parts of the world, are of various types: private education supported financially by the state, private education recognised but not funded by the state and private education institutions that are neither recognised nor funded by the state. Based on management-cum-finances, Tilak

144  Private sector in higher education in Asia (1991) classified the phenomenon of privatisation of education into four types: (1) extreme degree of privatisation, where education is seen as a business, and profits – exorbitant profits – are made by private institutions; (2) strong form of privatisation, where a large part of the costs is recovered, but no profits are made; (3) moderate form of privatisation, characterised by low to moderate levels of fees, which are set much below the cost levels; and (4) pseudo-privatisation, which includes private institutions managed completely privately but financed nearly fully by the governments. Currently, almost all countries in the Asian region have private education institutions of all four types in varied proportions.4 The private higher education systems in Japan and Korea belong to category (2), South Korea figuring ahead of Japan in the rates of cost recovery through student tuition fees. Whereas India, the Philippines and other countries have had pseudoprivate institutions (that is, private institutions heavily supported by the state) for a long time, the current trend in countries like India, Pakistan and the South-East Asian countries leans towards categories (1) and (2) and more in favour of category (1). Thus, a major part of the current discourse on policies relating to private higher education focuses on type (1). Very few are interested to discuss category (3).

Stylised facts There are wide differences among several countries in the Asian region in terms of development of education and with respect to the nature and growth of private higher education, as briefly noted earlier. However, one can make a few generalised statements, somewhat as ‘stylised facts’, on the current trends in growth of private higher education in the region. Some of these stylised facts are based on robust empirical evidence and some on theoretical support as well. A few are well known, but empirical research evidence on them is nil or negligible, as it is hard to obtain any reliable empirical data. Certainly, there may be a few exceptions to these facts, but they are more or less generally valid statements. After all, a stylised fact is a simplified presentation of an empirical finding. While results in statistics can only be shown to be highly probable, in a stylized fact, they are presented as true. They are a means to represent complicated statistical findings in an easy way. A stylized fact is often a broad generalization, which although essentially true may have inaccuracies in the detail.5

Private sector in higher education in Asia 145 A few such stylised facts are described here in this chapter. It may be noted that the available database on private higher education is extremely limited. For example, the Programme on Research on Private Higher Education (PROPHE), based at the State University of New York at Albany, which attempts to build a strong database on private higher education across the globe, could get data from various sources only on a couple of indicators of private education.6 More importantly, data available from different international sources, including UNESCO Institute of Statistics and OECD, are highly suspect; they differ from each other and further differ from national sources.7 Many also do not properly define terms and their scope, such as ‘private’ and ‘higher’.8 Correspondingly empirical research on private higher education is also limited to case studies and micro-level investigations; otherwise research has been confined to broad discussion on policy issues. Despite some of these serious limitations, following are a few stylised facts on the current trends in private higher education in Asia.9 Stylised fact 1 There has been rapid growth in private higher education in the last quarter century, resulting in a significant and rapid diminution in the relative size of the public sector in higher education. The growth in private education includes growth in various types of private institutions, ranging, as described earlier (Tilak 1991), from state-recognised institutions that charge full cost as tuition, profitmaking private institutions and state-funded private institutions, to private institutions not recognised by the higher education bodies in the given country or by any international bodies.10 More than 86 per cent of the higher education institutions in Japan are private institutions; corresponding figures are 81 and 87 per cent, respectively, in the Philippines and South Korea. In Malaysia these institutions account for as much as 92 per cent and in Indonesia the figures are as high as 96 per cent. These figures given in Table 7.1 refer, in all probability, only to the government-recognised institutions and may be inclusive of state-funded private institutions. In many countries, institutions that do not receive any state support are growing very fast and they outnumber public institutions. That the neo-liberal economic policies are primarily responsible for the growth of private higher education is clear from the trends in the recent past. For example, in Malaysia, the number of private institutions has

146  Private sector in higher education in Asia Table 7.1  Number of private higher education institutions in Asian countries

Bangladesh China India Indonesia Japan Malaysia Pakistan Philippines South Korea Taiwan Thailand

Year

Private

All

% Private

2005–06 2002 2005–06 2001 2000 2000 2005–06 1999 2002 2004 2003

54 – 42.9 1,931 4,173 642 54 – – – 54

111 – 17,973 2,012 4,834 696 111 – – – 120

48.6 39.1 42.9 96.0 86.3 92.2 48.6 81.0 87.0 65.8 45.0

Source: PROPHE (2007a)

increased by more than four times, from 156 in 1992 to 706 in 2001. In India, private universities emerged only during the last decade and a half. Compared to the situation of no private universities about a decade ago, there are now more than 20 private universities and about 80 university-level institutions, known as ‘institutions deemed to be universities’. In one of the southern states in India, the number of private colleges that exclusively rely on fees has increased from negligible numbers in 1989–90, i.e., on the eve of introduction of economic reform policies in India, to more than 1,100 in 2000–01. Today, such colleges outnumber public institutions by several times. Correspondingly, the relative size of the public sector has been diminishing to negligible levels, posing problems of access to weaker sections of the society. Hardly 10 per cent of the colleges of engineering and medicine are in the public sector. Correspondingly, the relative size of the public sector diminishes to negligible levels, posing problems of access to weaker sections of the society. Hardly 10 per cent of the colleges of engineering and medicine are in the public sector. All this is in addition to the more rapidly growing menace of unrecognised institutions of higher education. These institutions do not qualify to be recognised by the government as educational institutions. Moreover, the institutions themselves do not seek recognition, as recognition by the government restricts the freedom of the institutions to adopt undesirable and questionable methods of management, relating to admission, student fees, teacher recruitment, etc. These ‘fake’ institutions can be regarded as ‘black’ or ‘illegal’ education markets. They vary in nature widely and include teaching shops or shop-like institutions, coaching centres, cram schools, etc.

Private sector in higher education in Asia 147 The numbers of private institutions and the consequent overall numbers of institutions of higher education are so large in quite a few countries that governments do not feel the need to open any new public institutions and to increase the total number of higher education institutions in their countries. In fact, the size of the private sector is so vast that no space is left for public institutions. As Umakoshi (2004, p. 39) shows in a diagram, the tiny public sector is being encircled and squeezed by the rapidly expanding private sector, as shown in Figure 7.1. With a high growth rate, private institutions outnumber public institutions in several countries of the region. The private sector hardly remains peripheral. More interestingly, some of these developing countries surpassed advanced countries in the relative extent of private higher education. Today, higher education in developing countries is more privatised than in many advanced countries. This is true with respect to the growth of all types of private education, but also

Private

Public

Private

Figure 7.1  Private sector squeezes public space Source: Adapted from Umakoshi (2004, p. 39)

148  Private sector in higher education in Asia holds true even if one confines observation to the growth of fee-relying recognised private institutions. For example, only one-fourth of the enrolments in higher education in the United States are found to have been in private institutions, and the ratio is much lower in Canada and many European countries. In contrast, the proportion is higher than two-thirds in some of the developing countries: 67 per cent in Indonesia, 68 per cent in the Philippines, etc. (OECD 2004). Except in South Korea and Japan, 75 to 100 per cent of the total enrolments in the OECD countries are in public and government-funded private institutions (Table 7.2). As many of the developing countries were to adopt pro-private approaches as a part of the package of structural adjustment policies and the like, the critics of neo-liberalism rightly view this as a conspiracy of advanced countries and international organisations against developing countries to weaken the state in general and the higher education systems in particular, so that these countries depend upon developed countries forever. The evidence also raises questions like whether the prescription of private education is good for developing countries but not for

Table 7.2 Distribution of enrolments in tertiary education (type A and research), 2002 Public Government- Indepen­ supported dent private private OECD countries USA 76 – France 87.8 0.8 Spain 87.9 – Switzerland 90.4 6.8 Austria 92.7 7.3 Italy 93.5 0 Sweden 94.1 5.9 New 97.3 1.4 Zealand Australia 100 0 Canada 100 0 Germany 100 0 UK 100 0 OECD mean 79 10.3

24 11.4 12.1 2.8 0 6.5 0 0.6

Public Government- Indepen­ supported dent private private Asian countries Philippines 31.9 Indonesia 33.5 Malaysia 77.0 Thailand 86.9

– – – –

OECD countries in Asia Korea 22.7 – Japan 27.5 –

68.1 66.5 23.0 13.1 77.3 72.5

0 0 0 0 11.4

Note: Though it is not clear, enrolments in government-supported private institutions in Asian countries seem to have been included in the ‘Independent Private’ Source: OECD (2004)

Private sector in higher education in Asia 149 advanced countries. Note that private education is advocated in developing countries not just because those countries cannot afford public education, but also for reasons of efficiency. That said, does the issue of efficiency in education assume relevance only in case of the developing countries and not for others? Perhaps what is good for advanced countries is not good for developing countries; and what is good for developing countries is not relevant for developed countries. Stylised fact 2 There has been a very significant shift from philanthropy to profits in private higher education over the years in most countries – developing and developed – but it has been more pronounced in the developing countries of Asia. In the middle of the last century, i.e., during the period immediately after attaining independence, many countries of the Asian region witnessed a sudden growth in philanthropy in education. Individuals, the corporate sector and others voluntarily made huge contributions in cash and kind to public education. Some pooled their own resources and founded private education institutions with a view to participate in national development, to supplement government efforts and to provide education to the people. Charity, philanthropy and genuine concerns to help the poor were the guiding principles in founding those institutions. Some of the best private institutions in India and many other countries belong to this category. Governments also recognised their contributions and extended financial assistance to those institutions. But over the years, there has been a drastic decline in voluntary private contributions in the form of donations and endowments to public institutions. For example, the decline in donations and voluntary contributions is quite marked during the post-independence period in India. In 1950–51, such donations, voluntary contributions and other sources formed 11.6 per cent of the total income of the education institutions (of all levels) in the country; and they declined in relative size to 4 per cent by 1986–87, the latest year for which such data are available.11 Further, there is a virtual halt in the growth of private institutions based on the principle of charity and philanthropy. Over the years, even those institutions that were set up with philanthropy and charity as the main considerations became nearly totally dependent on government funds. Moreover, the charitable private institutions have also tended to become profit-oriented commercial institutions. In contrast, the individuals, the corporate sector and others began to find that investment in education yields attractive returns quickly. The

150  Private sector in higher education in Asia very concept of profit, which was not respectable in discourses on education for a long time, has become acceptable and even fashionable. Though there are ethical and, more importantly, legal barriers in many countries to formally recognising profit as acceptable, classification of private higher education institutions as for-profit and not-for-profit institutions has become common. The presence of private investors seeking profits in education has become normal. As a result, all kinds of businessmen – petty to large, with the least knowledge of the nature of higher education – entered the education markets and began setting up institutions. For many of them there is no difference between setting up an institution of higher education and establishing a manufacturing firm, a poultry farm or a shopping mall. They are ready to offer any programme or conduct any activity, academic or not, in their institutions that yields quick profits. They also receive social and bureaucratic acceptance as educational entrepreneurs. These developments reflect an overall change in the attitudes of society towards education on the one hand and private monetary and other pecuniary gains, replacing social concerns on the other, and have contributed to a rapid growth of full-cost-recovering private institutions, also known as selffinancing private institutions, or simply profit-making institutions.12 The growth of such institutions has been so rapid in the recent years that such institutions are predominant among the private institutions, and even among the total (including public) number of institutions. Commercialisation of higher education is taking place at a fast pace.13 Although public policy in many countries favours the private sector in higher education, it does not favour commercialisation of higher education. Privatisation of education is acceptable for many governments, but not commercialisation. But it is actually difficult to differentiate between privatisation and commercialisation in education, either theoretically or in practice. Both are characterised by profit. The Concise Oxford Dictionary defines ‘commercialisation’ as a method to ‘manage or exploit in a way designed to make a profit’, and ‘profit’ as ‘a financial gain, especially the difference between an initial outlay and the subsequent amount earned’. These are also exactly the same features of privatisation, which also involves management of resources so as to make a profit. Thus, one may note no difference between privatisation and commercialisation; they are two sides of the same coin. Both are based on the same principles and considerations, the most important of which being profit maximisation. If commercialisation of education is not good for education, as is widely agreed, then nor is privatisation of education.

Private sector in higher education in Asia 151 Stylised fact 3 Contrary to the most generally held belief that private institutions provide high-quality education, in many private education institutions in the region, the quality and standards of education are poor. Except for a very few, the quality of most private institutions is of low level. This fact, which is being widely noted, may be due to a lack of serious concern for providing quality education by the management of these institutions, as their motives revolve more around making quick money than providing good quality education. More importantly, it may be due to a lack of any strong quality ensuring mechanisms instituted by the governments and other higher education regulatory bodies. These institutions also focus on less expensive programmes. For example, most of the more than 1,000 private universities in China offer only two- and three-year study programmes. In fact, many of these universities are small in size and somewhat equivalent to community colleges (Min 2004). Private institutions in many countries are too small to provide a rich and vibrating intellectual environment and adequate academic infrastructure. In contrast, many public institutions are big in size, offering undergraduate, postgraduate and research degree programmes in many disciplines, besides being involved in postdoctoral research. For example, in India, institutions such as the Indian Institutes of Technology, Indian Institutes of Management, All India Institute of Medical Sciences, the Indian Institute of Sciences, and some central and state universities, as well as the Peking University and a few other public universities in China, Singapore and Hong Kong – and many in Europe – are regarded as high-quality institutions of international standards. All the while, they are open to economically and socially disadvantaged sections of society. No detailed data are available on quality differences between public and private universities in many countries, except for anecdotal references and case studies relating to internal and external efficiency of private higher education. For example, the NASSCOM-McKinsey Report (NASSCOM 2005) found that only 25 per cent of the Indian engineering graduates were employable in the offshore IT industry, i.e., 75 per cent mostly produced by private institutions are unemployable. It is a different issue that the boom in the industry has been such that even those with the poorest education have been finding jobs. A working group on medical education in India constituted by the National Knowledge Commission found that rapid expansion of private medical and nursing colleges has led to falling standards and

152  Private sector in higher education in Asia reduced the quality of graduates. Many colleges function without adequate infrastructure, and hence provide only substandard education. Another committee on engineering education also found that private colleges typically lack vision or mission; and they are staffed mostly with inexperienced and temporary faculty with no R&D capability. In the absence of any systematic data, one may look at the World University Rankings, which are based on a variety of qualitative and quantitative indicators of university systems. In the world university ranking of the Times Higher Education Supplement (2004), it may be interesting to note that very few non-US private universities figure. Out of the 138 non-US universities that the THES ranked, only six private universities can be found on the list, as shown in Table 7.3. They include one university in North America (Canada), four in Europe and one in Asia (South Korea); none of them, however, figures in the top 50 universities. They also seem to be least-known universities. Not a single university in Japan, despite having a large number of private universities, or China, which has more than 1,200 private universities, figured in the world rankings. Research is an important factor considered in these university rankings. It is well known that few private universities focus on research. They are largely teaching institutions, that too at undergraduate level. Many of them may not have conventional graduate schools. Further, several private institutions concentrate more on marketable disciplines of study and training, paying little attention to basic sciences, social sciences, humanities and arts. All this has a bearing on the final quality of institutions and of their graduates. In contrast, some, although not many, public universities figure in these world rankings: six in Japan, five in China, one in India, two in Malaysia, two in Singapore, two in South Korea and one in Taiwan. Table 7.3  Non-US private universities in the world university rankings (2004)

1 2 3 4 5 6

Name of the university

Country

Rank

Université Catholique de Louvain Free University of Brussels Chalmers University of Technology McMaster University Pohang University of Science & Technology Nijmegen University

Belgium Belgium Sweden

 52  54  92

Canada South Korea

147 163

Netherlands

191

Source: World University Rankings, Times Higher Education Supplement (reproduced in PROPHE [2007b])

Private sector in higher education in Asia 153 Table 7.4  Public and private universities in Asia in the world university rankings, 2004 Country

Rank

Public China (5)

University

17 61 154 192 195 Hong Kong (4) 39 42 82 198 India (1) 41 Japan (6) 12 29 51 69 153 167 Malaysia (2) 89 111 Singapore (2) 18 50 South Korea (2) 118 160 Taiwan (1) 102

Peking University Tsing Hua University China University of Science & Technology Nanjing University Fudan University University of Hong Kong Hong Kong University of Science & Technology Chinese University of Hong Kong City University of Hong Kong Indian Institute of Technology University of Tokyo Kyoto University Tokyo Institute of Technology Osaka University Tohoku University Nagoya University University of Malaya Sains Malaysia University National University of Singapore Nanyang Technological University Seoul National University Korea Advanced Institute of Science & Technology National Taiwan University

Private South Korea (1)

Pohang University of Science & Technology

163

Note: Figures in parentheses denote the number of universities. Source: PROPHE (2007b)

Table 7.4 presents an exhaustive list of universities in Asia figured in top 200. In all, 23 public universities and one private university in Asia figure in this list. Despite some of the familiar weaknesses associated with such world rankings, they do reflect some broad dimensions of quality, and hence they are useful for general comparisons. In the present context, they are really telling. Stylised fact 4 Private institutions in Asia tend to rely exclusively on student fees as the source of funds.

154  Private sector in higher education in Asia Student fees are either the only source or, in a few cases, the major source of funds for private institutions. The private sector’s own contribution in terms of financing education is negligible, and whatever investments are made by the private sector are quickly recovered with interest within a short period through student fees. Fees in private institutions are generally higher than in public institutions in most countries. This is understandable and well known. Whereas in public institutions fees cover a small proportion of the total costs, mostly ranging between 0–40 per cent, they cover 100 per cent, if not more, of the costs of education in private institutions in India, China, Pakistan and many other developing countries. In contrast, in the United States the corresponding proportion was only one-quarter; in Japan 59 per cent (Futao and Hata 2004). Tuition fees yield as little as 8–15 per cent of the total revenues in the state universities and about 20–25 per cent in the private universities in the United States. Moreover, fees in private institutions in countries like the United States and Japan are only three to eight times higher than the fees in public institutions in those countries, while it is 50 to 80 times higher in countries like India. The fees are so high, that students in, for example, India seem to prefer going abroad to countries like China for medical and even engineering education than study within the country. The non-tuition and non-state sources of funding of private institutions in the United States are very important; they include voluntary donations and philanthropic contributions from the community and the corporate sector, and profits from investments made out of university corpus funds. This third source of funds – non-tuition and nonstate – is virtually absent in many developing countries of Asia. Most public higher education systems, almost everywhere, provide for elaborate mechanisms of student support – scholarships, stipends, fee waivers, etc. – as equity in education by gender and between socio-economic groups and also regional balanced development are important concerns of public education. Furthermore, diversity in the socio-economic, cultural and racial composition of students in the university campuses is regarded as an important virtue of higher education that needs to be safeguarded and nurtured. For the same reason, many private universities in the West spend considerable amounts of their budgets on scholarships and granting free tuition. For example, it is reported that universities like Harvard spend about 10 per cent of their recurring budgets on scholarships and fee waivers. This is, again, a major feature missing from private higher education in most developing countries. Very few private institutions in Asian developing countries have instituted any noteworthy student-aid mechanism.

Private sector in higher education in Asia 155 The importance of scholarships as an instrument for ensuring greater equality of access for disadvantaged but academically deserving students is hardly noted by these institutions. Students are left to themselves and to markets. In short, private education in Asian countries is not the same as in Western countries. In the West, private education grew out of considerations of philanthropy, charity and education, and to promote quality and diversity. In contrast, in developing countries, private education is growing as public investment is declining and is motivated by profit. As Lawrence Summers (2006) observed, the Asian model of private higher education that relies on profit is not the best model of development of higher education. He argues that the US model based on philanthropy is more appropriate for the developing countries that would like to set up private universities. Stylised fact 5 Economies with predominant private higher education systems have not necessarily developed much – educationally or economically, or even socially and politically. The view that large, private higher education systems will necessarily result in higher levels of development is not supported by the available evidence. Large higher education systems reflected in high gross enrolment ratios are important for development, though their effect on development also depends upon several other factors. But countries that have expanded their higher education systems, mainly relying on the private sector, do not seem to have registered significant progress. The opposite is also true: countries that have higher education systems that can be described as predominantly public have progressed well – educationally, economically, socially and politically. Exceptions to this are very few. Only Japan and South Korea seem to be the two major exceptions. In most other countries, the evidence of the fact is robust. Countries in North America and Western Europe have strong public higher education systems and some of them have no private higher education at all; and they are educationally advanced, economically prosperous, politically stable and socially cohesive. On the other hand, many countries in the Latin American region have long histories of private higher education, but they continue to remain as economically developing countries and are not socially, politically or even educationally advanced. This is also the case in the Philippines, which has a long history of private higher education, and in Indonesia, where more than 66 per cent of the students are enrolled in private higher

156  Private sector in higher education in Asia education institutions; both remain poor developing countries. This may be partly because of the poor quality of higher education offered by the private institutions. In contrast, Singapore and Hong Kong have strong public higher education systems and they are relatively more advanced. At the same time, it may be possible to argue that as governments in poor countries are not able to meet the demand for higher education, the private sector becomes dominant in those countries, whereas the governments in advanced countries can meet the demand on their own without relying on the private sector. It is, indeed, difficult to reveal the cause-and-effect relationship between the size of the private sector and development. Nevertheless, the fact remains that countries with predominant private higher education systems have remained ­underdeveloped – economically, educationally and even socially and politically. Interestingly, high enrolment in private education does not reflect significantly improved access to higher education either. Despite high enrolment in private higher education – above 66 per cent – the gross enrolment ratio in higher education in Indonesia is only 17 per cent and in the Philippines it is 28 per cent (Table 7.5). With lower enrolment in private education (23 per cent), Malaysia could increase its gross enrolment ratio to 32 per cent, and Thailand, with 13 per cent enrolment in private education, has attained a higher enrolment ratio of 43 per cent. However, the gross enrolment ratio in India is only 12 per cent, though it also has a sizeable proportion of students in private institutions. Though the relationships are not so simple and linear, they do, nevertheless, suggest that there is no automatic positive relationship between private enrolments and overall gross enrolment ratios, and clearly, increase in enrolment in private education does not necessarily increase the overall rate of participation in higher education. After all, the private sector has rarely undertaken the role of providing massive Table 7.5 Enrolments in private higher education and overall gross enrolment ratio in higher education

Philippines Indonesia India Malaysia Thailand

% Private

GER (2005)

68 67 31 23 13

28 17 12 32 43

Sources: PROPHE (2007a); UNESCO (2008) and for India: GOI (2008).

Private sector in higher education in Asia 157 access to higher education, or, of course, a role in any social reform (Kirp 2003). In fact, as the private sector knows very well, the few advantages that the private sector can gain in higher education can be realised only if the size of the sector is kept small. Stylised fact 6 Though many attempts are being made to forge public-private partnerships in education, they often tend to end in favour of privatisation of education and diminution of the role of the government. Realising the strong adverse effects of privatisation of higher education, it was often stated that private participation in education should be encouraged, but not necessarily privatisation. Some find private participation in education undesirable, but favour public-private partnership. In fact, ‘public-private partnership’ has become a popular slogan nowadays. In the area of education, mobilising private sector for public education and public support for private education have not been altogether new forms, though they assume new dimensions nowadays (Patrinos and Sosale 2007). The government-supported private system of institutions of higher education – the private sector setting up institutions of higher education with its own initial capital investments and the state financing most of the current budget needs – is indeed an important example of public-private partnership. These institutions did serve an important purpose in the early decades after independence in India and until around the 1960s in Korea, the Philippines, Indonesia and many other countries, as the private sector came in with some considerations of philanthropy. But they also tended, as argued earlier, to become profit-seeking institutions. With the changing dynamics of political economy factors, involving the corrupt political class, the shady bureaucracy and the conniving business community in a strong nexus, the involvement of the private sector caused a severe degree of distortion in allocation of public resources, pocketing for themselves disproportionate levels of public budgets, leaving very small amounts for government-run schools and colleges. This is a phenomenon that Tilak (1994) has described as ‘private enrichment and public pauperization’. Current modes of public-private partnership that are being suggested also belong to this category of private enrichment at public expense. In the current thinking, direct subsidisation by the government in the form of grants-in-aid does not figure explicitly; concepts of indirect subsidies in the form of a host of tax concessions, subsidised land, other resources, etc., are more common, as the explicitly stated

158  Private sector in higher education in Asia goal is to promote private investment and private participation. Provision of a liberal, huge grant by the government to private investors to set up educational institutions, and then leaving the institutions completely to the private investors is yet another form of public-private partnership in education that is being favourably discussed in developing countries like India. In addition, forging of university–industry links is also advocated, essentially with a view to involve private sector in education issues. Encouragement of the private sector also involves issues relating to autonomy, specifically financial autonomy for these institutions to determine levels of fees and salaries, to control utilisation (or misuse) of funds, and, in short, to make profits – normal or exorbitant. In fact, public-private partnership is also interpreted to mean restricting the public sector so that space is created for the private sector! Eventually, one may end up with a situation where there is no space for the public sector at all, as in the famous fable of the Arab and the camel. As Katrina Tomasevski (2003) rightly observed, the public-private partnerships often turn out, essentially, to be business deals and not any meaningful and desirable types of partnerships for development of education. After all, the considerations of the state and those of the private sector are widely different and they conflict with each other (see Bok 2003); and the interests of the private institutions may even conflict with not only public good aspects of education, but also national interests, as Table 7.6 shows. Moreover, the partnership is between unequals and the forces of the markets are so strong that public institutions become vulnerable and they give in to the private interests at the cost of academic and

Table 7.6 Conflicting interests of the State and private sector in higher education and research

Motivation Main concern Area of interests Duration of interest Team effort Research Time schedule Nature of universities Source: Author

State

Private

Service Knowledge Generic Long term Rarely Publish/public good Flexible Diversity

Profit Skills Specific Short term Always Strict confidential/private good Rigid Uniformity

Private sector in higher education in Asia 159 other public interests. In the same way, the competition, if any, is also between unequals, and public institutions are at a disadvantage. Gradually, the public institutions will feel compelled to become ‘entrepreneurial universities’ and ‘viable commercial’ institutions (Guinn 2002; Raines and Leathers 2003; Gittleman 2004) and eventually cease to be academic organisations with intellectual interests of creation and dissemination of knowledge. Stylised fact 7 The ability of the government in regulating markets and in ensuring that private institutions provide quality education is extremely limited in developing countries. Those who favour private education also argue for strong regulatory mechanisms, admitting that without regulation, private sector can create chaos in the higher education markets. In fact, many (e.g., Bortolotti and Perotti 2007) argue for a drastic change in the role of the government – from governance to regulatory governance. But in most developing countries the government’s ability to regulate, monitor and control the private sector, to ensure quality, to ensure strict adherence to norms and procedures, to check malpractices, etc., is extremely limited. India, for example, has a good number of regulatory bodies, including the University Grants Commission (UGC) for general higher education, the All-India Council for Technical Education (AICTE) for technical (essentially management and engineering) education, the Medical Council of India (MCI) for medical education, the Bar Council of India for legal education, etc., and also an accreditation council, the National Assessment and Accreditation Council (NAAC) for assessment and accreditation of various courses of study and the institutions of higher education. These are in addition to several government bodies, such as State Councils of Higher Education, directorates/commissionerates of higher education and ministries of higher education in the state and central governments. But it is widely held that few of these statutory and other bodies have been effective in regulating the quality and standards in higher education institutions in general and in private institutions in particular. They are not even able to check the emergence of ‘fake’ institutions and they’re cheating the gullible public by offering unrecognised degrees and diplomas. These bodies are also not able to ensure proper adherence of the private institutions to officially prescribed norms regarding fees, admissions, teacher recruitment, syllabi, etc. In a sense, the private education promoters are stronger than the state, and the governments’

160  Private sector in higher education in Asia ability to monitor private higher education is severely constrained. It is constrained by (1) sociopolitical factors, (2) the strong forces of the monopolistic and oligopolistic private education sector and (3) inherent inabilities of the regulatory organisations. This is also evident in the numerous court cases involving issues relating to private education. A large number of private universities in an Indian state were found to be illegal and hence were to be closed down recently. This, however, does not owe to any government action, but to civil (in fact, an individual) initiative and judicial intervention. Hence, the argument that the private sector needs to be encouraged in the education sector, but with a strong regulatory mechanism, does not seem to be tenable, particularly in big countries with soft governments and democracies. Countries with strong governments, like Singapore, Thailand, South Korea and Japan, may be able to manage to some extent. Some of these countries may have the advantage of size and have different political systems. Even China is found to be unable to regulate the growth and quality of private universities effectively.

Concluding observations An attempt has been made in this chapter to describe some of the important trends in private higher education in Asia as a set of stylised facts. They may look like sweeping generalisations. It is well known that stylised facts are defined as ‘observations that have been made in so many contexts that they are widely understood to be empirical truths, to which theories must fit’.14 So, they are, of course, sweeping statements, with some important exceptions. In fact, numerous caveats may have to be attached to the preceding facts. Nevertheless, I believe, they are generally true. Public policies towards private education are in a confusing state in many countries. Policies are formulated either out of compulsion, or, rarely, out of conviction. Some policies are strongly supportive of the public sector and are anti-private; some are pro-private; and some intend to regulate the growth of the private sector. Many policies can be described as laissez-faire policies, which, in effect, are pro-private. In fact, the governments in quite a few countries seem to be terribly confused regarding the role of private sector in education, the dangers involved therein and choosing between state and markets15 (Wolf 1993; Tilak 2005b). As Levy (2006) argues, it is more ‘the lack of vision’ on the part of the government than ‘a concrete vision’ that makes the public policy on private higher education in many countries. This very lack of vision has created a big policy vacuum relating

Private sector in higher education in Asia 161 to private higher education in some of the Asian countries. But even when there is no clear policy on private education, cuts in public investment in education and an overall policy neglect of higher education by the government also contribute to the growth of private education; and growth of private education in turn justifies increase in public apathy towards public higher education. Thus, public apathy and growth of private education are mutually related in a cyclic way. Absence of clear and coherent policy statements have contributed to an erratic and unbridled growth of various types of private higher education in many countries. Thus, the growth in the private sector is due to changing domestic conditions, lack of government resources, strong market forces, weak government mechanisms and the absence of clear public policies. The international environment – the introduction of neo-liberal and adjustment policies and the emergence of WTO/GATS in the area of higher education – also contributes to the rapid growth. Privatisation of higher education has been the most rapidly growing phenomenon in many countries in Asia, much to the detriment of society. The growth of the kind being experienced in many of the developing countries of Asia results in loss of social and economic equity; increase in regional disparities; erosion in quality; loss of important academic disciplines (in favour of marketable disciplines) of study; change in attitudes; erosion in national, social and educational values; public pauperisation and private enrichment; crowding-out of the public sector; loss of the public-good nature of higher education; and balanced development of higher education in terms of various disciplines of study and research (Tilak 1999). In short, one notices the Gresham’s law of money operating in the education sector as well. Belfield and Levin (2002) suggested evaluation of private systems in terms of (1) freedom of choice to the students, (2) efficiency in resource use and (3) equity or fairness in access to educational opportunities, resources and outcomes. Evidence shows that in terms of not only these three criteria, but with respect to others as well, private systems in countries are not faring satisfactorily. Why doesn’t the private sector perform well in higher education, whereas it does with respect to many manufacturing goods and services? The reasons lie in the very special characteristic features of higher education, which limit the relevance of principles of neoclassical economics and markets to education.16 First, education is not just a non-profit enterprise. It is a public good, producing a wide variety and a magnitude of externalities. The social benefits of having a large higher educated population go beyond the increase in GNP. The externalities include improvement in health,

162  Private sector in higher education in Asia reduction in population growth, reduction in poverty, improvement in income distribution, reduction in crime, rapid adoption of new technologies, strengthening of democracy, ensuring of civil liberties and even dynamic externalities, which are necessary for technical progress and economic growth and to arrest diminishing marginal returns. Realisation of these positive externalities necessitates strong public higher education systems. Furthermore, when viewing democracy, reduction of crime, economic growth, redistribution of resources, etc., as other public goods, it is important to note that higher education helps in the fulfilment of these other public goods. Secondly, education is a merit good, social benefits from which are so desirable that governments have to essentially limit consumer choice to the public sector to ensure that such goods are appropriately provided. Thirdly, public provision of higher education is advocated on the grounds of providing equality of opportunity, which is an important function of higher education. Fourthly, higher education institutions have multiple objectives and they are not just economic. They also produce multiple outputs, some tangible and many not. Further, a strong argument accepted by many in support of public provision of education is the existence of imperfections in capital markets and asymmetric information, including imperfect quality information (Dill and Soo 2004; Stiglitz 2000). These basic characteristic features of higher education stress the importance of the public sector in providing education, and at the same time explain why markets do not work in the case of higher education. Public systems are also associated with some failures; but market failures can be costlier than government failures in higher education. To conclude, private sector has a very limited role in providing good higher education that is socially relevant, that contributes to national development and that produces public goods. Hence, it has to be realised that despite economic constraints, the state has no choice but to assume complete or near complete responsibility of higher education, and that private sector can, at best, perform only a peripheral supporting role. After all, it has been widely noted for decades that ‘public education is the foundation of the prosperity of the nations’ (Cubas 1893).

Appendix

Table 7A.1 Different data sources and different estimates on enrolments in private higher education institutions in Asia UIS (Total tertiary)

India Indonesia Malaysia Philippines Thailand

PROPHE (Higher)

Year

%

Year

%

2002–03 2002–03 2002 2002–03 2003–04

0.6 61.0 31.8 66.4 18.5

2005–06 2001 2000 1999 2003

30.7 71.4 39.1 75.0 13.7

Sources: UIS (2007) and PROPHE (2007a)

164  Private sector in higher education in Asia

Notes * This chapter originally appeared as ‘Current Trends in Private Sector in Higher Education in Asia’, Higher Education Review, 41(2), 48–77, 2009. Reproduced with permission. An earlier version was presented in the International Conference on Privatization in Higher Education. Haifa, Israel: Samuel Neaman Institute, Technion University (5–8 January 2008) and was available as a part of the Proceedings of the International Conference on Privatization in Higher Education. Haifa, Israel: Samuel Neaman Institute, Technion University, http://www.neaman.org.il/Neaman/UpLoadFiles/DGallery/7123474333.pdf or http://www. neaman.org.il/Neaman/publications/publication_item.asp?fid=899&parent_ fid=489&iid=7765, published in January 2009 (online) pp. 113–43. 1 The chapter largely focuses on South Asia and East Asia, including China and Japan. 2 As the United States does not fit into this classification, it was categorised as a separate sector: the ‘American private sector’ (Geiger 1987). Levy (2008) classifies the private higher education models into two categories, viz., the US model and the global (non-US) model. In fact, based on the nature of private higher education, the existing models can be classified into four types, viz., the US model, the Western European model, the Japan-Korea model (or the J-model, as Umakoshi (2004), calls it) and the developing countries model. 3 The growth of private institutions recognised to award degrees seems to be regulated in China, while the growth of others is less or not at all regulated. 4 Public institutions are also becoming privatised – financially with reduced levels of public subsidies and increased levels of student fees and other non-governmental revenues, and managerially by corporatising the universities, as in Japan. This aspect is deliberately kept outside the purview of this chapter. 5 http://en.wikipedia.org/wiki/Stylized_facts 6 Two tables based on PROPHE are given in this paper. 7 For example, according to the UNESCO Institute of Statistics (2007), 99.4 per cent of the enrolments in tertiary education in India are in public institutions in 2002–03, in contrast to 30.7 per cent as given by PROPHE. The latter seems to be closer to reality. UIS in a personal communication admitted that a correction on India is pending. But this is not an isolated example. See Table 7A.1 in the Appendix. 8 Terms such as ‘tertiary’, ‘higher’ and ‘post-secondary’ are used to refer to higher education. Private universities are also known, causing often avoidable confusion, under different names: independent universities, nongovernment institutions, foundation universities, non-state universities, non-budget or non-subsidised institutions, etc., though terms like ‘nonsubsidised institutions’ may not be correct, as these institutions receive many indirect subsidies, like tax exemptions, and direct subsides, like subsidised public land and other raw material and resources. 9 Some of the issues discussed here are partly drawn from Tilak (2007). 10 As there is not much information on the last category, i.e., on institutions not recognised by the government, we often confine our examinations to

Private sector in higher education in Asia 165 the others only, and among the others to private institutions that do not receive any state support. 11 In 1996–97 such contributions to school education accounted for 3.6 per cent (GOI, various years). 12 Costs in neo-classical economics include profits as remuneration for entrepreneurship; so full-cost-recovering institutions can be rightly considered as profit-making institutions. 13 See Tilak (2006) for a discussion on the shift from philanthropy to profits in higher education. 14 Online Glossary of Research Economics. 15 Wolf (1993) considers both the state and markets as imperfect alternatives. 16 See Neave (2004) for a discussion on how economics, pragmatism and ideology meshed and influenced higher education policy in many parts of the world, historically and contemporarily.

References Belfield, C. R., and Levin, H. M. (2002). Education Privatization: Causes, Consequences and Planning Implications. Paris: UNESCO-IIEP. Bok, D. (2003). Universities in the Marketplace: The Commercialization of Higher Education. Princeton, NJ: Princeton University Press. Bortolotti, B., and Perotti, E. (2007). From Government to Regulatory Governance: Privatization and the Residual Role of the State. World Bank Research Observer, 22(1), Spring, 53–66. Cubas, A. G. (1893). Mexico: Its Trade, Industries and Resources [quoted in Fuller, B., Edwards, J.H.Y., and Gorman, K. (1986). When Does Education Boost Economic Growth? School Expansion and School Quality in Mexico. Sociology of Education, 59(3), July, 167]. Dill, D. D., and Soo, M. (2004). Transparency and Quality in Higher Education Markets. In P. Teixeira, B. Jongbloed, D. Dill, and A. Amaral (Eds.), Markets in Higher Education: Rhetoric or Reality? (pp. 61–86). Dordrecht, The Netherlands: Kluwer. Gieger, R. L. (1987). Private Sectors in Higher Education. Ann Arbor, MI: University of Michigan Press. Gittleman, S. (2004). An Entrepreneurial University: The Transformation of Tufts, 1976–2002. Medford, MA: Tufts University Press, University Press of New England. Government of India (GOI). (2006). Selected Educational Statistics 2004–05. New Delhi: Ministry of Human Resource Development. Government of India (GOI). (2008). Statistics of Higher and Technical Education in India 2008–09. New Delhi: Ministry of Human Resource Development. Guinn, M. (2002). The Entrepreneurial University: High-Wire Balancing Act. UAB Magazine, 22(1), Winter. http://main.uab.edu/show.asp?durki=48194. Government of India (GOI). (various years). Education in India. New Delhi: Ministry of Human Resource Development. Hata, T., and Huang, F. (2004). Governance Reforms in Japanese Higher Education System. Eight-Nation Conference on Enhancing Quality and

166  Private sector in higher education in Asia Building the 21st Century Higher Education System, COE International Seminar No. 12, 2004, Regional Institute of Higher Education, Hiroshima University, Hiroshima. James, E. (1993). Why Do Different Countries Choose a Different PublicPrivate Mix of Educational Services? Journal of Human Resources, 28(3), Summer, 571–591. Kirp, D. (2003). Shakespeare, Einstein and the Bottom Line. Cambridge, MA: Harvard University Press. Levy, D. C. (2006). The Unanticipated Explosion: Private Higher Education’s Global Surge. Comparative Education Review, 50(2), May, 217–240. Levy, D. C. (2008). Private Higher Education’s Global Surge: Emulating U.S. Patterns? (in this volume). McPherson, M. S., and Winston, G. (1993). Economics of Cost, Price and Quality in US Higher Education. In M. S. McPherson, M. O. Schapiro, and G. Winston (Eds.), Paying the Piper: Productivity, Incentives and Financing in US Higher Education (pp. 69–107). Ann Arbor, MI: University of Michigan Press. Min, W. (2004). Chinese Higher Education: The Legacy of the Past and the Context of the Future. In P. G. Altbach and T. Umakoshi (Eds.), Asian Universities: Historical Perspectives and Contemporary Challenges (pp. 53–83). Baltimore, MD: Johns Hopkins University Press. NASSCOM. (2005). Extending India’s Leadership in the Global IT and BPO Industries. NASSCOM-McKinsey Report 2005, National Association of Software and Service Companies, New Delhi, India. Neave, G. (2004). Higher Education Policy as Orthodoxy: Being One Tale of Doxological Drift, Political Intention and Changing Circumstances. In P. Teixeira, B. Jongbloed, D. Dill, and A. Amaral (Eds.), Markets in Higher Education: Rhetoric or Reality? (pp. 127–160). Dordrecht, The Netherlands: Kluwer. OECD. (2004). Education at a Glance: OECD Indicators. Paris: Organisation for Economic Cooperation and Development. Patrinos, H. A., and Sosale, S. (2007). Mobilizing the Private Sector for Public Education: A View from the Trenches. Washington, DC: World Bank. PROPHE. (2007a). PROPHE Country Data Summary (2000–2006). www. albany.edu/dept/eaps/prophe/data/International_Data/PROPHEData SummaryJUL07.doc. Program for Research on Private Higher Education. Albany: SUNY. PROPHE. (2007b). World University Rankings 2004. www.albany.edu/dept/ eaps/prophe/data/International_Data/WorldUniversityRanking2004_ModifiedFromTHES.pdf. Program for Research on Private Higher Education. Albany: SUNY. Raines, J. P., and Leathers, C. G. (2003). The Economic Institutions of Higher Education: Economic Theories of University Behavior. Cheltenham: Edward Elgar. Shumar, W. (1997). College for Sale: A Critique of the Commodification of Higher Education. London: Falmer Press.

Private sector in higher education in Asia 167 Stiglitz, J. E. (2000). Contribution of the Economics of Information to Twentieth Century Economics. Quarterly Journal of Economics, 115(4), 1441–1478. Summers, L. (2006). Private Higher Education: Opportunities and Challenges. Span (US Embassy, New Delhi), 47(3), May/June. Tilak, J.B.G. (1991). Privatization of Higher Education. Prospects: Quarterly Review of Education (UNESCO), 21(2), 227–239. Tilak, J.B.G. (1994). South Asian Perspectives (on Alternative Policies for the Finance, Control, and Delivery of Basic Education). International Journal of Educational Research (Pergamon), 21(8), 791–798. Tilak, J.B.G. (1999). Emerging Trends and Evolving Public Policies on Privatisation of Higher Education in India. In P. G. Altbach (Ed.), Private Prometheus: Private Higher Education and Development in the 21st Century (pp. 113–135). Westport, CT: Greenwood Publishing. Tilak, J.B.G. (2005a). Are We Marching Towards Laissez-Faireism in Higher Education Development? Journal of International Cooperation in Education, 8(1), April, 153–165. Tilak, J.B.G. (2005b). Higher Education in ‘Trishanku’: Hanging Between State and Market. Economic and Political Weekly, 40(37), September 10, 4029–4037. Tilak, J.B.G. (2006). Private Higher Education: Philanthropy to Profits. In Higher Education in the World: The Financing of Universities (pp. 113– 125). Global University Network for Innovation, Barcelona and Palgrave Macmillan. Tilak, J.B.G. (2007). Private Sector in Higher Education: A Few Stylized Facts. ICSSR Distinguished Lecture organised as a part of the Commemorative Celebrations of the 150th Year of First War of India’s Independence, Centre for Multi-Disciplinary Development Research, Dharwad, February 14. Times Higher Education Supplement (THES). (2004). World University Rankings. London. www.timeshighereducation.com/features/world-university-rank ings-2004/192158.article Times Higher Education Supplement. (2006). World University Rankings. London, October 4. Tomasevski, K. (2003). Education Denied. New York: Zed Books. Umakoshi, T. (2004). Private Higher Education in Asia. In P. G. Altbach and T. Umakoshi (Eds.), Asian Universities: Historical Perspectives and Contemporary Challenges (pp. 33–49). Baltimore, MD: Johns Hopkins University Press. UNESCO. (2008). Education for All by 2015: Will We Make It? Global Monitoring Report 2008. Paris: UNESCO/Oxford University Press. UNESO Institute of Statistics (UIS). (2007). Educational Trends in Perspective – an Analysis of the World Education Indicators 2005. www.uis.unesco.org/ ev_en.php?ID=692_201&ID2=DO_TOPI C (accessed April 25, 2006). Wolf, C. (1993). Markets or Governments: Choosing Between Imperfect Alternatives. Cambridge, MA: MIT Press.

8 Higher education in the BRIC countries Comparative patterns and policies *

The BRIC countries – Brazil, Russia, India and China – are experiencing a very high rate of growth in the demand for higher education. But they do not have the fiscal resources to meaningfully meet the key challenge of catering for the exploding demand without compromising on quality and equity. Each of them has adopted a stratified system of higher education – a few high-quality, elite institutions coexisting beside a large number of low-quality, mass institutions – to address the problems of access, quality, and equity, all at the same time. This chapter focuses on this aspect of development of higher education, and examines its real effects on access, quality, equity and funding, and attempts to draw a comparative picture among the BRIC countries. Higher education is in transition in many countries of the world and the approaches of governments have changed considerably during the last few decades. One can note a few major global trends in the growth of higher education in the last quarter century. First, there has been remarkable expansion of higher education, the rate of growth in enrolments being very impressive. The rates of growth are much higher in many developing countries than in advanced countries. They are also the highest in the higher education histories of developing countries. Second, much of the expansion has taken place in the private sector. In some developing countries, there has been a virtual halt in the growth of public higher education, reducing the relative size of the public sector to a negligible level. Within the private sector, it is the ‘for-profit’ higher education segment that is growing fast. Philanthropy- and ­charity-based private higher education seems to be disappearing altogether in many developing countries. Third, cost-recovery strategies have become very dominant in public policies. Student fees and loans are increasingly viewed as sound and effective methods of financing higher education, and are even viewed as feasible and desirable substitutes to public funding. Loans

Higher education in the BRIC countries 169 have replaced scholarships in public policies. Public funding has experienced a modest to serious decline in several countries, and remained at best stagnant in some others. Fourth, the expansion in higher education has been more in marketrelevant areas of study. The demand for engineering and management courses has been increasing at a faster rate than enrolments in what can be called standard or traditional areas of study. The growth in such market-relevant areas of study in higher education has been at the cost of growth in the liberal arts, humanities and sciences. Fifth, the commoditisation of higher education is considered not only inevitable but also acceptable. Profit, which is not considered right in education for a long time, has de jure entered into the educational activities in a big way. Domestic as well as international trade in higher education has become an acceptable phenomenon, along with the emergence of commercially motivated new forms of internationalisation. These and similar trends can be observed in many developing countries and even in a few advanced countries. How are the BRIC countries – Brazil, Russia, India and China, the four largest low- and middle-income developing economies – ­developing as emerging economic powerhouses and how are their higher education systems being shaped?

Similarities and differences There are several common features in the policies adopted by the BRIC countries. However, there are considerable differences in the approaches of their governments to expand higher education. These approaches are strongly influenced by their initial conditions, their social and economic histories, the political character of their states and a variety of other factors. Brazil and India are democracies. Russia, now defined as a democracy, is dominated by a complex authoritarian state-capitalist regime. China is a communist state with a statecapitalist economy which has allowed the growth of a large free-market sector. The economic regimes in Russia, India and China have undergone dramatic changes in the last three decades. They have adopted neo-liberal policies in various degrees, and policies to liberalise their domestic and external sectors, leading to large-scale privatisation of their domestic economies and policies of globalisation, including globalisation of their financial sectors, and the lowering of barriers to free trade and international movement of high-skilled labour. All have become, or tend to become, free-market economies. Interestingly, all the BRIC countries introduced these economic reform policies when

170  Higher education in the BRIC countries the power of the state diminished significantly, and these policies, in turn, further weakened the state. The changing nature, character and strength of the state has had a strong influence on quite a few dimensions of higher education – access, quality, equity, funding, governance and so on. Among the developing countries, the BRIC countries are seen as dynamic and vibrant. They are developing fast and even posing challenges to the supremacy of the developed countries. These countries are economically growing even as most other countries, particularly developed ones, continue to experience slow to negative rates of growth. Together, they currently account for about one-fifth of the world gross domestic product (GDP), compared to a meagre 8 per cent in 2001. The dynamism and vibrancy is not confined to the economic sphere. In higher education, the BRIC countries produce and supply skilled manpower to the advanced countries at such levels that sectors like information technology (IT) in Western countries critically depend on the manpower produced in India and China. China and Russia, and to a lesser extent Brazil and India, are increasingly viewed as real competitors to the Western nations, both in terms of the quantity of science and engineering graduates and their quality. It is also feared by some that the poles of technological innovation could shift from the United States, Europe and Japan to the BRIC countries. All four BRIC countries have been busy formulating and implementing various strategies to become developed countries, or rather developed countries of a distinct category. In the last two decades, there has been a rapid shift in public attention to the creation of a knowledge economy – driven by the revolution in information and communication technology. Higher education is recognised as an important instrument in the process of becoming a developed economy. The internationalisation of higher education is hotly pursued in the BRIC countries. Though China and India are the largest ‘importers’ of higher education, sending the largest numbers of students abroad, all the four have developed, or are developing, strategies to attract international students in large numbers, both for enhancing the credibility of their education programmes and generating muchneeded additional resources from foreign students. At the beginning of the 1990s, enrolments in higher education in the BRIC countries were very low. The enrolment in India in 1990 was about the same as in the United States in 1920; in Brazil, it equalled the 1935 enrolment in the United States; and in the Soviet Union, it was the same as in the United States in 1960. Enrolment in China was hardly one-third that in India. Together, they had about 8.5 million

Higher education in the BRIC countries 171 students, compared to 13 million in the United States alone. The four BRIC countries greatly expanded their higher education systems in the following years, recognising that higher education is essential for economic growth, particularly for knowledge-intensive growth. Economic growth, in turn, has had a very significant impact on enrolments in higher education in these countries. There is also pressure to expand higher education from the increasing number of youth who have completed secondary education. The pressure is high as the economic payoffs of higher education are attractive, and even seem to be increasing. So, even if the state had not seen a rapid growth in higher education as necessary for economic development, it has had to respond to the explosive growth in private demand for higher education and expand educational facilities. It is widely known that expansion in higher education helps in establishing political legitimacy, and it did so in many developing countries in the twentieth century. All the four BRIC nations are characterised by a relatively high degree of political stability and strong economic growth, even when revolutionary changes have taken place in Russia and China, or political struggles against military regimes have taken place in Brazil, or when there has been a shift away from a ‘socialistic’ economic paradigm in India. In all the four countries, the state has been a major driving force in the expansion of higher education, primarily for enhancing its political legitimacy in the domestic and international spheres, and secondarily for boosting economic growth.

Enrolments and economic development The absolute number of enrolments in higher education in all the BRIC countries has grown in leaps and bounds in the last few decades. Russia and Brazil had a relatively large base to start with and expanded their enrolments further. Among the four, Russia has the most developed higher education system, that too in the public sector. The gross enrolment ratio in Russia is now more than 80 per cent, compared to about 50 per cent ten years ago. However, Russia is now experiencing a decline in its youth population, which has been affecting the growth in enrolments in higher education. The number of secondary school graduates in 2012 was expected to be half that in 2006. With a relatively low base, China and India have expanded their enrolments very rapidly in the last 25 years. China has raised its enrolment ratio from about 3 per cent in the late 1980s to about 20 per cent in recent years, and India from about 5 per cent to about 17 per cent. In Brazil, the ratio was 32 per cent in 2008, compared to about 5 per

172  Higher education in the BRIC countries cent in the early 1970s. A study by the British Council (2012) entitled The Shape of Things to Come: Higher Education Global Trends and Emerging Opportunities to 2020 projects that China and India will remain in the first and second places in terms of the number of enrolments, with 37 million and 28 million, respectively, and Brazil will be among the world’s top five countries by 2020. If meaningful strategies are adopted, there is a chance that these regional players may emerge as academic superpowers at the global level. It is quite interesting to note that when the United States and Europe went in for expansion of higher education in the 1960s and 1970s, their levels of economic development were high, or they had high GDPs per capita, and they took much longer to raise their enrolment ratios to comparable levels. The present phase of expansion of higher education even in Russia and Brazil, the richest of the BRIC countries, not to speak of China and India, is associated with low levels of economic development and low GDP, but the expansion in all the four countries has been very fast. India is economically at the bottom among the BRIC countries, yet its growth in higher education in recent years is remarkable in terms of numbers and diversity. Further, while expansion in higher education in Europe and the United States in the 1960s and the 1970s was at public expense, the current expansion in all the BRIC nations has been predominantly privately financed – by high fees in public institutions and exclusive, fee-based private institutions. All four BRIC countries have a somewhat weak fiscal base, and dwindling or uncertain budgets for higher education. They have not been interested in, or not been capable of, raising taxes to finance higher education. This goes well with the current ideology of neoliberalism, but it also results in weaker fiscal capacity to finance higher education. Even if the ‘weak state’ in these countries decides to liberally finance higher education it is no position to do so. Public funding for higher education has been under serious strain, forcing the governments to adopt different strategies for development of higher education, including its funding. I hold that despite massive expansion, inequalities in access to higher education in the BRIC countries may not decline much, and may not influence inequalities in their societies. This is essentially because of the nature of expansion of higher education. Two overlapping factors characterise the massive expansion – one, the development of a highly differentiated system of higher education, which I prefer to call a stratified system; and two, the dominance of private higher education, resulting even in the displacement of the public sector. One of the important strategies adopted by the BRIC countries is

Higher education in the BRIC countries 173 the development of a stratified system of higher education, which has enabled them to address issues of access, equity, quality and efficiency somewhat simultaneously, though not satisfactorily and convincingly. I focus on this aspect of development of higher education, and how it is related to access, quality, equity and funding, and attempt to draw a comparative picture among the BRIC countries.

Elite institutions In all the BRIC countries, including the two erstwhile communist states, a differentiated or a stratified system of higher education has developed – a small number of elite institutions and a large mass of non-elite institutions. Enrolments in low-quality and sometimes lowcost private and public institutions are rapidly increasing, and enrolments in the few high-quality elite institutions, which are mainly public, are also increasing, but the relative size and growth of the latter is very small. A very high fraction of the increased demand for higher education is absorbed by relatively low-cost and low-quality mass institutions in Brazil, India and China, and to a lesser extent in Russia. A majority of the mass institutions in Russia and China belong to the state sector, while they are mostly private in India and Brazil. The governments in all four countries seem to focus more on their elite institutions, increasing their per student spending in them. The spending is much less on mass institutions in China and Russia, and it is largely left to the private sector in Brazil and India. China’s emphasis is on what were earlier known as national key universities or the C9 League, and the 100 universities covered by Project 2011 that began in the mid-1990s, or more particularly the top 39 universities covered under the project 985, launched in 1998. Russia concentrates its resources on national research universities. China and Russia have also intensified their efforts towards building worldclass universities. In Brazil, the issue of world-class universities has not attracted much attention, and in India, the concept takes a marginally different shape in the form of research and innovation universities. The Brazilian government encourages spending on sending graduates abroad for high-quality training, while China sends abroad its higher education leaders for training. The Indian government spends more on some of its best institutions, and has doubled the number of central universities, Indian Institutes of Technology, Indian Institutes of Management, National Institutes of Technology and similar institutions. It has also allowed huge private investment in other institutions. But even in the institutions on which the government has increased its total

174  Higher education in the BRIC countries spending, public spending per student has not significantly increased in general, especially in research and development (R&D) and major academic activities. On the whole, the gap in public spending per student in elite and mass institutions has been large and widening. Since elite institutions in India, China and Brazil are very few, their output is very small, compared to the total graduate output or the output of the mass institutions, which is of poor quality. Enrolments in elite institutions, according to crude estimates, vary between 10 per cent and 15 per cent of the total in the four countries. The underlying assumption seems to be that a few high-quality graduates are crucial and sufficient for rapid economic growth. On the whole, access to good public institutions is very limited. Historically, inequalities are quite marked in Brazil and India compared to China and Russia. And inequalities in China have increased over the years. Russia provides relatively equal access to universities. It does not have to bother too much about equity as it implemented strong policies of affirmative action during the Soviet era and also in the post-Soviet era, and higher education is now widely accessible, though the distribution of access favours the intellectual and political elite. In other words, with a fair degree of access and less inequalities in higher education, Russia feels no strong need for any kind of affirmative action for the lower socio-economic strata of its population. It is under the least pressure on equity in higher education, but this does not mean that social differentiation in opportunities for higher education and access to it do not exist in Russia. Yet, on the whole, publicly funded higher education in Russia is more equally distributed across different socio-economic strata than in the other three BRIC countries. Of the four nations, China needs to be seriously concerned about inequities. But it is not. Equity in higher education has never been a serious consideration, with China focusing on ensuring equitable access to basic education. The secondary system has expanded, but the expansion of higher education had been tightly constrained by the state for political reasons. There is no special focus on promoting equitable access to higher education or reducing growing inequalities in higher education between different social classes. It is observed that China has become a very unequal society. Economic inequalities have increased sharply, with the Gini coefficient rising from 0.3 in 1980–85 to 0.42 in 2005–08, the sharpest rise among the BRIC countries. In higher education, China has the most stratified and hierarchical system of all the BRIC countries, and it is one of the most stratified systems in the world at large. Brazil and India are traditional democracies, and

Higher education in the BRIC countries 175 are subject to considerable social and political pressure to focus on equity. But social and political pressures to improve quality are not sufficiently strong. India has a long history of affirmative action policies in higher education, as does Brazil. In India, affirmative action has expanded widely in recent years. It includes quotas in admission for various backward social groups of the population, the reimbursement of fees and other financial measures specifically targeted at the lower strata. Quotas are provided in Brazil for the admission of black, mixed race and indigenous students from public primary and secondary schools to public federal universities, which provide a better quality of education than private ones. But many middle- and upper-class students opt for private universities. Quotas in Brazil are meant to democratise education by strengthening public primary and secondary schools, and public universities. They also serve as disincentives for students to go to private schools and may check privatisation in general, including in higher education. In contrast, some policies of affirmative action recently adopted in India, such as fee reimbursement, which works in practice like vouchers, are clearly pro-private. Brazil has financial incentive programmes such as conditional cash transfers for private universities to admit students from disadvantaged groups at a reduced tuition fee. Affirmative action policies, on the whole, are relatively stronger in India than in Brazil, though they have attracted strong criticism, particularly with the widening of their scope. However, the positive effects of these policies in India and Brazil may be limited. Of late, in both countries, social democratic redistributive policies have been mild and are pushed to the background. Compared to the other three countries, India faces more serious problems in expanding higher education, improving its quality and promoting equity.

Forms of financing Interestingly, all four BRIC societies have moved from a free, highly subsidised public education model to a moderate-to-high fee-based public system and a private system where the fees are equal to, if not higher than, costs. The forms of financing introduced in China and Russia include fees and educational loans. The universities are also expected to generate resources from non-governmental sources. The measures introduced in Russia include encouraging mobilisation of resources from non-budgetary and ‘third-party’ sources, allowing the introduction of paid programmes and courses, implementing schemes for student loans, and introducing procedures for the greater financial

176  Higher education in the BRIC countries independence of institutes. Private economic pay-offs to investment in higher education are high, and are rising in all the BRIC countries, which explains the growth in demand for higher education. The high growth in private demand for higher education has allowed governments in the four countries to shift their costs to families through increased fees and loans, and reduced public funding. This transition marks a big ideological shift. It can also be described as ‘state opportunism’, which may have an ideological component, but appears to be a pragmatic way of raising non-governmental resources. China and Russia rely more on the principle of cost-sharing and ‘user charges’ in higher education, while Brazil and India rely on the private sector for expansion of higher education. In China, for example, government funding has come down from more than 80 per cent in the 1990s to below 50 per cent in 2009. The gap is filled by tuition and other user charges. Almost all students now pay tuition and hardly 20 per cent of them receive limited financial aid. In Russia, the tuition revenue per student in every category of university has increased in the last few years. In Brazil, nearly 70 per cent of the students attend private institutes. In India, two-thirds of the students in general and more than three-fourths in professional fields attend private institutions. Funding is not as serious a problem in Russia as in other countries, though higher education institutions there suffered when there were drastic budget cuts in the 1990s. Strong efforts to rebuild universities have been initiated and public spending has been raised. Even in nonelite institutions, public spending per student has been increasing, as the number of students in general, and budgeted (publicly financed) students in particular, has been static and total public funding is rising. As a result, i.e., mainly because of demographic change, per student expenditure on budgeted places has increased significantly. Some mass institutions face the threat of closure as enrolments decline, and this has made Russia think of mergers in higher education. It has been busy with mergers, but not very successfully. After all, academic mergers are rather difficult. But mergers and rationalisation could affect lowincome universities adversely. On the whole, the gap in spending on mass and elite institutions has increased in both Russia and China. In Russia, the higher education of academically bright students is heavily subsidised or even free in state institutions, while others join as fee-paying students. The number of fee-paying students has increased dramatically to 54 per cent of the total and it is set to increase further. According to some estimates, it is even as high as 85 per cent in some public institutions. Russian public universities find this mechanism quite attractive to augment income, and at the same time provide

Higher education in the BRIC countries 177 equal quality education to all. In India, academically bright students are admitted to subsidised public institutions of higher learning, which are of a relatively high quality, and the rest join low-quality private institutions that charge fees several times higher than that in public institutions. This is particularly the case in technical and professional education. In private institutions, which rely fully on fees, also known as self-financing, expenditure per student is low, though income per student through fees is quite high. In China, the majority of students from the lower socio-economic strata end up in vocational colleges. Public expenditure per student (PPP$) is high in Brazil ($2,907) and Russia ($2,889), but much less in India and China. In Brazil and India, it has declined over the years, while in Russia and China, it has increased. Brazil and Russia spend 5.1 per cent and 4.1 per cent of their GDP, respectively, on education (2008), while India spends 3.7 per cent and China much less. India has a goal of spending 6 per cent of GDP on education, and the recommendation in China was 4 per cent. These goals have been pending for the last three decades. There are constitutional norms in Brazil that stipulate that not less than 15 per cent of the government’s expenditure should be allocated to education, which is strictly adhered to. Brazil often spends higher than this, and the 2008 figure was 16.1 per cent. Public expenditure on higher education constituted 0.9 per cent of GDP in Brazil in 2008, 0.7 per cent in Russia and 0.5 per cent in China. It is the least in India. Brazil and China have stepped up their expenditure, particularly on research, in recent years. As a result, their research output and patents have significantly increased, though much of it is applied research – short term and strategic, not basic and fundamental.

Control and lack of it On the whole, China and Russia heavily subsidise higher education. In India and Brazil, two-thirds to three-fourths of the students are in private institutions and most of them are not subsidised by the state. Private higher education has now become an integral part of the overall system in India, and it has been so for a long time in Brazil. The private education system is still to expand to considerable levels in Russia and China, though they are also promoting the growth of private higher education. About 20 per cent of the students in China and Russia now attend private universities. A heavy reliance on the private sector is a poor strategy, and it may reflect that the state is ‘weak’ in resisting market forces and unwilling to accord high priority to public higher education. Poor student outcomes and the low value added by private

178  Higher education in the BRIC countries institutions in Brazil and possibly India go against the argument of private efficiency. The high growth of private education has serious implications for economic efficiency and social equity. While private higher education is growing in all four BRIC countries, the difference between the growth in China and Russia on the one hand and India and Brazil on the other is that it is happening under strict government control in the former, while it is out of government control in the latter and left to the mercy of the markets. The Indian and Brazilian governments are not in a position to develop any strong, effective regulatory mechanisms. The state in India is not able to regulate the growth in private higher education, or regulate commercialisation, and failing standards. In a sense, the capacity of the state to steer the system of higher education is on the decline. It is important to realise that a well-organised state is crucial even in market economies, and its need is much higher in developing countries like India and Brazil where markets are imperfect. The state in Russia – the central government – has a strong control on the higher education system. Russia’s universities receive central funding, and no local funding, which partly explains the tight central control. The Indian federal system provides for a decentralised system in the development and governance of higher education. The union government has little control over the overall growth of higher education, and resource-starved state governments rely heavily on the private sector for expansion. The role of the union government is confined to a few universities and institutions of higher education that are known as central universities and central institutions of higher education. The union government formulates policies and regulations mostly through the University Grants Commission (UGC) and other public bodies. A majority of the higher education institutions are set up by state governments. So, much of the governance of higher education in India is left to state governments. As a vast majority of higher education institutions are private, one can state that they are controlled very little by the union or state governments. In short, both governments are very weak in effectively governing the growth of higher education, which is left to the markets or laissez-faireism. Brazil also has a highly decentralised system with little direct control over its higher education system. Historically, the private sector has been dominant in Brazil’s higher education system. Private institutions enjoy a high degree of freedom with a minimum of state control, but this has not necessarily meant they are all doing well. In general, higher education institutions and faculties in Brazil have enjoyed great autonomy (except for periods of military dictatorship), more than in any

Higher education in the BRIC countries 179 other BRIC country. So, elite institutions in Brazil have been able to produce quality output and innovations. In terms of the global innovation index 2012, prepared by the Institut Européen d’Administration des Affaires (INSEAD, or European Institute of Business Administration) eLab and the World Intellectual Property Organisation (WIPO, a specialised agency of the United Nations), Brazil, with a rank of 58, is far ahead of India (64), but behind China (34) and Russia (54). Brazil is not as aggressive as China in focusing on elite universities with extra investments. The centralised power of the Communist Party explains the tight control of the Chinese government on universities and other intellectual activities. This, along with Confucian values, is generally felt to hamper innovation in research. The Russian and Chinese systems are controlled by large bureaucracies. In China, the hierarchy is rigid and the administration is non-transparent. In both countries, academies have a large role, and they control higher education. They also lay special emphasis on promoting research in the elite institutions. In the recent past, a good number of higher education institutions in China have been transferred to the control of regional authorities. Yet, with self-censorship and state controls, academic autonomy is rather restricted in China and Russia.

Question of quality With the rapid growth of higher education, particularly private higher education, quality has become a matter of serious concern. As the BRIC countries tend to focus on improving quality in only a few elite institutions, the gap between the elite institutions and the mass ones is very wide, and the overall quality of higher education is very low. Very few universities figure in the top 200 in global university rankings. No Indian university figures in the top 200 and only a few from China and Russia figure on such lists. A majority of the institutions in India and Brazil are private, and the quality of most of these institutions is very low. Cost efficiency in operations, not quality, is the main concern of private institutions. Incentives to improve quality are non-existent or very weak in Brazil, India and China, more particularly in non-elite institutions. Funding is not related to quality and performance. Some incentives that exist, say, in China, can be described as ‘market-like incentives’ that work in elite institutions. Teachers with doctoral qualifications are few in Brazil, China and especially India. In Russia, the situation is much better and is comparable to the United States. India suffers from a grave shortage

180  Higher education in the BRIC countries of qualified faculty. Professional education suffers more. Though qualified teachers (with PhDs) are reasonably well available in Brazil, mass private institutions hire only a few of them. Brazil and China have a higher proportion of qualified PhDs. Legislative measures to raise the minimum educational qualifications of faculty members and measuring outcomes are some of the steps being attempted in Brazil to raise the quality of higher education. Among the four, Brazil is the most focused on improving quality system-wide, but the approach is influenced by market-relevant quality and marketoriented competition. China is more concerned about quality than India and Brazil, but only in elite institutions. In terms of publications, China surpasses the United States. Brazil and India have improved, but their absolute numbers are still very small. China decided as early as 1997–98 to invest significantly in a limited number of universities. It is committed to developing elite institutions, research-oriented universities and world-class universities. In a sense, it very early on envisaged emerging as a world economic leader. This explains much of its policies and approaches regarding investment in quality in elite institutions and the neglect of mass institutions, which has led to the development of a stratified system. Russia’s concern with quality and measures to improve it began a decade later than China. Both China and Russia have intensified their effort to fortify a few elite universities to produce high-quality research. Strongly focusing on producing world-class universities, China filters away candidates from higher education with the help of entrance examinations introduced after the Cultural Revolution, and diverts large numbers of secondary school graduates to pre-tertiary vocational and other programmes. China could expand its higher education with less funding because faculty salaries are very low in many universities, and this is partly true in Russia as well. According to a 28-country study (Altbach et al. 2012), in terms of average salaries (in PPP$), Russia and China are at the bottom of the list, ahead of only Armenia. Though salaries in India and Brazil are high, these two countries and China have allowed student-faculty ratios to increase to between 15 and 26. In Russia, the ratio has improved over time and is now 11 students per faculty member. In the Organisation for Economic Co-operation and Development (OECD) countries, the average is below 15. In Brazil, India and China, the lack of qualified faculty has become a serious problem, and the number of part-time teachers and contractual appointments is rising – more, of course, in mass institutions than in elite universities.

Higher education in the BRIC countries 181

Technical education Influenced by the fast-emerging global knowledge economy, all the BRIC countries seem to be focusing on developing strong and widespread technical education. In Russia and China, there is an increasing demand for high-skilled technical manpower, and the situation is no different in the recently liberalised Indian and Brazilian economies. The increasing demand is not confined to domestic labour markets, and the international demand for engineering graduates is high. The economic pay-off of engineering and technical education in all four countries is estimated to be high, which explains the high demand for courses in engineering and computer sciences. Engineering and computer science education is growing rapidly in all the countries, sometimes even at the cost of other disciplines. Today, the BRIC countries produce more than half the world’s engineering graduates each year. The relative number of engineering students is the smallest in Brazil, followed by Russia, where one-sixth of the students in higher education are enrolled in engineering institutions. In contrast, one-fourth of the student population in India and nearly one-third in China are enrolled in engineering institutions. In the United States and a few other advanced countries, the corresponding share has actually declined. Interestingly, whereas half the students in Russia are enrolled in postgraduate courses, their numbers are insignificant in the other three countries. The transition rate from postgraduate courses to PhD courses is a high 52 per cent in Brazil, compared to 27 per cent in China, 4 per cent in Russia and 1 per cent in India, according to the World Bank’s international benchmarking study (World Bank 2012). In terms of producing engineering graduates, China and India exceed all others in the world. In India, engineering education seems to have over-expanded, and there are signs of a contraction, particularly in low-quality private institutions. Yet, in all four BRIC countries, the private rates of return are high for engineering education. Russian technical higher education institutions were meant to produce manpower for state-sector industries, which are now in decline. This is reflected in the falling number of students in technical education. Highquality engineering education is confined to elite institutions in India and China. With its focus on elite institutions, China has been aggressive in encouraging publication and patents. According to preliminary findings of the international benchmarking study (World Bank 2012), with about 25,000 articles (in English) on engineering published in 2011, China ranked very high, this as compared to about 5,000 in India, 3,000 in Russia and 2,000 in Brazil. Russia and India also fare

182  Higher education in the BRIC countries very badly in terms of publications per faculty. China also produces a huge number of 30,000 engineers with PhD degrees every year, while the corresponding number is 4,500 in India. Even the United States turns out only about 25,000 PhD engineers a year. The high production of engineers and their migration from the BRIC countries have helped the West. Brazil and India produce very few high-quality scientists and engineers. India is paradoxically the world’s largest exporter of IT services after the United States. But unlike Brazil, the Indian state invests little in technical education. Its expenditure on R&D per student is insignificant, the lowest among the BRIC countries, while Brazil spends the highest. Given that elite institutions are few and the focus on quality is very low in other institutions, scientists in all four BRIC countries tend to migrate to the West. China has been working on several incentives to persuade its top academics abroad to return home. India hopes its changed economic and academic environment will lure some of its diaspora back. There are some signs of a brain gain, though the numbers are very small – 9 per cent of the Chinese students in science and engineering in the United States, 11 per cent of the Indian students and 52 per cent of the Brazilian students have plans of returning home after completing their studies. But a large number still prefer to stay back, mainly because the starting salaries for graduates in all four BRIC countries are very low.

Conclusions Let me conclude by summarising the main trends in higher education in the BRIC countries. With rapidly growing higher education systems, the BRIC countries are transforming themselves from regional players to global players in higher education. Each of these countries is a major player in its region. Brazil has the most vibrant higher education system in Latin America, and its public universities are research powerhouses for the region. India is the best in south Asia, and if its language advantage is factored in, may even be one of the best in Asia. China with a small but increasing number of universities in the global university rankings is emerging as a major player in East Asia, competing with Singapore and South Korea. Russia is much ahead of the other three BRIC countries, but it still has a long way to go to emerge as a major player in Europe. The BRIC countries are experiencing a very high rate of growth in the demand for higher education. But given that the fiscal capacity of the state in all the four countries is under strain, they have not been able to meaningfully meet the key challenge of catering for the

Higher education in the BRIC countries 183 exploding demand without compromising on quality and equity. The state in each of the countries has adopted a stratified system of higher education – a few high-quality, elite institutions coexisting beside a large number of low-quality, mass institutions – to address the problems of access, quality and equity, all at the same time. The elite and the mass in higher education are not necessarily defined in economic terms. The elite institutions are of high quality, but they are mostly publicly funded and ensure fair access to all. Public funding is highly skewed in favour of these institutions. The mass system receives less public funding, offers poor-quality education, and is mostly left to the private sector. It is not the poor, but those from the middle- and highincome groups, who can afford high fees, who attend these institutions. The mass institutions produce large numbers of graduates, while the elite ones produce a small number of high-quality graduates. There is a chance that some of these elite institutions may figure among the top 100 or 200 universities in global rankings. Interestingly, the development of a stratified system of higher education has not encountered any significant level of public opposition even in democratic India and Brazil. For, the policy has allowed rapid expansion of the higher education system, partly supported by policies of affirmative action, and it has met the educational aspirations of the high- and middle-income groups. With a clear long-term policy and heavy investments in the quality of higher education and R&D, though in a few elite institutions, China seems to be relatively successful in developing higher education and its economic outlook seems promising. Russia is yet to make significant moves to transform its higher education system to suit the needs of the twenty-first-century global knowledge economy. Though highly innovative and open, Brazil faces the challenges of quality and inequity created by a huge private sector. India, lacking a coherent long-term policy, confronts much bigger challenges in ensuring quality, quantity, equity and governance in higher education. To sum up, while all the four BRIC countries face tough challenges in improving all aspects of higher education, they are more formidable in the case of India, while macro-economic conditions seem to favour China over the others. I end with a few questions that researchers in comparative education and policymakers in education would do well to ponder. It is widely held that the expansion of higher education will contribute to growth and also improve income distribution. Will a system of higher education characterised by stratification and dominance of the private sector be able to contribute to sustainable growth and better income

184  Higher education in the BRIC countries distribution? In the long run, will the expansion of mass, low-quality higher education spell trouble for the goals of high economic growth? Can such a stratified system of higher education help in the rapid economic transformation of today’s societies into ones that support inclusive and faster growth? How far is the public policy of fortifying a small group of elite institutions to produce high-quality research and graduates socially justified, economically efficient and educationally sustainable? Does such a stratified system really address the issues of access, quality and equity in higher education? Is there no better alternative?

Note * This chapter was originally published as ‘Higher Education in BRIC Countries: Comparative Patterns and Policies’, Economic and Political Weekly, 48(14), 41–47, 2013. Reproduced with permission. The article is based on the presidential address at the annual conference of the Comparative Education Society of India on 10–12 October 2012 at the University of Jammu. It draws on a major international comparative study in 2012 by M. Carnoy, P. Loyalka, M. Dobryakova, R. Dossani, I. Froumin, K. Kuhns, J. Tilak and W. Rong entitled University Expansion in a Changing Global Economy: Triumph of the BRICS? (Draft, Stanford University).

References Altbach, P. G. et al. (Eds.). (2012). Paying the Professoriate: A Global Comparison of Compensation and Contracts: Routledge: New York and London. British Council. (2012). The Shape of Things to Come: Higher Education – Global Trends and Emerging Opportunities to 2020. London. https:// www.britishcouncil.org/sites/default/files/the_shape_of_things_to_come_-_ higher_education_global_trends_and_emerging_opportunities_to_2020. pdf World Bank. (2012). Putting Higher Education to Work Skills and Research for Growth in East Asia. Washington, DC: World Bank.

9 Economics of internationalisation of higher education*

Today internationalisation of higher education has become an issue of high priority for as many as 73 per cent of the higher education institutions around the world, according to a survey conducted by the International Association of Universities in 2005 (IAU 2008). Simply defined as ‘the process of integrating an international/intercultural dimension in the teaching, research and service functions of the [higher education] institutions’ (Knight 1997), internationalisation of higher education is neither a new term nor a new phenomenon. Universities are universal by definition, and have always been international institutions, attracting students and faculty from various countries. Many countries used to and still continue to attract foreign students with subsidies to improve diversity in their higher education systems, to improve international understanding, forge cultural relations and to improve educational levels of the people in developing countries of the world. The low levels of public investment in developing countries, the phenomenon of excess demand for higher education and high rates of return to investment in foreign education that the students reap have been important factors for international student mobility. Nowadays internationalisation of higher education has a different meaning. In fact, internationalisation of higher education has taken different forms and is nowadays predominantly defined in terms of, if not broadly equated to, trade in education placing it under the purview of the General Agreement of Trade in Services (GATS), in the framework of which internationalisation takes places through four different modes, familiarly known as (1) cross-border supply, (2) con­sumption abroad, (3) commercial presence and (4) movement of natural persons. Of all, the most dominant mode continues to be the second one – the student mobility. In 2009 about 3.4 million students studied in countries different from their own.

186  Internationalisation of higher education Viewed as a multimillion-dollar business, there are several economic issues that need to be carefully analysed. The significant rise in international student mobility which is now being experienced can be attributed more to the new forces of globalisation and internationalisation that include opening of frontiers; global competition for skilled manpower; reduction in cross-border barriers including easy availability of visa and other immigration conditions, etc.; the emergence of a wealthy middle class in developing countries like China, South Africa and India; and lastly, but not the least, the aggressive marketing policies being adopted by many universities to attract foreign students and through them the badly needed additional financial resources through high student fees. At least seven important features of the recent trends in internationalisation need to be noted: (1) the numbers involving international student mobility are on a rapid rise; (2) methods, motives and processes being adopted in it are changing; (3) in the business, it is not a win-­win situation; there are winners and there are losers; (4) benefits accrue disproportionately to the developed countries and losses to the developing countries; (5) most developing countries turn out to be importers of higher education and the advanced countries exporters; (6) a few developing countries are also emerging as exporters; and lastly (7) almost all countries – the rich and the poor – are struggling with the problem of internationalisation. In the following sections we review the limited experience of a few developing and developed countries with internationalisation, including with trade and the GATS in education, with a view to draw lessons for sound policy formulation. A few measures for action are outlined that might also help in internationalisation of higher education, but not necessarily trade in higher education. *** Higher education is getting subjected to new forms of internationalisation and internationalisation on the whole is taking place at unprecedented levels and with unprecedented speed. Internationalisation of higher education is not a new phenomenon. It has been there for ages during medieval, modern and contemporary periods. Universities are universal by definition, and have always been international institutions. The most important form of internationalisation used to be exchange of scholars. Many foreign scholars were on the rolls of ancient universities in India like Nalanda and Taxila. International academic mobility had been there even during the sixth century BC in several parts of the world, and it continued ever after (see Gürüz

Internationalisation of higher education 187 2008). In the modern period also we find many students and faculty from developing and also developed countries going to foreign universities. Study visits of scholars for short- and long-term periods have been a common feature. Such studies are often supported by scholarships and fellowships by either host or home countries or by international organisations. Universities regarded having students and faculty from various countries, cultures and backgrounds as an important aspect, enriching the intellectual diversity of the university campuses and the overall learning environment. Besides adding to the status and prestige of the universities, the presence of international students broadens the international perspective of students and faculty of the universities. Knowledge of other countries, cultures and peoples was also considered an important ingredient of university education. For the same reason, many universities have set up research centres for area studies and inter-country collaborative research studies have been undertaken. Student and faculty exchange programmes are also used to improve understanding and sociocultural and political relations between countries. Thus, traditionally, the rationale for internationalisation has been seen mainly in academic, social, cultural and political terms (Knight and de Wit 1997; Scott 1998). From the individual point of view, students go abroad to have access to better education and earn a higher salary in their country of origin or abroad. They invest in human capital. Investment in foreign studies yields fairly very high rate of return, higher than investment in education in developing countries of their own. All this formed standard traditional form of internationalisation, though this traditional form was never referred to as internationalisation, the way it is being interpreted nowadays (Larsen and Vincent-Lancrin 2002). But all this seems to be going into oblivion fast and are giving place to new modes and types of internationalisation in many countries. Narrow economic considerations seem to be the main objectives of present and emerging forms of internationalisation of higher education. The new types of internationalisation that are booming include setting up of offshore institutions/campuses/branches/operational bases, franchising, twinning and selling joint and split degrees/diplomas in education, and training through internet. Many more new modes of internationalisation are emerging and they seem to change the very nature of higher education. Today there is no single specific form of internationalisation of education, but trade in higher education is emerging as the most dominant explicit or underlying phenomenon of higher education. It may not be appropriate or even possible to have a discussion on internationalisation without considering the

188  Internationalisation of higher education new dimensions, including the GATS. With the advent of the World Trade Organisation (WTO) and the GATS, which is one of the principal treaties of the WTO, and with the inclusion of education services in the new service negotiations of the GATS which began in 1995, which can also be seen as an extension of neo-liberal policies, this process got accentuated and trade jargon has crept into the arena of education on a large scale; and internationalisation of higher education is interpreted largely in the context of WTO and the GATS, as cross-border education or international trade in higher education. As a result, we hear hitherto unfamiliar terms like export and import of education, sale of educational products, consumers and buyers, sellers, making surplus, turnover, equity shares, and so on. These trends in internationalisation are accentuated by the resource crunch felt by universities all over on the one hand, and on the other the global wave of privatisation of education, the revolution in information and communication technology, the globalisation and international flow of human capital. *** Of late, internationalisation of higher education has been a very strong and widespread phenomenon and most countries are getting involved in it, either out of conviction or more out of compulsion – arising from resource scarcity on the one hand, and pressures from domestic private sector and more importantly international lobbies on the other. The growth has been unregulated, over-hyped, even ill-intended and under-examined. Some view that it is an unalterable element of contemporary society. Under the name of internationalisation, many universities, particularly in the West, have been following aggressive policies of attracting foreign students, and the overseas students are charged fees above the costs, so that they cross-subsidise the higher education of the native students, if not help in making surpluses. Some such practices are not strictly under the framework of the GATS, though ‘limitations’ can be imposed to this effect. Moreover, as already stated, internationalisation, cross-border education and even trade take place in many countries outside the GATS, which do not restrict dual and even multiple fee systems. Only in a few countries trade takes place in the area of education within the framework of the GATS, as only a few countries have so far made commitments on education to the GATS. Many countries have also set up a national agency or a central body, or ‘intermediaries’, mandated with promotion of the same (Bourke 2000). Similarly, some universities have also set up separate bodies at university level in this regard, essentially to attract foreign students

Internationalisation of higher education 189 and to promote cross-border education. National level bodies are also set up in countries like Malaysia and Hong Kong to be responsible for activities relating to export and import of education under the GATS (Woodhouse 2007). American Recruitment Council was set up in the United States as a non-profit organisation whose services are taken by a large number of universities in getting international students.1 Traditional non-profit universities are also entering into this business, though their motives are somewhat different (Altbach and Knight 2007).2 It is unfortunate that even some of the best universities of the world, such as Oxford, Cambridge and Stanford also seem to be adopting the same and similar approaches (Suror 2005), contrary to what they used to do earlier, viz., offering scholarships to foreign students to attract and promote best talent, though their motives may not necessarily be purely commercial. Market reforms and cuts in public grants to higher education institutions in the United Kingdom, Australia, New Zealand and in many countries in the West requiring universities to generate resources mainly by exporting education have actually forced them to go across the borders in search of finances. Many countries find it convenient further to sell cheap higher education degrees to gullible students in developing countries by adopting different modes under the GATS. Universities everywhere are fast becoming entrepreneurial institutions both domestically and internationally. Also under the same and similar framework of trade, international, regional and sub-regional knowledge hubs (see Chapman 2008) are being created, where foreign universities are invited to start their branch campuses. The rationale is generally both to bring in foreign capital and foreign revenues through students and to raise national visibility and prestige (Armstrong 2007, p. 135). For example, 25 universities from several countries have already started branch campuses in the Dubai Knowledge Village, a dedicated tertiary education cluster created in 2003 in Dubai. The Dubai International Academic City is being developed. There is already a race for creating regional education hubs, like for example, the ‘Global Schoolhouse’ in Singapore, where 16 foreign universities were attracted to offer degree programmes in collaboration with local universities, ‘Regional Knowledge hub’ in Hong Kong, ‘to promote Hong Kong as Asia’s world city’ and similar projects like Kuala Lumpur Education City in Malaysia, Education City in Qatar and a Higher Education City in Bahrain (see Tan 2008b; Knight 2008b, 2011). The objectives of these several models are not necessarily exactly the same. Though improvement of the status and world recognition is the common objective of all, other objectives such as improvement of domestic higher education system

190  Internationalisation of higher education and development of knowledge economy are not common. To attract foreign direct investment is one of the objectives that most of these projects have in common (see Knight 2011, p. 226). However, all are not successful, as described later. In the first phase of negotiations (2000–01) only four proposals were submitted under the GATS to the WTO on education – by ­Australia, Japan, New Zealand and the United States. By the time of the next round of negotiations (at Doha), i.e., by 2002, as many as 43 countries had made specific commitments in the area of education, of which 32 countries had made commitments for higher education, 34 for secondary education and 29 for primary education. Further 31 countries have committed adult education and 18 ‘other’ education. As of March 2006, a total of 53 countries (the European Union being counted as a one country) out of the nearly 150 WTO member countries, had made commitments to education, of which a large majority, nearly 40, were with respect to higher education (Education International 2006; Knight 2006a),3 which means that a majority of the WTO member countries have so far made no commitments of education.4 The United States and Canada have not so far made any commitments in higher education, though they favour trade in education, and the United States has made offers (see ACE 2007). Many developed countries made requests and most of the requests in the first two rounds – the Uruguay and the Doha rounds – were related to mode 1 (cross-border supply) and mode 3 (commercial presence). The United States not only made offers, but also had made substantial requests to other countries to remove all barriers in higher education, adult education and other educational services. It asked all WTO members to undertake full commitments for market access and most favoured nation treatment in the delivery of education services under the first three modes, viz., cross-border supply, commercial presence and presence of natural persons. It did not request for commitments in primary or secondary education. Interestingly, the nature of offer made by the United States was the complete opposite of its requests. Its offers underscored (1) the authority of US institutions in admission policies, setting tuition fees, developing curricula and course content, (2) granting of US federal or state government funding or subsidies to US schools or citizens, (3) the requirements for regional or speciality accreditation practices and (4) conditions for foreign-owned entities to receive public benefits (see Gürüz 2008). Many countries such as India are yet to make a commitment on education to the GATS. Among the countries which committed, some may be those countries where foreign providers already existed and some kind of trade had been taking place

Internationalisation of higher education 191 (e.g., many developing countries); in the case of some other countries the commitments are much below the status quo (e.g., India);5 and some are the countries which actually desired to attract foreign providers (e.g., Singapore and Japan) and to go abroad for trade (e.g., Australia) (Nielson 2004). Some countries may commit education, not necessarily with a motive to trade in education, but for trade in other sectors, as higher education might be seen by some countries as a ‘horse-trading’ sector, meaning that commitments to education are made to gain access to other key sectors such as agriculture and textiles. It is important to note that education and other services are not negotiated independently or one by one; they are negotiated in relation to all the sectors covered by the round of negotiations. This ‘all unique method’ implies that offers on one sector are conditioned to the level of liberalisation in other sectors (Verger 2009b, p. 385). In all, economic motives assume pride of place in the rationale underpinning all the international ventures in education. On the whole, many countries are very reluctant to engage in negotiations on educational services. This is true in case of many developing countries and also some of the European countries that view education more as a public good than as a tradable commodity. At one point of time, the European Union and Canada flatly refused to make any offer on education to the GATS. However, the situation may change rapidly, as we already note a shift from cautious approach adopted by the countries in relation to services in the Uruguay round to a somewhat ambitious approach in the Doha round, characterised by dominance of mercantilist ideology. In the Doha round, seven countries were offering education for the first time, and eight countries widened the liberation commitments made in education in the previous negotiations (Verger 2009b, p. 386). ‘The merchants of education’ (Verger 2009b) are steadily increasing in number. The methods of negotiations are also changing. After the first two rounds of negotiations – the Uruguay and Doha rounds – it has been found that the progress is not as rapid as expected. The United States and the European Union, together with India, proposed to adopt, along with the bilateral request-offer approach, the method of purilateral agreements, ‘a new flexible method under the GATS architecture’. Purilateral agreements are those which are limited to only those member countries which agree to them separately. According to this, members can enter into negotiations with a group of countries rather than one-on-one bilateral mode. Some of the developed countries can negotiate as a group of countries with other countries and some developing countries, in principle, can negotiate as a group with one or a

192  Internationalisation of higher education group of developed countries. This, as Knight (2006a) rightly feared, would make the job of negotiations more difficult for the developing countries as they would have to confront with groups of powerful countries that represent ‘the most aggressive “demandeurs” in a particular sector’;6 and secondly, this would give wider oversight powers to the WTO to challenge domestic policies, even if they are consistent with provisions in the GATS. Though actual commitments have not been made on higher education under the GATS by many countries, trade is already taking place under any or all of the four modes and it is steadily growing and all modes of trade are found to be affecting all aspects of higher education. In case of many countries the bulk of international education is largely of ‘consumption abroad’ type. This is a very important mode of operations. In 2007, more than 2.8 million students were enrolled in higher education outside their own countries – a rise by more than 50 per cent since 2000, and a two-and-a-half times increase since 1975. Increasing at a breakneck speed from 1.8 million in 2000, the figure is to balloon to about 8 million by 2025 at an annual rate of growth of 5.8 per cent (Knight 2006b). Presently, about 3 million students in the world study in a country different from their own. They include students from developing as well as developed countries. That is, about 2 per cent of the total

10.0

8.00 7.5 5.80 5.0

2.70 2.10

2.5

0.0

0.11

0.15

0.24

0.35

1950

1955

1960

1965

0.67

1975

0.94

1985

1.35

1995

2002

2010

2020

Figure 9.1  Growth in global foreign student enrolment (in millions) Source: Gürüz (2008, p. 162)

2025

Internationalisation of higher education 193 Table 9.1  International student mobility, 2008  

Outbound mobility*

 

Number (000s)

Outbound mobility ratio

World Arab countries Central & Eastern Europe Central Asia East Asia and Pacific Latin America & the Caribbean North America & Western Europe South & West Asia Sub-Saharan Africa Not specified

2,966 207 331 96 847 178 487 276 223 322

1.9 2.8 1.6 4.6 1.7 0.9 1.4 1.3 4.9 ...

* Students from a given country studying abroad Source: UIS (2010)

students in higher education study in foreign countries. As the figures in Table 9.1 show, the largest group of internationally mobile students comes from East Asia and the Pacific, among the world regions, the number being about 850,000, accounting for 29 per cent of the world total. Next comes North America and Western Europe. These figures refer to the number of students of a given country (not a region) studying in another country (not region), may be of the same world region. In fact, a large number of students from North America and European countries might be studying in another country of the same region. For example, majority of the students from the United States go to the United Kingdom, Canada, France, Australia and Germany and only a very small number go to other countries. About half the number of foreign students in the United Kingdom were from the European Union in 2007–08 (Foskett 2011, p. 34). Similarly, a large number of students who went abroad from the United Kingdom are found to be studying in the United States, France, Australia, Denmark and Ireland. Following the Bologna process (1999), mobility of students from one country to the other within the European Union has been very high. So these regional figures need to be interpreted with caution. Nevertheless they show the extent of outbound mobility of students. Sub-Saharan Africa has the highest outbound mobility share of the total higher education population: nearly 5 per cent of the higher education population in the region goes abroad for studies, almost two-and-a-half times greater than the world average.

194  Internationalisation of higher education The regional distribution of all the students in the world studying abroad in 2008 is given in Figure 9.2. East Asia and the Pacific region account for the largest share. Over the past two decades, foreign students in the OECD countries have doubled in number, and there are more than 2.7 million foreign students in tertiary education; the rate of growth of foreign students in these countries was higher than the rate of growth of total number of students in these countries. Though the share of the United States in foreign students has marginally declined over the years,7 still US universities account for the largest number of foreign students – 625,000 in 2008 and the Western European countries accounted for another 120,000 students. Japan accounted for 127,000 foreign students in 2008 and plans to increase the number to 300,000 soon. Countries in Eastern Europe do not attract many students; the figure was about 300,000 in 2008. In all, in terms of foreign students in 2008, the United States, the United Kingdom, France, Australia and Germany

Sub-Saharan Africa 223 8%

Not specified 322 11%

Arab Countries 207 7%

Central Asia 96 3%

South & West Asia 276 9%

North America & Western Europe 487 16%

Central & Eastern Europe 331 11%

East Asia & Pacific 847 29% Latin America & Caribbean 178 6%

Figure 9.2  Regional distribution of students studying abroad (%), 2008 Note: Figures in the first row of the labels refer to students in thousands. Figures in the second row refer to regional distribution in percentage. Source: UIS (2010)

Internationalisation of higher education 195 were the top five countries, which were followed by Japan and Canada (UIS 2010) (see Table 9.2). The United States has been the clear choice of destination for foreign students for at least the last half century. Enrolment of foreign students in the United States has increased from about 26,000 in 1950 to about 625,000 in 2008. Students from China, Korea and Japan account for a large proportion of foreign students in the United States. The United Kingdom has been a major destination due to colonial connections, the reputation of the institutions and policies driven by political and cultural considerations. The number of foreign students in the United Kingdom is estimated to increase to 870,000 by 2020 (Gürüz 2008, p. 191). Enrolment in foreign distance education programmes is also sizeable and increasing rapidly. The growth is also facilitated by revolution in information and communication technology (ICT). As Bohm et al. (2004) highlighted, the international education economic sector in the United Kingdom includes, in addition to the 350,000 foreign students enrolled in UK universities, 190,000 international students who receive UK higher education programme in their own countries, over 60,000 students enrolled in further education colleges in the United Kingdom, over 500,000 students in private colleges, schools and English-language training institutions, a number of foreign scholars on short visits, foreign contracted R&D projects carried out in the United Kingdom and export of other education-related goods and services, which in all amounted to about £18 billion. France and Germany attract large numbers of students with huge public subsidies in terms of scholarships for overseas students. Australia started to implement active recruitment practices since the beginning of the 1980s, mainly influenced by economic rationale.

Table 9.2  Top ten countries with foreign students, 2008 Number of % of all foreign students countries (in thousands) USA UK France Australia

624.5 341.8 243.4 230.6

21.1 11.5 8.2 7.8

Germany 189.3

6.4

Source: UIS (2010)

Number of % of all foreign students countries (in thousands) Japan 126.5 Canada 68.5 South Africa 63.9 Russian Federation 60.3 Italy 57.3

4.3 2.3 2.2 2.0 1.9

196  Internationalisation of higher education Among the various world regions, the major attractions are the United States in North America (and in the world as a whole), the United Kingdom in Western Europe, Australia in Asia and Pacific, Russia in Eastern Europe and South Africa in the sub-Saharan Africa. More than 2 million students from developing countries were studying abroad in 2004, mostly in advanced countries. By 2025, international student numbers in OECD countries are estimated to reach 7.2 million (Bohm et al. 2004). Open universities also have increasingly large number of foreign students on their rolls who received an education living in their own countries. In 2003, 14 per cent of the students of the UK Open University were located outside the United Kingdom. American institutions provide educational services in at least 115 countries across the world. The global e-learning market for higher education grows at a rate of 12 per cent per annum (Media Inc. 2004). Perceptions on quality of education, cost of education, market value of foreign degrees and quality of life in developed countries in comparison with those in home countries are important motivations for the students in developing countries to go abroad and/or to study for foreign degrees through open education. The United States is the leading exporter of educational services. In terms of export value, educational services rank third among all services in Australia and fourth in New Zealand. Through the enrolment of foreign students, in 2005, the United States made $14.1 billion, the United Kingdom $6.1 billion and Australia $5.6 billion; Canada and New Zealand received $1.6 billion and $1.0 billion, respectively. During the last ten years, New Zealand, Canada and Australia experienced the highest growth in earnings through export of education of this mode (foreign students) (Bashir 2007; see also Kritz 2006). Australia is regarded as over-dependent on international students (Marginson 2009, p. 11). The inbound mobility ratio, i.e., number of students from abroad studying in a given country as a percentage of the total enrolment in tertiary education in that country was as high as 21 per cent in Australia in 2008. In other words, more than one-fifth of the students in Australia are from other countries.8 The corresponding ratio is only 3 per cent in the United States. Though the United States is the largest home for foreign students, foreign students accounted for only 3.4 per cent of the enrolment of native students in the United States in 2004, which remained more or less unchanged in the following years as well. The corresponding proportion is above 10 per cent in some of the European countries, 15 per cent in Australia and 21 per cent in New Zealand, as shown in Figure 9.3. It was 15 per cent in Canada in 2006. These figures

Internationalisation of higher education 197 are rapidly changing. It is due to the quality of their higher education system, as well as to the openness and flexibility of their system and of their labour market conditions, costs of education, living conditions, political relations and other policies. It is widely believed that the United States is losing its pre-eminence in higher education (Adams 2010). Some of the European countries like Switzerland, Belgium, Denmark and Sweden are losing students to the United States and the United Kingdom. Though the share of the United States remained the same, the share of the United Kingdom increased between 2004 and 2008. On the whole, there is a global competition for international students (Waldavsky 2010). Though the OECD countries have been the perennial favourite hosts of international students, new players are also emerging. Some of the developing countries like China and Malaysia are also emerging as major exporters of education.9 As host countries, they are newcomers to the global higher education market and the league of major host countries.10 Other major countries include India and Singapore.11

12.9

New Zealand

21.2 14.1

Switzerland Australia

18.2 20.6

15.1

Austria

18.7

13.5

UK

12.6

14.7

11.2 10.9

France 7.4

Belgium Denmark

5.5

Sweden

5.6

Norway

5.2

Netherlands

3.9

9.6 9.0

7.8 7.6

5.0 2004

3.4 3.4

USA

0

5

10

15

20

2008

25

Figure 9.3 Foreign students as percentage of host country enrolments, 2004 and 2008 Sources: Gürüz (2008, p. 165) and UIS (2010)

198  Internationalisation of higher education They pose stiff competition to the traditional hosts and the competitive advantage the traditional hosts have had may be affected. Some developing countries have set clear targets of increasing the number of inbound students, as shown in Table 9.3. China wishes to attract half a million foreign students by 2020. It plans to increase the number of scholarships it offers to international students for study in China, from about 10,000 to 20,000 by 2010 (Xinyu 2011). One can notice increasing numbers of international students in countries like Malaysia, where the international enrolments increased from 30,000 in 2003 to 48,000 in 2007 (Table 9.4). Substantial growth is accounted by the private institutions of higher education in Malaysia. Malaysia had a target of increasing the international students to 100,000 by 2010. Many other countries also have made special efforts to increase foreign students in their higher education systems. Singapore’s 2002 plan of the global schoolhouse is to recruit additionally 100,000 international students, or to increase the total enrolment of foreign students to 150,000 by 2015 and to attract foreign universities to set up campuses in Singapore; but many feel that these are too ambitious goals to realise (Tan 2008a, b).12 Singapore has established Education Singapore, a new agency meant for promoting and marketing Singapore abroad. In

Table 9.3  Benchmarks for international students in selected countries  

Actual in 2008

Target date

Target

China Japan Jordan Malaysia Singapore

51,038 126,568 26,637 30,581 –

2020 2020 2020 2010 2015

500,000 300,000 100,000 100,000 150,000

Sources: Actual in 2008: UIS (2010); others: Bhandari and Blumenthal (2011, p. 9)

Table 9.4  Growth in international students in Malaysian higher education  

2003

2004

2005

2006

2007

Public Private Total

5,239 25,158 30,397

5,735 25,939 31,674

6,622 33,903 40,525

7,941 36,449 44,390

11,324 33,604 44,928

Source: Welch (2011, p. 70)

Internationalisation of higher education 199 Thailand, the foreign students increased from 2,500 in 2001 to 11,000 in 2007. In 2003, Thailand earned TB (Thai Bahts) 2.5 million from foreign students (Welch 2011, p. 100). However, these numbers are very small compared to the number of students who go abroad for studies from the respective countries. Secondly, a majority of the foreign students in these countries, including India (AIU 2007; Tilak 2011), are from neighbouring and other developing countries. For example, out of 4,168 international students in the Philippines in 2004–05, 88 per cent were from developing countries in Asia, and 65 per cent were from Sudan, the only non-Asian country apart from the United States from where 680 students were enrolled. Although China attracts students from 189 countries, more than 30 per cent are from Korea (Xinyu 2011). The seven largest higher education importing countries under this mode in 2004 were China, India, Malaysia, Hong Kong, Indonesia, Singapore and Turkey (Table 9.5). These seven countries spent $11.3 billion in 2004 on their students who studied in Australia, New Zealand, Canada, the United States and the United Kingdom. China is the biggest ‘sending country’ with around 440,000 students in higher education abroad in 2008, followed by India and South Korea from where 170,000 and 113,000 students, respectively, went abroad in 2008 (UIS 2010). With respect to other kinds of import of education also, China is at the top. There are as many as 1,100 programmes offered by foreign education providers in China, but only 140 of the joint programmes were approved by the Ministry of Education in 2004. A majority of them are non-diploma and diploma programmes. Degree and postgraduate programmes hardly constitute one-third of the total (Li 2009, p. 52). In Hong Kong, 385 programmes are offered by foreign institutions, and another 473 programmes are operated by foreign Table 9.5  Developing countries with highest outbound numbers of students

China India Korea Malaysia Morocco Turkey

Number (in 000s)

% Share in the world total

Outbound ratio

441.2 170.2 112.6 47.4 41.3 41.1

14.9 5.7 3.8 1.6 1.4 1.4

1.7 1.0 3.5 5.7 1.3 1.6

Source: UIS (2010)

200  Internationalisation of higher education institutions in collaboration with local institutions. Ten foreign universities have set up branch campuses in Singapore. Thirteen Australian universities, nine UK universities and one German university have either twinning or franchise arrangements in Thailand. Double-, jointor multiple-degree programmes are becoming a popular method, as it is convenient and economical to both local and foreign institutions, though it is also vexed with questions and problems, as it might also mean to some extent academic fraud – double counting (see Knight 2008b). Mostly low-quality institutions in developing countries seem to be eager to enter into collaboration with foreign universities of even low reputation, as the foreign label itself helps these low-quality institutions in developing countries. Quite a few countries have varied kinds of experiences with internationalisation of higher education, some of which are worth noting. When the education sector was made open to foreign institutions in Japan in the late 1980s, there was a ‘mini invasion’ by ‘low end’ US institutions and quite a few branch campuses were set up. To regulate these institutions, the government of Japan set up strict standards for recognition of the institutions and their programmes and laid down elaborate terms and conditions. There was a good amount of control by the Japanese government: the government bodies of Japan were to examine the products and institutions, define and determine recognition of the institutions and degrees/diplomas. What was the result? None of the foreign institutions met the requirements prescribed by the Japanese government bodies and all foreign institutions had to leave the country. Of the 100 US partners that came in 1980s, only one (Temple University) remained (Chambers and Cummings 1990);13 others were closed by mid-1990s. Similarly, when operations of the Monash University in South Africa were not in conformity with the rules and regulations of South Africa, the Monash University had to pack up its operations in the country; and it appears it started again later. Similarly, a joint venture campus in Malaysia between RMIT University, Melbourne and Adorna Institute of Technology, Penang, planned since 1993 and opened in 1996, was a big failure by 1999, as it was not able to attract good staff with poor buildings and over capitalisation (Welch 2011, p. 76). Malaysia has, of course, a successful arrangement with Monash University which set up a branch campus in Malaysia. Singapore has adopted a selective approach and a differentiated approach, which might not strictly fall under the framework of the GATS.14 It identified and requested a few excellent foreign institutions to come in and offer some programmes. This bilateral approach, e.g., the Singapore-Australia Free Trade Agreement (SAFTA) signed

Internationalisation of higher education 201 in 2003 covering university, adult, vocational and technical education with only limited exceptions – rather than trade under multilateral framework – is expected to give Singapore sufficient control on the system. Yet, Singapore’s experience is not all that successful. Australia’s University of New South Wales and Johns Hopkins University of the United States which set up campuses in Singapore were to close down their campuses in a short time, the first one immediately after the first semester in the wake of public disagreement and local resentment of the people who were not able to secure admission because of limited space for locals, as enrolment of foreign students seemed to have taken place at the cost of enrolment of domestic students. Low international enrolments, a requisite condition for the foreign universities to continue in Singapore, resulting in a multimillion-dollar shortfall, and the fear of further financial losses were cited as reasons for the closure (Gribble and McBurnie 2007). An equally important reason could be, because key performance indicators were not met, funding by the Singapore government which was of the order of $50 million ceased. University of Warwick changed its mind about establishing a full-fledged campus in Singapore amid staff concerns about possible limitations on academic freedom (Tan 2008a). The lesson is clear: branch campuses of even reputed universities cannot attract students, as many of the faculty members in these campuses are not necessarily from the parent universities, but are locally recruited low-quality teachers (see Altbach 2007). Second, even when reputed universities are involved, academic freedom is not guaranteed. Further, it is also important to note that major foreign universities are unable or very hesitant about transplanting or extending advanced research and development operations to developing countries, including Singapore (Olds 2007). They need to be sensitive to the local concerns and needs of the host countries, which is not easy. It may be very difficult to predict demand in one country for another country’s educational product, given the differences in prices (fees) and other factors (Armstrong 2007, p. 138). Given all this, the foreign institution involved might be viewed in their behaviour and functioning as engaged in ‘academic imperialism’ (Becker 2009, p. 6). Over the years, Singapore has reduced its dependence on foreign higher education and in the next decade or so only highly selective elite foreign providers focusing on full branch campuses are likely to remain in Singapore (Agarwal 2009, p. 337), and they will remain under stringent regulatory mechanism of Singapore.15 It may be important to note that Singapore was ready to forego universities like even the Johns Hopkins, rather than relax their stringent conditions. Malaysia has also adopted a cautious approach. Foreign

202  Internationalisation of higher education institutions can be set up in Malaysia only by invitation. Malaysia has invited only high-profile and internationally well-known institutions. It has set up an agency responsible for all incoming operations in education. It has also made specifications on the number of branch campuses, student and foreign lecturers, as well as certain country-level requirements and specifications for the level of financial commitment from both sides (Woodhouse 2007, p. 150). As Marginson (2007) describes, a two-tier structure seems to be emerging in the global market for higher education: the market comprises of a small number of super league universities and a large number of less reputed and low-quality institutions. Institutions of the former kind do not aim at massive expansion and huge financial gains; their prestige depends upon their continued scarcity; they compete with each other for best faculty and best students from all over the world and they are interested in long-term academic and research cooperation with reputed institutions located in developing countries or anywhere.16 On the other hand, the second-tier institutions are mostly for-profit institutions looking for business opportunities and are primarily interested in capturing large markets and reaping financial gains. Commercial interests are their primary concern in their global education business activities, even if profits and commercial considerations do not figure in their domestic operations. One major feature of trade in education is clear: many developing countries do not export education and many advanced countries do not import education. The biggest traders in education are reported to be the United States, the United Kingdom, Australia, New Zealand and Canada, none of which expects any outsiders to make incursions into their turf. Compared to 625,000 foreign students studying in the United States, hardly 50,000 American students went abroad in 2008; the respective figures are 342,000 and 22,000 for the United Kingdom, 231,000 and 10,000 for Australia and 32,000 and 4,000 for New Zealand (UIS 2010). Thus these countries are primarily exporters.17 The net inflow rate – the total number of students from abroad (inbound students) studying in a given country minus the number of students at the same level of education from that country studying abroad (outbound students), expressed as a percentage of total number of students in that country – varies between 1 per cent in Spain and 20 per cent in Australia, as shown in Figure 9.4. In most of the OECD countries it is positive: inbound students outnumber outbound students; and in most of the developing countries it is negative: outbound students exceed the inbound students, in some cases by several times. It is obvious that

Internationalisation of higher education 203 Spain Finland

0.9 1.6

Japan

1.9

Portugal

1.9

Norway

2.0 2.2

Sweden USA

3.1

Denmark

3.3 3.6

Netherlands Belgium

4.9

France

9.2

Switzerland

9.4 11.2

New Zealand UK

13.7

Austria Australia

15.2 19.8 0

5

10

15

20

25

Figure 9.4  OECD countries with highest net inflow rate of students (%), 2008 Source: UIS (2010)

the rich countries will be able to exploit their advanced infrastructure and qualified teaching staff, research infrastructure, libraries, etc., to export educational services to the poor countries, and will emerge as the net winners in the whole game. Though there are a few importing countries that began exporting education, the categorisation of countries into exporters and importers on the whole is more or less neat and largely non-overlapping, as the GATS and the WTO do not provide for reciprocity as a necessary condition. A country can remain unwilling to make any commitment to the GATS for any sector but at the same time, it has the right to negotiate its own access to the market in another country. In the requestand-offer process, a request is granted or rejected without any quid pro quo. So, powerful countries can have access to foreign markets, despite the fact that they do not allow anyone from abroad (see Moutsios 2009).18 As a result of this ‘hegemonic exceptionalism’ (Mundy and Iga 2003), we note that the whole trade in education so far is largely unidirectional: rich countries export or sell and poor countries import or buy education from overseas. If at all some of the developing countries are found exporting education, they do to lesser developed developing countries and they might offer low-quality non-recognised programmes. For example, more than 95 per cent of the international students in India come from the developing countries of Asia and Africa. A considerable portion of Singapore’s foreign students enrol in

204  Internationalisation of higher education more than 300 private institutions, which are not regulated or some of which are not even recognised by the government and which offer low-cost and low-quality commercial programmes in Information Technology (IT) and language courses. Similarly if at all large numbers of students from developed countries, say in Europe, are found going abroad, they go to other developed countries within either Europe or the United States; and American students to Europe. Hardly can one find any evidence of a developing country exporting higher education under any mode to an advanced country, though some students from advanced countries like the United States do come to developing countries like India, but under non-trade modes. The prominent phenomenon is developing countries import. So, international trade in higher education helps the educated and economically developed countries more than others and may actually harm the others. Who are the big pushers of education under the GATS? Ministries of Trade and Commerce and ‘entrepreneurial groups’ play a more dominant role than ministries of Education in formulating such education policies. As the Education International (2009) observed, ‘trade ministries are often making decisions on matters such as education without considering the full impact of trade rules.’ For example, the US Department of Commerce, US trade representatives and UK Department of Trade and Industry are emerging as the biggest pushers of the GATS in education.19 They are further supported not only by the Departments of Education, but also by multi/transnational organisations, giant private universities and giant testing companies, like the Sylvan leading testing system, Apollo, Kaplan, Laureate Education,20 some of which are listed on stock exchanges.21 Commercial subsidiaries of publicly funded universities in the United States and Australia have been active in trade under all modes of overseas delivery. Though the European Union has proposed that internationalisation should not be seen as an end in itself, but a means of enhancement of quality in higher education, many countries including some in Europe tend to view internationalisation with economic motives. In sum, one can notice three types of internationalisation of higher education happening: import-oriented, export-oriented and importand-export oriented (Huang 2007). While many developing countries have had to adopt import-oriented models, and developed countries primarily export-oriented ones, countries like India and China belong to the third category. The progress in terms of commitments of education to trade under WTO is measured with the help of an index, EduGATS (Verger

Internationalisation of higher education 205 2009a). The index is based on (1) the sub-sectors of education committed; (2) limitations in market access and national treatment, which may vary depending on the sub-sectors and the trading modes; and (3) horizontal commitments. Interestingly, according to the index that Verger (2009a) prepared, and which can take values between 0 (totally closed or zero liberalisation) and 1 (maximum openness), many developing countries have liberalised their education systems more, than rich countries. For example, the value of the EduGATS index is 0.92 in Albania, 0.91 in Turkey, and above 0.8 in Lesotho, Moldova, Latvia, Armenia and Jamaica, while among the developed countries the value of the index is the lowest, 0.7 in Switzerland, and ranges between 0.2 in Japan and 0.66 in New Zealand. Table 9.6 provides the details. Table 9.6  EduGATS in higher education in developed and developing countries Value

Value

Value

Developed countries

Developing countries

Transition countries

Australia Austria Belgium Denmark France Germany Greece Ireland Italy Japan Liechtenstein Luxembourg Netherlands New Zealand Norway Portugal Spain Switzerland United Kingdom United States Average        

China 0.42 Costa Rica   Ghana 0.00 Jamaica 0.81 Jordan 0.65 Mexico 0.70 Oman 0.69 Panama 0.57 Taiwan 0.70 Thailand 0.00 Trinidad & Tobago 0.33 Turkey 0.91 Average 0.48     Less developed countries Congo 0.76 Cambodia 0.73 Gambia 0.00 Haiti 0.00 Lesotho 0.89 Mali 0.00 Nepal 0.67 Rwanda 0.00 Sierra Leone 0.53 Average 0.40

Albania Armenia Bulgaria Croatia Czech Republic Estonia Georgia Hungary Kyrgyzstan Latvia Lithuania Macedonia Moldova Poland Slovakia Slovenia Average                

0.59 0.00 0.64 0.61 0.55 0.62 0.58 0.62 0.58 0.21 0.43 0.64 0.64 0.66 0.55 0.62 0.60 0.70 0.64 0.00 0.52        

Source: Verger (2009a, pp. 231–233)

0.92 0.86 0.00 0.72 0.38 0.75 0.62 0.70 0.72 0.87 0.77 0.67 0.88 0.62 0.67 0.65 0.67                

206  Internationalisation of higher education While many countries are considering commitment of education under the GATS, there are still several unresolved issues (Varghese 2007), such as: what happens to public provision of education under the GATS? What happens to subsidies in higher education? What will be the impact of the GATS on development aid for education? What will be the nature of student support systems? Will it result in brain gain as claimed, or will it contribute to brain drain? These issues are too fundamental to be ignored, but there is no clarity yet on many of them.

Policy implications for the development of higher education and perspective for future Globalisation and internationalisation are the major drivers of change in higher education all over the world. Relatively speaking, internationalisation of higher education of the present form is of recent origin, but has gained a central position in higher education with significant implications. A close look at the global trends reveals that the following are the dominant characteristics of the process of internationalisation of higher education (Bode 2009, p. 219): (1) a growth mobility of students and academic staff and the emersion of a global ‘education market’ with an increasing number of institutions of higher education competing to attract paying clients or smart brains in an ever fiercer ‘war of talents’; (2) the internationalisation of curricula by integrating international and intercultural elements into national study courses, often expanding them into international networks or double degree programmes; (3) the dominance of English as the lingua franca of the global academic community; (4) the increasing ‘exportation’ of education and research services into developing and emerging countries; (5) a rapidly growing number of transnational partnerships and networks in the fields of study and research, as well as international consortia of education; (6) the implementation of international research schemes trying to find answers to global challenges; and (vii) the rapidly growing supra-regional coordination of national policies of higher education (e.g., the Bologna process). Under the name of internationalisation of higher education, international higher education markets have emerged. In contrast to national education markets (bazaars) which are still regarded as quasi-markets, international higher education markets are full ‘classical’ markets and not quasimarkets, as there are fewer direct constraints on how they operate (Foskett 2011, p. 34). Hence a well-designed regulatory framework is important, which is absent in many developing countries.

Internationalisation of higher education 207 Internationalisation of higher education is viewed by many as a response to the pressures created by world-wide wave of globalisation that also resulted in increasing demand for higher education of diverse types and nature. In the increasingly globalised contemporary world, many view that internationalisation of higher education, hence becomes an unalterable component. Even many educationists do find virtues in internationalisation of higher education; after all, universities are and should be universal in their nature and scope. Also this has been there for several centuries. What is new is the new form of internationalisation, or more precisely international trade in education, which is a matter of contention. Few question the old mode, in fact, many favour internationalisation of the traditional type; but many have serious reservations on the emerging trends of trade in education under the name of internationalisation, as internationalisation is now mostly about generation of income for cash-strapped higher education institutions. In case of those who support modern forms of internationalisation, one can identify three variants: (1) those who favour internationalisation of education under all four modes of the GATS, but may not necessarily support trade and the GATS; such people may be large in number;22 (2) those who favour foreign direct investment and do not mind trade in education and indeed welcome it under all four modes of the GATS, but do not necessarily favour any commitment to the GATS (this may be the second largest group); and (3) those who favour foreign direct investment and trade in education under the defined framework of the GATS. Relatively, the third group may be small in size. All three groups, however, treat education as a commodity meant for business of making money, and strongly argue in favour of private – even profit-seeking private – education. The conventional type of internationalisation, bereft of narrow economic motives, does not need the GATS; it is indeed modern forms of internationalisation that essentially require the GATS, as a legally binding multilateral system. In fact, trade in education takes place with or without the GATS. The advantage claimed in favour of the GATS is it ensures not merely rule-based trade, but also free trade – trade with no barriers, that also is in the framework of a legally binding agreement and under the supervision of an international body. The implications of the GATS for education are many-fold (see Knight 2003) and are different for different countries. One should note that the world is not flat, contrary to what Friedman (2005) argues. The gains seem to accrue disproportionately more to the advanced countries and losses to the developing countries. Private and some public institutions in the developed countries would be the

208  Internationalisation of higher education main beneficiaries by exporting education to developing countries. The countries that import education, public institutions in developing countries, and academically and socially important areas of study are likely to be the losers. While commercially viable disciplines, particularly professional, technical and vocational programmes would flourish, this would be at the cost of disciplines that are needed to build a humane society, which include humanities, social sciences, natural and physical sciences. The later disciplines are also critical for the very sustenance of sound education systems. Skewed development of education is not good for the society. Furthermore, the loss of local government control on national systems of higher education will result in loss in national autonomy. Even if there are some advantages from trade in education, note that the GATS aims at ‘the development of free trade, not fair trade’ (Devidal 2009, p. 75), the disadvantages seem to be many and they accrue essentially to developing countries, hurting the realisation of equity and developmental objectives and eroding national autonomy in the educational policy issues. The myth that foreign universities will provide good quality degree programmes in developing countries under trade is already being exploded. This has been a matter of serious concern of all public bodies and some of the committees in India.23 Trade may promote spurious demand for foreign degrees, as after all, the craze for foreign labels is still strong in many developing countries, characterised by imperfect markets on the one hand and gullible students and parents on the other. Foreign universities if they come in to the developing countries may exploit and dominate the imperfect education markets and may adversely affect the native universities and other institutions of higher education, rather than improving their quality and standards, through competition. Lastly, it is important to note that higher education is intricately related to almost all aspects of the society and as a result any change in higher education will affect the whole society. As Panchamukhi (2008, p. 501) argued, the GATS ‘would engulf the activities of the entire economy if trading of higher education in the true sense of the term, takes place under the above mentioned [four] modes’. By imposing international trade disciplines over services, not just the several services of the entire economy, but as Wallach (2005) observes, ‘almost no human activity from birth (health care) to death (funerals) remains outside these rules.’ According to the very rules of the GATS it can cover ‘any service in any sector’ (Article 1–3-b). The problems involved are too serious to be ignored. The champions of the GATS claim, on behalf of developing countries, benefits relating to access, availability of diversified systems,

Internationalisation of higher education 209 innovations, competition, efficiency and quality. The critics question the very role of the GATS as a threat to democracy, as people’s choices and the sovereignty of the nation will be subjected to the international market regime under the name of the GATS, as ‘governments are free in principle to pursue any national policy objectives provided the relevant measures are compatible with the GATS’ (WTO 1999, p. 5;24 emphasis added), or free to formulate only those policies ‘which are not inconsistent with the provisions’ of the GATS (Article XIV). As Article III (3) requires, each member shall promptly and at least annually inform the Council for Trade in Services of the introduction of any new, or any change to exiting, laws, regulations or administrative guidelines which significantly affect trade in services covered by its specific commitments under the agreement. In short, governments have to submit all their trade policies in all areas to WTO, which are subject to evaluation by the WTO in relation to criteria such as free and open trade pre-visibility, transparency and guarantees for foreign providers and exporters. These evaluations ‘condition the behavior’ of the governments of the member countries (Verger 2009b, pp. 385–386). Further, claims on transparency seem to be too tall. The protocol of the GATS prohibits any country to make public the requests it makes and receives from other countries.25 Further, as Sinclair (2000, p. 1) notes, the GATS discussions are closed door discussions: ‘Essentially unknown to the public, the agreement is designed to facilitate international business by constraining democratic governance. The talks are taking place behind closed doors in close consultation with international corporate lobbyists.’ Critics also question the very idea of treating higher education, which is a public good, as a commercial good. It is difficult to calculate the impact of trade in higher education on higher education in the developing and the developed countries, as it is still evolving. But some aspects are somewhat clear: As Robinson (2008) warned, Trade agreements are legally-binding treaties that promote liberalisation, not just by eliminating barriers to trade and investment, but also by encouraging domestic liberalisation in the form of privatisation, commercialisation, and deregulation of public services like education. Trade agreements don’t necessarily force governments to per se privatise and commercialise education.26 But they

210  Internationalisation of higher education can have the effect, through the legal restrictions they place on governments, of intensifying and locking-in pressures to do so. Education is traditionally regarded as a public good, or a public service and not as a market-based activity; but the GATS recognises it not as a public good, but as a tradable commodity, and supply of education as a commercial trade. It does not make any distinction between trade in services like education and trade in automobiles, computers, textiles, financial services, etc. Thus, the GATS in education essentially implies privatisation and commercialisation of higher education and international trade in education with no barriers to access markets by foreign firms for trade and investment. The GATS is mainly and explicitly for trade, and not for promoting education in developing countries, or to improve the access of weaker sections to education. If at all it improves access to education, it is only an unintended effect. The concerns expressed on the impact of the GATS on various dimensions of education need to be taken seriously. As Paul (2009, p. 39) observed, ‘the risks that come with trade and unequal exchanges are real and cannot be wished away.’ But some argue that this is exaggeration, as even after half a decade of emergence of the GATS, there has been no wholesale privatisation or commercialisation of higher education or loss of control of national government over higher education systems. This is not necessarily correct. Higher education in many developing countries is getting rapidly privatised, and in some developing countries in South Asia, South-East Asia, and sub-Saharan Africa, at an alarming rate especially in, but not confined to, professional education (see Tilak 2009b). Moreover the whole system is getting out of control of the government; and the ability of the government to regulate it is getting increasingly limited (Tilak 2009a, b). It is true that in many European countries and in North America, higher education is not yet largely privatised and many think that it is not likely to be extensively privatised in the near future. One should note that after all, many governments have not yet made commitment of higher education to the GATS, and in all, we have experience with education under the GATS for a little more than a decade only. Some feel that strong regulatory, accreditation and quality assurance mechanisms will eliminate all the potential adverse effects of the GATS. The mechanisms suggested include foolproof methods of registration, accreditation, approval, equivalence recognition and quality assurance. One of the most important concerns of many countries with the GATS is the potential loss of autonomy of the governments to regulate and make policies for development of quality education and

Internationalisation of higher education 211 improvement in equitable access. They might rightly feel that though it is difficult to effectively regulate higher education sector in which the involvement of the private sector is high, it would be harder to regulate a sector which is characterised with foreign commercial presence. As Altbach (2009b) cautioned, ‘vetting and regulating these institutions will not be easy.’ Regulation is one major issue. The GATS is not interested in regulatory authorities; it negotiates liberalisation, not regulation (Nielson 2004). Many believe that it is not just regulation, but the dangers involved are much more deeply imbedded in the very nature of trade and in its application to education. The new environment characterised by an altogether new terminology has resulted in change in objectives, definition, nature and scope of education and mechanisms of transaction processes – teaching/instruction, research and the whole academic profession – the teacher, the student, the institutional structure and its management; and it even raised somewhat awkward questions, such as what a university is, who a professor is, who a student is, what subjects need to be taught and what should not be in a university, etc. Enrichment of quality and diversity in higher education, which was an important reason for attracting the overseas students by many countries for several centuries, is no more the objective of internationalisation. Equity, philanthropy and ideological and philosophical considerations do not figure any more in these activities. In short, mottos like ‘higher education is a right’, ‘higher education for all’, it is a public good, etc., are replaced by popular slogans like ‘education for sale’, and international trade in education. National sovereignty in making educational policies, in regulating educational development, and in serving the nation-building functions, is also believed to be at stake, as almost every aspect of educational policy and planning will be under the control of the WTO radar. Alternatively, some (Haigh 2008, p. 436) argue that internationalisation conceived as education for planetary citizenship which means trading the national goals in favour of global concerns can be a counterweight to the commercial forces that drive higher education to abet future destructive practices. But this might prove to be an unrealistic dream. One of the most important reasons for the higher education institutions, including some of the best universities to work for internationalisation has been the declining public budgetary support, which resulted in the emergence of commercial concerns and promotion of international trade and in the disappearance of educational considerations. The traditional mechanisms of offering scholarships, grants and other direct and indirect subsidies to foreign students have been replaced not only by an end of (or a drastic decline in) subsidies but also by

212  Internationalisation of higher education introduction of high fee systems for overseas students in many universities in the West, though there are still many traditional universities in North America, Europe and Japan which still offer scholarships to a good number of foreign students. But in many other universities – new and old, full, if not more than full, cost recovery seems to be the principle applied to overseas students. Interestingly, academia in not only developing countries but also advanced countries is either not interested or even dead against trade in education (e.g., Altbach 2003, 2006). For example, the Education International, International Association of Universities, Association of Universities and Colleges of Canada, the American Council on Education, European University Association and the Council for Higher Education Accreditation in Europe strongly pleaded for rejection of the inclusion of education in the negotiations of the GATS.27 Ministries of education and culture in many developing and developed countries are also not much interested in it. The UNESCO, which recognised higher education as a public good in the World Conference on Higher Education 1998 and in 200928 does not seem to be favouring this much, though the UNESCO in collaboration with the OECD (UNESCOOECD 2005) is engaged in preparing ‘guidelines’ in this regard, particularly in ensuring quality of education that is offered across borders, including accreditation, etc.29 But Ministries of Trade and Commerce, and national and transnational associations of industries in developed and a few developing countries, ‘Friends of Private Education Export Groups’, multinational companies, which are found to be less aware of the passionate debates on the GATS and its effects on education (Verger 2009b, p. 393) and the WTO, the supranational organisations are strongly in favour of the GATS and trade in education. The World Bank, the International Finance Corporation, the OECD and the European Commission favour it and extend support for expanding private investments in education and the international education markets (see Rhoads and Slaughter 2006; Schugurensky 2006). Countries will increasingly become more and more engaged in near future in issues related to internationalisation and particularly trade in higher education. Hence, it is important that countries become fully aware of the implications and also of alternatives available, while responding to these issues. First, it is important to realise that all traditional – non-trade – forms of internationalisation of higher education are significantly different from trade forms, and that they make huge positive contribution to the development of higher education. Hence such forms need to be

Internationalisation of higher education 213 encouraged, through collaborative research programmes, faculty and student exchanges, etc., as they immensely benefit educational systems in the developing as well as developed countries. These forms recognise higher education and research as public goods and as global public goods and involve public subsidisation. The Lisbon Convention (1997), the Sorbonne Declaration (1998) and finally the Bologna Declaration (1999) have not only favoured such forms of internationalisation within Europe, but also stressed the need for facilitating it by establishing principles of compatibility or equivalence in degrees, mutual recognition of degrees, transferability and transparency. Second, in case of present modern forms of internationalisation – trading education under the GATS – an extreme degree of caution is necessary. Many have recommended selective approaches – s­elective in terms of countries, universities (domestic as well as foreign) – and perhaps even programmes, making distinction between education and research activities, between education and training programmes, between degree programmes and non-degree programmes, and between humanities and social sciences on the one hand and engineering, science and technology on the other. Such selective approaches require identification of universities of high quality which are genuinely interested in the development of higher education and research, and provision of a conducive environment for their participation in internationalisation. Third, if one were to benefit from trade – selective or otherwise – a strong higher education system is important, which is also, of course, important on its own. To reap the gains in trade in education, it is necessary before one thinks of internationalisation to improve domestically the higher education system. It needs to be raised to a level equivalent to the best systems in the world, so that competition becomes meaningful and will be between equals and not between unequals. It is also important to note that top quality foreign universities collaborate and would like to further collaborate with highquality institutions in developing countries and not with two-tier and three-tier institutions. Hence the need for rejuvenation of the system arises. This is a pre-requisite for, and cannot be treated as an expected outcome of, internationalisation. If the pre-requisite is not fulfilled, the local fragile higher education system might eventually vanish altogether. Any move toward internationalisation will be counterproductive, if the system in the country is not made an excellent one in terms of quality of education, quality of teachers and quality of graduates it produces. This is to be considered as the bottom-line. It might require

214  Internationalisation of higher education huge public investments in education. But that is necessary. The higher education system in several developing countries is left severely underinvested. A well-funded strong public higher education system would be an antidote to many problems the country faces. Fourth, many of the higher education systems in the developing countries are expanding without any clear long-term policy perspectives and plans, resulting in uneven and unstructured expansion. In this regard, one may identify the following liens of action: 1 It is necessary that coherent and sound policies are formulated in higher education and suitable long-term plans are chalked out, along with efficient strategies for implementation of the policies and execution of the plans. Realistic benchmarks have to be set. 2 Second, many systems require a strong regulatory framework that promotes development of higher education and which also checks the growth of undesirable components of higher education. The scope of such regulatory frameworks may have to be beyond the borders. 3 It is also important to have efficient accreditation mechanisms, which cover all academic aspects of all universities and higher education institutions in the country – public, private and foreign. This is critically necessary whether the country opts for internationalisation or not. After all, most of the advanced countries have strong regulatory mechanisms and sound accreditation systems that regulate private universities and also foreign universities and their functioning. 4 Fourth, besides ensuring reasonable level of infrastructure facilities, it is necessary that quality teachers are recruited, as after all the teachers are the backbone of the whole higher education system. Admission policies and recruitment methods should ensure best-quality faculty and students. 5 Fifth, many systems also require setting up of quality assurance mechanisms. A good set of performance indicators has to be identified and used in planning and management of higher education institutions, which can also be used in the allocation of resources and in other aspects of development of higher education systems. 6 Sixth, the principles of equivalence in degrees and transferability need to be established both nationally and internationally. Many countries may be having such mechanisms only for transfer between universities within the countries.

Internationalisation of higher education 215 7 Above all, in all this, a firm commitment of the government for the development of higher education is important, which should be reflected in policymaking and allocation of national resources to higher education. To conclude, internationalisation is here to stay within the framework of the GATS or otherwise, more likely within the framework of the GATS. Once the countries develop strong higher education systems, they will be in a position to choose the mode of internationalisation; they can be selective and encourage rich internationalisation of higher education without any concerns of trade and the GATS. A strong and vibrant public higher education system may help developing countries on their own for their own sake, and in being successful in the internationalisation of higher education, as a strong, high-quality system of higher education will attract the best students and faculty from all over the world. More over this will help in escaping from the negative effects of internationalisation, and more significantly in escaping from the national and international pressures on committing education to the GATS. After all, once higher education is recognised as one that is provided ‘in the exercise of governmental authority’, meaning that it is supplied ‘neither on a commercial basis, nor in competition with one or more service suppliers’, it has to be exempted from the GATS altogether, as all government-controlled services are exempted from the GATS.30 This, viz., development of a strong and vibrant higher education of high quality and excellence is important even otherwise for its own sake. In fact, one can hypothesise that had public investment in education been of a higher level, say 6 per cent of GDP, say as recommended by the Indian Education Commission (1966) long ago, and had higher education of good quality been sufficiently expanded, there would have been no justifiable reason for developing countries like India even to consider any proposal of making a commitment of education to the GATS nowadays. There is an inverse relationship between growth in higher education in a country and outward mobility of students (Bashir 2007). Students may not go abroad, if the national system of higher education of good quality expands fast. Then, in fact, the whole case for trade in education, particularly for import of education would disappear. As each national system becomes strong, the case for trade in higher education as whole might gradually fade away over the years and only the classical mode of internationalisation of education will prevail. It can be argued that this is the best option, perhaps there is no other meaningful option.

216  Internationalisation of higher education

Notes * This chapter is based on ‘Internationalisation of Higher Education GATS: Illusory Promises and Daunting Threats’, Journal of Indian School of Political Economy, 19(3), 371–418, 2007. Used with permission. This, drawing from Tilak (2011), was presented in the Beijing Interregional Forum on Economics of Education 2012 and the 2012 Annual Conference of the Chinese Society for Economics of Education, Beijing (November 2012). 1 Economist (3 January 2009). 2 Universities adopt different methods and approaches. For example, a reputed international school of business in Spain all of a sudden started undergraduate courses in English medium, essentially to attract foreign students and succeeded in getting about 80 per cent students from outside Spain (Economist 3 January 2009). 3 However, data on distribution of the commitments made by 47 countries as in February 2006 is available. In all, 167 commitments were made in education: 33 in case of primary education, 37 in secondary education, 37 in adult education and 22 in ‘other’ education, in addition to nearly 40 commitments in higher education (Knight 2008a, pp. 168–169). 4 Most of those countries which have made commitments, have done only partially: some have committed only higher education; some have committed only privately funded education services; some others have committed both public and private services (Geloso-Grosso 2007); all also have not committed to all modes: some have committed for mode 3 and mode 4, also with restrictions; no country has made unrestricted commitment in the entire education sector. Only a few countries (some European Union countries and former Soviet Union) have made quite extensive commitments in nearly all sectors of education. See Scherrer (2005, pp. 487–488). 5 For example, as Agarwal (2009, p. 342) notes, India’s ‘initial and revised’ offers do ‘not mean much’. The contents of offer are briefly described in Tilak (2011). 6 Many developing countries were unhappy that India broke ranks with other developing countries and were apprehensive of the purilateral arrangements, as such an approach would lead to greater pressure on them to open up sensitive services in their markets with little assurance of concrete gains in areas like mode 4. See Chanda (2006, p. 5). 7 Recent economic recession seems to be affecting the inflow of foreign students into the United States, as many universities experience a big drop in the number of foreign students (Fischer 2009). See also Schmidt (2009) who reports that for the first time after 2004, domestic students increased at a faster rate than foreign students in the United States. 8 The corresponding figure is the highest in Luxemburg (42.2 per cent); followed by 27.9 per cent in Cyprus. However, developing countries like Grenada with 57.5 per cent and Macao, China, with 49.8 per cent figure at the top. 9 China had about 77,000 foreign students enrolled in Chinese institutions (Huang 2007), and more than 90 per cent of them are self-financed or (high) fee-paying, contrary to the earlier situation when they used to be financed state scholarships (Xiaohoa et al. 2009). Number of foreign

Internationalisation of higher education 217 students in Malaysia has increased from 28,000 in 2002 to 48,000 in 2007 (Tham 2010, p. 105). During the same period, the number of Malaysian students overseas has also increased from 42,000 to 55,000. Interestingly, the corresponding number was above 100,000 in 2000 and 2001. See Rudner (1997) for a discussion on trends in Asia-Pacific countries. 10 As Huang (2003) noted, there have been two phases in internationalisation of higher education in China. During the first phase (1978–92) China sent students abroad and invited visiting scholars from abroad; and during the second phase (1993 onwards) the emphasis has been to attract more foreign students into China, besides encouraging Chinese expatriate scholars to come back home. Other countries like India seem to be intending to walk on the same path. 11 See Tilak (2011) for a case study of India. 12 Singapore Economic Development Board sets targets and plans in this regard. See also its resources at www.sedb.com. 13 Even the Temple University branch campus reportedly lost US$50 million a year at least until 2000 (Kim and Zhu 2010, p. 175). Further, it is reported that most of these universities had low name recognition and they sacrificed academic integrity for tuition money and have actually committed outright financial fraud. Finally they were closed. See Kim and Zhu (2010). 14 Such selective approaches and preferential trade agreements are actually in conflict with the GATS rules. But under ‘limitations’ some scope does exist even within the framework of the GATS for such selective practices. 15 Singapore Economic Development Board regulates the entry of foreign universities. 16 As the president of the University of Washington (Seattle) observed in interview in India, ‘We are much more interested in bringing students over, exchanging professors, doing collaborative research . . . those kinds of activities make great sense. Coming over here and setting up a campus is probably not something many of us are interested in.’ See Joshua (2007). The president of Yale University also expressed similar views. See Vidyasagar (2005) http://timesofindia.indiatimes.com/articleshow/msid-979587, prtpage-1.cms 17 There is an interesting case of Australia looking like an importer. Carnegie Mellon University (CMU) exports education to Australia from the United States. It looks intriguing: it is indeed intriguing. But if one looks at the operations, the situation is clear. CMU exports education to Asian students through Australia. Asian students, who want an American education but want it not in the expensive United States, nor in poor home countries in Asia, but in an advanced environment of Australia where regular external checks and accreditation mechanism are ensured, are the primary target of the CMU. Such an arrangement is found to be attractive and beneficial to all the three sides, viz., the CMU, the Asian students and Australia as well. See Woodhouse (2007). 18 For the same reason, developed countries continue to provide subsidies and retain tariffs, but insist on elimination of subsidies and tariffs by developing countries (see Stiglitz 2002). 19 It is the US Trade Representative, who for the first time offered higher education to the WTO under the GATS. Such ministries and other departments are supported by their embassies and information organisations located abroad. For example, it is observed that the ‘British Council is no

218  Internationalisation of higher education longer mainly in the information business bur rather is focused on export promotion’ (Altbach 2009a). 20 Apollo group owns a few private universities including University of Phoenix and Western International University in the United States and Meritus University (Meritus) in Canada; Kaplan offers undergraduate and graduate college degrees online and also provides test preparation services; and Laureate Education (formerly Sylvan Learning Systems) has purchased whole or part of private higher education institutions in Chile, Mexico, Panama and Costa Rica and owns universities in Spain, Switzerland and France (Knight 2006b); in all it owns 29 universities and post-secondary institutions on three continents (Altbach 2009a). 21 Knight (2008a, pp. 138–139) gives a list of 49 higher education institutions which are publicly traded on stock exchange. In fact, they are companies offering education programmes and services. 22 Some discuss the whole of issue of internationalisation without any reference to the GATS and the WTO. For example, see many papers in Higher Education Policy 22 (3) (September 2009); the issue is titled ‘African Universities and Internationalization’. 23 Some of the evidence and the concerns are discussed in Tilak (2011). 24 Quoted by Wallach (2005). 25 South Africa is perhaps the only country that broke this protocol (Sørensen 2005). 26 As Nielson also (2004) states, the GATS is only interested in foreign supply – not privatisation per se. 27 See Guarga (2009) for more details on how and who protested against bringing higher education under the GATS in North and Latin America, and Europe. 28 See http://unesdoc.unesco.org/images/0014/001419/141952e.pdf for the Declaration of the 1998 Conference; and for the Communiqué of the 2009 Conference, see www.unesco.org/fileadmin/MULTIMEDIA/HQ/ED/ED/pdf/ WCHE_2009/FINAL%20COMMUNIQUE%20WCHE%202009.pdf 29 The aim of these voluntary and non-binding guidelines was to support and encourage international cooperation, protect students from low provision and disreputable providers and encourage quality cross-border higher education (Lee 2007). UNESCO has also prepared a toolkit in this regard (UNESCO-APQN 2006). 30 However, it might be very difficult for a country to get its higher education sector exempted altogether from commitments under this provision.

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Internationalisation of higher education 221 Huang, F. (2007). Internationalisation of Higher Education in the Era of Globalisation: What Have Been Its Implications in China and Japan? Higher Education Management and Policy, 19(1), 47–61. International Association of Universities. (2008). IAU Global Survey Report 2005 – Internationalization of Higher Education: New Directions, New Challenges. Paris: International Association of Universities. Joshua, A. (2007). There’s a Growing Fascination With India in the U.S. The Hindu, April 14. www.hinduonnet.com/thehindu/thscrip/print.pl?le=200704140 1291100.htm&date=2007/04/14/&prd=th& Kim, E. H., and Zhu, M. (2010). Universities as Firms: The Case of US Overseas Programs. In C.T. Clotfelter (Ed.), American Universities in a Global Market (pp. 163–201). New York: National Bureau of Economic Research. Knight, J. (1997). Internationalisation of Higher Education: A Conceptual Framework. In J. Knight and H. deWit (Eds.), Internationalisation of Higher Education in Asia and Pacific Countries. Amsterdam: European Association for International Education. Knight, J. (2003). GATS, Trade and Higher Education. www.obhe.ac.uk/ products Knight, J. (2006a). GATS: The Way Forward After Hong Kong. International Higher Education, 43, Spring, 12–14. Knight, J. (2006b). Higher Education Crossing Borders: A Guide to the Implications of the General Agreement on Trade in Services (GATS) for CrossBorder Education. Vancouver and London: Commonwealth of Learning and UNESCO. Knight, J. (2008a). Higher Education in Turmoil: The Changing World of Internationalization. Rotterdam and Taipei: Sense Publishers. Knight, J. (2008b). Double and Joint Degree Programs – Vexing Questions and Issues. Research Report, Observatory on Borderless Higher Education, London. Knight, J. (2011). Regional Education Hubs: Mobility for the Knowledge Economy. In R. Bhandari and P. Blumenthal (Eds.), International Students and Global Mobility in Higher Education: National Trends and New Directions (pp. 211–230). New York: Palgrave Macmillan. Knight, J., and de Wit, H. (1997). Internationalization of Higher Education in Asia-Pacific Countries. Amsterdam: European Association for International Education. Kritz, M. M. (2006). Globalisation and Internationalisation of Tertiary Education. International Symposium on International Migration and Development, United Nations Secretariat, Department of Economic and Social Affairs, Turin, Italy. UN/POP/MIG/SYMP/2006/02/Rev. huwu.org/esa/ population/migration/turin/Symposium_Turin_files/P02_KRITZ_Rev3_ Augst21.pdf Larsen, K., and Vincent-Lancrin, S. (2002). International Trade in Educational Services: Good or Bad? Higher Education Management and Policy, 14(3), 9–46. Lee, M.N.N. (2007). Cross-border higher education and quality assurance in Asia-Pacific. In Higher Education in the World 2007: Accreditation for

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10 Social control on higher education*

In the context of discussing ‘social control’ on higher education, it is important to note three interrelated concepts. They are: ‘social control on higher education’, ‘social responsibility of higher education’ and ‘social responsibility for higher education’. While social control refers to the question, who should control higher education, social responsibility of higher education refers to the question, what higher education should do for society, or simply what the social functions of higher education are. Social responsibility for higher education refers to the issue of what society should do for higher education. All three concepts are very closely related and are interdependent. Society gets authority on either ethical or legal grounds, if higher education performs its due role in the development of the society, and more importantly if the society provides what the higher education system requires in order to perform its functions. If higher education does not perform its role in the development of the society, it also cannot expect the society to do its duty towards development of higher education. If the higher education system contributes to the development of the society, and if the society fulfils its obligations, then only one can speak of social control – the right of the society to control higher education.

Social functions of higher education So first, what are the functions of higher education? It is recognised for long that higher education performs a very critical role in the development of the society. One of the most important roles assigned to higher education has been socialisation and modernisation of societies by helping in forming attitudes and even by causing the necessary changes in attitudes of the people. Higher education helps in socialisation of the youth and in their effective functioning in the modem societies, as

226  Social control on higher education many sociologists have highlighted. It induces change and progress in society. It contributes significantly to transformation of traditional societies into modem ones. In short, education is a major instrument of social change. As the Education Commission, also known as the Kothari Commission, noted, ‘if this “change on a grand scale” is to be achieved without violent revolution (and even for that it would be necessary), there is one instrument, and one instrument only, that can be used: EDUCATION’ (Education Commission 1966, p. 8). Secondly, by developing critical thinking among the people, higher education produces citizens with social consciousness and with national and human values, which are important in creating a politically mature, socially cohesive and humane society. By inculcating the right values, it helps in the formation of national culture. It helps people in their effective participation in sociopolitical and cultural spheres of development of the societies. The role of higher education in creating intelligent citizenry for the national and global societies is widely recognised. Thirdly, it produces and supplies skilled manpower for development of the economy – for industrialisation and economic transformation – and also manpower for administration and the overall governance of the nations. This now known as the human capital function of higher education is being widely recognised as a very important one, along with its social and political functions, so much that higher education is considered as an important factor in economic growth and development. Fourthly, higher education also helps in the development of sustainable education systems, by producing teachers, researchers, administrators, planners and policymakers for all levels of education. Above all, but most fundamentally, higher education contributes to the creation and advancement of human knowledge and the expansion of frontiers of knowledge, through scientific research and several other intellectual endeavours – knowledge which is essential for the very sustenance of the civilisations and the humanity at large. Thus the social functions of higher education include social, cultural, economic, political, educational and humanistic; and it has a long time horizon often spanning over generations and centuries. Whereas the contribution of higher education to increase in productivity of the people in labour markets, and thereby in employment and increase in individual earnings are regarded as direct individual benefits of higher education, others are considered as social benefits or externalities of higher education, accruing to the whole society. The externalities, many believe, are a legion. That higher education is both efficient (in improving economic growth) and equitable (in reducing poverty and income inequalities, etc.) is also well known. These externalities or social benefits

Social control on higher education 227 of higher education make higher education a public good (at least a quasi- or semi-public good), and a merit good, in the production of which the state assumes a significant role in most civilised societies. As the specialists of human development theory remind us, higher education not only contributes to development of the societies, i.e., it serves as a means of development, but also is an end in itself; it is development. That is, large numbers of higher educated people rightly represent higher levels of human development of a nation.

Social responsibility for higher education To ensure that higher education performs its due role effectively, the society has a responsibility towards developing and nurturing the edifice of higher education. The society’s responsibility cannot be confined to financing, or the delivery of higher education. The society’s responsibility includes policy formulation, planning, financing and providing higher education to the citizens and to ensure that the system of higher education functions efficiently. When I say efficiency, I do not mean just managerial efficiency or financial efficiency; it should be socially as well as economically, politically and educationally efficient. Only if the society performs its duty, it gets a right to ‘control’ higher education. The society’s all-encompassing responsibility is important. Otherwise, nowadays it is being argued that these functions can be split and shared by several actors in the society: the state might have to finance higher education, but does not have to provide it; or the state may plan, but implementation can be left to others, notably the markets; or the state might at best serve as an enabler, providing an enabling framework for the markets to set up and manage higher education institutions; and so on. The proposal for public-private partnership in higher education has to be seen in the same context. The core responsibilities cannot be split, as the interests of the various actors are different and contradictory, as I argue later.

Who should ‘control’ higher education? This takes me to the main issue of social control or control by the society on higher education. There are two terms: ‘social’ (or society) and ‘control’. First, in the framework of welfare economics, ‘society’ encompasses all its social, economic, political and cultural organs, including the state, markets, households and all other public and private institutions; in other words it includes all government as well as

228  Social control on higher education all non-government organs. So social control actually means control by all these organs. But problems are complicated, not only because they are too many, but also because none of these institutions is static; all are dynamic in nature, ever and even rapidly changing; and they have different interests. I shall come back to this a little later. Second, the term ‘control’ looks less positive, if not altogether negative and harmful. But ‘social control’ seems to be a positive one, compared to ‘control’ in general. Nowadays it is becoming fashionable to discuss this issue under the banner of ‘regulation’ or more prominently ‘governance’. The several actors in higher education While ‘society’ includes all its organs, a meaningful discussion can take place only if we examine the different organs and their role in higher education. Earlier social scientists (e.g., Max Weber, Thorstein Veblen) analysed the relations between faculty and bureaucracies and also the role of commerce in university affairs. Putting them together in a more coherent analytical framework. Burton Clark (1983) identified three major actors in higher education, viz., state, market and academic oligarchy. The three contemporary authorities may have different, even conflicting, interests. Clark refers to the relations between them as a triangle of coordination of higher education (Figure 10.1). The relationships between the three are always a matter of serious dynamic tension. Whereas in most societies, all three try to ‘control’ higher education, Clark classifies the erstwhile USSR as one that belongs to the category of state-controlled higher education systems, the United States as a market-controlled system and the higher education in Italy as one that is controlled by the academic oligarchy. Sweden and France figure on the axis of the state and academic oligarchy, and the systems in Canada, Britain and Japan belong to the centre of the triangle, tilting towards the market-academic oligarchy axis. Clark’s triangle of coordination in higher education has been quite robust in explaining the authority of the state, market and the academic institutions on higher education. But it might look simple. In the Dr Malcolm Adiseshiah memorial lecture, I identified three major actors: the state, households and markets as the actors in the triangle (Tilak 2003). Perhaps that is also not sufficient. The taxonomy might consist of a larger number, if not a multitude, of actors. Certainly there are more than three actors: state, markets, households, academic institutions, civil society, etc. Markets include domestic and international markets. Higher education institutions include the

Social control on higher education 229 State

USSR Sweden France

Canada

USA

Market

Japan Britain

Italy

Academic Oligarchy

Figure 10.1  Clark’s triangle of academic coordination Source: Clark (1983, p. 143)

leadership, administration, students and teachers, including teachers’ organisations and students’ unions. There is also another huge segment in the society, represented not necessarily by the state, namely the political power structures. That political institutions including political parties and politicians often exercise undue control on higher education often not sanctioned de jure by any authority, is well known. In addition, there are also international organisations (e.g., among many, the World Bank and the UNESCO) that work either through the state, or through the markets, or on their own and influence shaping of higher education policies. Thus one can note several actors on the higher education scene. All may be related and even if they are not clearly related, they influence each other. The interests of all these actors are often different, contradictory and even conflicting with each other. An increase in the role of one would be at the cost of another; for example, the role of the state diminishes as the role of the market increases, or as markets become dominant, the role of the state diminishes. The contemporary authority relations in higher education are indeed complex, as Brian Pusser (2008) notes. Hence we need a

230  Social control on higher education more nuanced model to have a better understanding of contemporary authority relations in higher education. The state in a civilised society considers education as a public good and its provision as one of its most important responsibilities. The markets consider higher education as a tradable commodity from which profits can be generated; the students and households treat it as an individual or a private good and will be interested only in the benefits that it confers on them; and the political institutions might consider education primarily as a vote bank. The academic institutions that include teachers’ organisations might view higher education as a noble profession in the service of the society or might consider it as any other business. Normally public higher education institutions may regard higher education as a public good, while private institutions may treat it, like the markets, as a commodity meant for sale. Thus the differences in the interests and considerations of various actors are indeed serious, strong and are conflicting with each other. The entwining of all these – the state, market, civil society, academic organisations, etc., and their control on higher education – requires serious attention. In such a context, when society means inclusive of all these actors, what is meant by social control, i.e., control by society? Who in the society should govern or control higher education? One might argue that many of the actors we have identified do not necessarily control higher education. This may be true, but they do influence shaping of higher education development considerably. They have an indirect control, which, in fact, can be quite dominant. For example, look at the students and households. Many students increasingly tend to focus on individual pecuniary benefits from higher education; accordingly they opt for such areas of study which have high value in markets, such as technical education nowadays, essentially IT (information technology)-related disciplines and management disciplines, some of which were not considered as higher education for a long time by some of the best universities in the world. The first choice of few students seems to be humanities, or basic sciences or even traditional engineering sciences and technology, which indeed lay foundations for society’s development. Many also view higher education not merely as a passport for job, but also as a visa to go abroad, mainly to the West. All this – students’ and parents’ aspirations – might considerably influence the development of higher education – public provision and even the private higher education. Departments of humanities, social sciences, basic sciences, etc., in many universities might, in response to such aspirations of the students and their parents, get closed, and more and

Social control on higher education 231 more engineering colleges offering degrees in information technology, fashion technology, and hotel management may get opened, as we note nowadays as a major trend. Similarly, the markets and the private sector in higher education would be interested in only revenue-generating areas of study and ignore other areas of study and research, however genuinely important they are for the development of a humane society. Particularly most of the actors in the non-government sector might not have any long-term vision and considerations for the development of higher education. Even the civil society may not necessarily have a long-term perspective. Higher education sector often gets pressurised to respond to such conflicting demands. An important question may be: should higher education respond to market demands, or should higher education influence and change market demands to socially relevant needs? This is an important question. Here the market demands may be inclusive of students’ perceptions and others’ pressures. Quite often, the answer has been in favour of the higher education system responding to market pressures; after all, it improves; the market value of higher education, it is argued. But this may not necessarily be right, particularly when markets are volatile, imperfect, characterised by typical features like profit motive and are bereft of ‘normative’ social considerations and long-term perspectives. So normatively one may argue that higher education should not get influenced, but should influence the market demands. This is indeed a difficult task. State versus markets So who should control higher education? Though there are several actors, the discussion is and can concentrate on state versus markets, though it is also important to discuss the role of the state/markets versus academic institutions (the familiar issue of autonomy versus control). Also important to note is, ideally the state is expected to represent the views of the people, but as Gunnar Myrdal (1968) notes in his famous Asian Drama, the state tends to be increasingly unrepresentative of peoples’ wishes, though the peoples’ perceptions can also be based on all kinds of not necessarily right perspectives. What are the advantages and weaknesses of state and market control on higher education? Market control on higher education and corresponding weakening of the role of the state in higher education, as the experience shows, might cause serious damage to the growth of higher education. Elsewhere (Tilak 2007), I have argued how markets in higher education cause severe distortions in higher education

232  Social control on higher education development (as markets fail to note the externalities associated with education, which are immense), how market entry into higher education would restrict the access of the poor and thus would form an impediment in providing inclusive education, how the imperfections in capital markets do not provide a case for private markets to enter education and how markets fail to provide optimum quantities of public goods like education. Market control on higher education leads, as the experience shows, to the growth of private higher education, to the rising cost of higher education, to the widening of inequalities in access to higher education, to the emergence of profit motive in higher education, to the flourishing of marketable disciplines of study at the cost of genuinely important areas of study causing serious imbalances in education development, to distortions in higher education and research agenda of academic institutions, to the crowding out of the public institutions altogether (like in the Arab and Camel story) and finally to the eclipse of the public good nature of higher education. It is important to realise how imperative it is for the state to play an effective role in education development. While state control on higher education is not an antidote to all this, certainly I argue that effective state control on higher education has a great potential to arrest the growth of such undesirable phenomena in higher education; and that markets on the other hand, actively promote the growth of the previously described aspects. Further, to state that state-controlled or public institutions have no or less degree of autonomy and are subject to a high degree of bureaucracy, compared to private institutions, may not be altogether right, unless we make a distinction between autonomy from the government and autonomy from market/business community that manages the institution. At least theoretically it is possible to conceive a fair degree of autonomy in state institutions (and may be so even in case of private institutions). All academic institutions require autonomy, particularly in academic matters (academic autonomy), even if autonomy is restricted in the case of administrative (administrative autonomy) and financial (financial autonomy) matters. Further, academic autonomy has to be guaranteed and respected not only at the institutional level, but also at the individual level of the faculty members. Autonomy, however, does mean autonomy with accountability. After all, there is no meaning of autonomy without accountability. But the question is accountability to whom – to the government, to the market, to the students who are nowadays regarded as customers (‘customer is the king’), to the parents who pay for their children’s education, to the teachers’ and students’ organisations, or to the academic profession, or to all. The issue

Social control on higher education 233 assumes importance as the measures of accountability of these various ‘stakeholders’ are different. We need to define normative measures of social accountability. This is, of course, more easily said than done. Having noted all this, let me also state that the state is also not necessarily a body of virtues. State in a given context could be myopic, may be subject to short-term pressures – domestic and external – and/ or may have wrong assumptions, say about the importance of higher education, or about the role of the state or about the role of the markets in higher education. All this, however, depends upon the nature of the state and its understanding of the issues, which are also subject to change. A neo-liberal state may adopt an approach of governance which could be drastically different from, say that of a welfare state. While a welfare state might assume a strong role in planning, providing and financing of higher education, and thereby effectively ‘controlling’ higher education, at the same time with a considerable degree of in-built autonomy for the universities and decentralisation in governance, a neo-liberal state may restrict itself to broadly providing an enabling framework for the development of higher education and for the markets to take the lead. So it depends upon the nature and strength of the state. An authoritarian state might adopt polices altogether different from what a democratic state might adopt. How strong and benevolent the state is in a given sociopolitical and economic context also determines state’s policies of control on higher education. Having noted that markets might not play a positive role in the development of higher education and state too can go on a wrong way, it is important that the academic oligarchy plays a crucial role. The institutional estate (of higher education), consisting of the students’ organisations and teachers’ associations, has to be ever vigilant and strive to protect the genuine academic interests keeping in view social development as its important goal and to see that the state does not deviate from its normative path. The role of the academic oligarchy in creating social pressures is very important in this context. Students’ movements which were very popular and strong in the 1960s and 1970s in exerting pressures on the state, have unfortunately become weak in the recent decades, in response to changing socio-economic policies. Students paying heavy fees for their education tend to become career-oriented and less interested in larger social issues. So do the staff associations, which are increasingly getting concerned with personal issues rather than with social and larger academic issues. But academic oligarchy has great potential in creating social awareness and building pressures and in controlling the very direction of higher education development, and this role needs to be resurrected.

234  Social control on higher education The policies of the state are often influenced by people, particularly in democratic societies. Hence it is important that higher education inculcates critical thinking in people, and produces not just skilled workers, but socially conscious critical thinkers and intellectuals, who critically examine and if necessary contest state action. Higher education has to impart and nurture human values necessary for sustainable human development; it has to influence and change irrelevant market demands into socially relevant needs from a long-term perspective, rather than remaining at a receiving end; and it has to be instrumental in influencing development paradigms, rather than being allowed to be influenced by them. Though some view state’s active control of higher education as desirable and some as undesirable, many note that the lack of state control may actually imply abdication of responsibility by the state, and even promoting laissez-faireism that can create chaos in the society. Hence there is the need for state control of higher education. But paradoxically what we note nowadays is that a state which is expected to play an active role in higher education is unwilling or reluctant to play its role, and markets which are not expected to enter into the arena of education are eager and highly enthusiastic to take complete control of higher education. The state’s reluctance to regulate the higher education system is clear, when we note several attempts being made in the proposed regulations for new universities, entry of foreign institutions etc. The draft regulations argue, for example, for doing away with the need for any prior approval by state bodies to set up institutions, and the need for state bodies to insist on fulfilment of basic conditions relating to infrastructure, etc. They seem to favour the growth of a highly deregulated or unregulated higher education system. On the other side, the enthusiasm of the markets in higher education is also clear with the burgeoning number of private (recognised and unrecognised) institutions of higher education being opened in the country, its demand for introduction of private university bill in the parliament, the recommendation of the Ambani-Birla Committee Report (Government of India 2000) for leaving the whole higher education to the private sector, etc.

Where are we? I have stated that there are several actors in the society that ‘control’ higher education, which put together, constitutes what can be called ‘social control’. That the interests of these various actors are highly diverse and often conflict with each other is well established not only

Social control on higher education 235 in India, but also in other societies. Even with regard to the state, there are several organisations in India, including the University Grants Commission, All India Council for Technical Education, Medical Council of India, Ministries/Departments of Higher Education (in the central and state governments), Planning Commission, State Councils of Higher Education, etc. In some cases, it is not clear who is calling the shots? But is it possible and, if possible, desirable to have one ‘authority’ or control that can take the interests of all the actors in higher education? Now there is a proposal to constitute a statutory body named the National Higher Education Commission (a similar proposal was made by the earlier government also). The National Knowledge Commission (2007) had already proposed creation of an Independent Regulating Authority for Higher Education (IRAHE). Both these proposals envisage a single regulatory body for whole higher education. Can the proposed Higher Education Commission or the IRAHE be conceived as a powerful body of ‘social control’ on higher education in India or as yet another administrative body with no meaning of any ‘social control’ on higher education? I will stop with this question for the reader to ponder over. Perhaps I have raised more questions than I could answer. Well that is, I feel, the very purpose of higher education.

Note * This chapter originally appeared as ‘Social Control on Higher Education’, Rajagiri Journal of Social Development, 4(2): 93–105, 2008. Reproduced with permission. It was a keynote address delivered in the XIX Conference of the MUTA (Madurai Kamaraj, Manonmaniam Sundaranar, Mother Teresa and ­Alagappa University Teachers’ Association) on ‘Social Control on Higher Education’, Madurai (4–5 October 2008).

References Clark, B. (1983). The Higher Education System: Academic Organisation in Cross-National Perspective. Berkeley, CA: University of California Press. Education Commission. (1966). Education and National Development – Report of the Education (Kothari) Commission 1964–66. New Delhi: Government of India. Government of India. (2000). A Policy Framework for Reforms in Education. A Report Submitted by Special Subject Group on Policy Framework for Private Investment in Education, Health and Rural Development, New Delhi, Prime Minister’s Council on Trade and Industry (Mukesh AmbaniKumaramanglalam Birla Report).

236  Social control on higher education Myrdal, G. (1968). Asian Drama: An Inquiry Into the Poverty of Nations and the Challenge of World Poverty. A World Anti-Poverty Program in Outline. New York: Twentieth Century Fund. National Knowledge Commission. (2007). Report to the Nation 2006. New Delhi: Government of India Pusser. Pusser, B. (2008). The State, the Market and the Institutional Estate. In J. C. Smart (Ed.), Higher Education: Handbook of Theory and Research (pp. 105–139). London: Springer. Tilak, J.B.G. (2003). State, Households and Markets in Education: Government’s Unwillingness and Households’ Compulsion to Pay for Education vis-a-vis the Exploitative Markets. Dr. Malcolm Adiseshiah Memorial Lecture, Madras Institute of Development Studies, Chennai, November 21. Tilak, J.B.G. (2007). Private Sector in Higher Education: A Few Stylized Facts. ICSSR Distinguished Lecture Organised as a Part of the Commemorative Celebrations of the 150th Year of First War of Independence, Dharwad, Centre for Multi-Disciplinary Development Research, February 14.

11 Higher education and development in Asia*

Higher education is an important form of investment in human capital. In fact, it can be regarded as a high level or a specialised form of human capital, the contribution of which to economic growth is very significant. It is rightly regarded as the ‘engine of development in the new world economy’ (Castells 1994, p. 14). The contribution of higher education to development can be varied: it helps in the rapid industrialisation of the economy, by providing manpower with professional, technical and managerial skills. In the present context of transformation into knowledge societies, higher education provides not just educated workers, but knowledge workers to the growth of the economy. It creates attitudes, and makes possible attitudinal changes necessary for the socialisation of the individuals and the modernisation and overall transformation of the societies. Most importantly, higher education helps, through teaching and research, in the creation, absorption and dissemination of knowledge. Higher education also helps in the formation of a strong nation-state and, at the same time, helps in globalisation. Lastly, higher education allows people to enjoy an enhanced ‘life of mind’, offering the wider society, both cultural and political benefits (TFHES 2000, p. 37). Developing as well as developed economies in the Asia-Pacific region, like most other economies of the world, have long recognised the importance of higher education in development. The human investment revolution in economic thought initiated by Theodore Schultz (1961) added further boost to the efforts of the developing economies of the region during the post-war period. As Patel (1985) notes, there occurred an educational miracle in the third world countries. Asia has its own major share, and higher education has an important share in the education miracle. Compared to 1.1 million students enrolled in higher education institutions in 1950 in Asia, there are, according to the latest available figures, 35 million students (1997). This means a

238  Higher education and development in Asia phenomenal rate of growth of 65 per cent per year. Women constitute nearly 40 per cent of the total enrolment, representing a fair degree of gender equality in higher education. As a proportion of the relevant (17–23) age group, enrolment in higher education forms more than 11 per cent, in contrast to about 2 per cent at the middle of the last century. The number of teachers in higher education institutions has increased from 0.1 million in 1950 to 2.3 million in 1997. The growth of some of these aspects is shown in Figure 11.1. All these figures are no mean achievements for countries of the region, which were economically backward, except Japan and a few oil-rich countries in West Asia. All this does not mean that all countries in the region have developed their higher education systems uniformly well. There are indeed wide variations in the levels of development of higher education between several countries: some have very well-developed higher education systems in both breadth and depth, and in others it is highly restricted to a small minority of the population. The five geographic regions in Asia – West Asia, Central Asia, South Asia, East Asia (including South-East Asia) and the Pacific (Oceania) – provide wide contrasts. There are wide regional disparities even between countries within the sub-regions and even within each country. Higher education has expanded well in some of the East Asian countries, apart from Japan, and in Australia and New Zealand in the Pacific region; but several countries in South Asia, Indo-china and in West Asia lag far behind. 4000 3182

1950

3000

1997

2300

2000 1000

100

100

Enrolments

Teachers

550 100

0 GER

Figure 11.1  Index of growth in higher education in Asia Source: Based on Education Statistics provided by UNESCO and UNESCO Institute of Statistics

Higher education and development in Asia 239 The unequal levels of development in higher education also lead to unequal levels of economic development.

Higher education and economic growth What is the effect of higher education on economic growth of the countries? There is a general presumption that higher education is not necessary for economic growth and development, particularly in developing countries. It is literacy and primary education that is argued to be important. Estimates on internal rate of return also contributed to strengthening of such a presumption. Conventionally, the contribution of education to economic development is analysed in terms of education–earnings relationships and, more conveniently, in the form of rates of return. Rates of return are a summary statistic of the relationship between lifetime earnings and the costs of education. Available estimates on rates of return, given in Table 11.1, clearly show that the social rates of return to investment in primary education are the highest, followed by secondary education. The returns to higher education are the least. This pattern is more or less true in general with respect to private rates of return also, though in case of Asia, higher education yields a higher rate of return than secondary education to the individuals. Such evidence is extensively used to discourage public investment in higher education and to concentrate rather exclusively on primary education. Though the rate of return to higher education is less than that to primary education, it should, nevertheless, be noted that higher education does yield an attractive rate of return to the society (11 per cent)1 and to the individual as well (18 per cent). The estimates in Table 11.1 are regional averages. There are wide variations in the rates of return in several countries. Table 11.2 presents the available estimates on rates of return to higher education in some of the Asian countries, for which data are available. Despite some of the severe limitations that the estimates on rates of return, Table 11.1  Rates of return to education in Asia (%)

Private Social

Primary

Secondary

Higher

20.0 16.2

15.8 11.1

18.2 11.0

Note: Asia includes non-OECD Asian countries Source: Psacharopoulos and Patrinos (2002)

240  Higher education and development in Asia Table 11.2  Rates of return to higher education in Asian countries Country

Year

Social

Private

Country

Year

Social

China Hong Kong India

1993 1976

11.3 12.4

15.1 25.2

Nepal

1982 1999

9.1

1965 1978 1995 1978 1986 1989

10.3 10.8

16.2 13.2 18.2

Pakistan

Indonesia

Iran Israel Japan

Malaysia

1972 1976 1958 1969 1973 1976 1980 1978 1983

14.8 22.0 5.0 11.5 13.6 6.6 6.4 6.9 5.7 7.6

Philippines South Korea 18.5

Singapore

8.0 8.1 8.8 8.3 34.5 12.2

Sri Lanka Taiwan Thailand

Asia (excl. Japan)

1975 1984–85 1991 1971 1988 1971 1986 1966 1998 1981 1970 1972 1970 1985 1989

8.0 19.8 8.5 10.5 9.3 15.5 24.1 13.9 15.0 17.7 11.0 13.3

11.0

Private 21.7 12.0 27.0 26.5 31.2 9.5 11.6 16.2 17.9 25.4 18.7 16.1 18.4 15.8 14.0 17.4 11.8 18.2

Sources: Tilak (1994); Psacharopoulos (1994); and Psacharopoulos and Patrinos (2002)

particularly social rates of return, carry with, these estimates are strongly believed to be a good indicator of the economic contribution of higher education. Some of the estimates are rather dated. Yet these estimates reveal (1) investment in higher education yields positive rates of return to the individual and also to the society at large; (2) in several countries social rates of return are high, above 10 per cent, which can be considered as an alternative rate of return; and (3) rates of return seem to be increasing over the years. Generally, declining rates of return over time are often expected but this is not the case in some of the Asian countries. This may be due to rapid increase in the demand for higher educated manpower. Contribution of higher education to economic development can also be measured better with the help of production function or even a

Higher education and development in Asia 241 simple regression equation. The gross enrolment ratio, a flow variable, which is the most commonly used indicator of education development, reflecting the current level of efforts of the countries for the development of higher education, shows very unequal development of higher education between the several countries of the region. The ratio ranges between 1 per cent and nearly 70 per cent, as shown in Table 11.3. Higher education has expanded well in the East Asian tiger economies and a few Central and West Asian countries, the gross enrolment ratio being comparable to that in some of the developed countries. The gross enrolment ratio in Korea, Singapore, Hong Kong, Thailand, Australia and New Zealand is above 20 per cent. Countries like Indonesia and Malaysia are rapidly expanding their system, but still the enrolment ratios are only around 10 per cent. By contrast, all countries in South Asia and also those in SouthEast Asia, like Cambodia and Viet Nam, have very low enrolment ratios. Viet Nam and Myanmar have had universal primary education for a long time. Even in the 1980s the gross enrolment ratios in primary education were above 100 per cent. They also have high literacy rates among adults (above 80 per cent). Yet they could not progress.

Table 11.3 Gross enrolment ratio in higher education in Asia and the Pacific (latest year in the 1990s) Gross enrolment ratio (%) 50

Afghanistan Bangladesh Brunei

China India Oman

Armenia Azerbaijan Bahrain

Hong Kong Cyprus Lebanon

Georgia Israel Japan

Indonesia Iran Kuwait Kyrgyzstan Malaysia Mongolia Saudi Arabia Syria Tajikistan UAE Fiji

Macao Philippines Qatar Thailand Turkey Turkmenistan

Kazakhstan Singapore Uzbekistan

Korea Australia New Zealand

Cambodia Lao Maldives Myanmar Nepal Pakistan Sri Lanka Viet Nam Yemen PNG Samoa

Source: Based on UNESCO (1999)

242  Higher education and development in Asia Similarly, though Sri Lanka could attain a high level of performance in school education, economically it is still poor. This may be because Sri Lanka and these other countries have not paid adequate attention to higher education. For example, in Sri Lanka higher education is extremely restricted and secondary school graduates have to wait for two to three years in a queue for admission in higher education. Higher professional and technical education is much more restricted (see Tilak 1996). All this suggests that primary education is not enough for economic development. It does not provide the wherewithal necessary for economic growth. On the other hand, it is clear that higher education is critically important for economic growth. As earlier research (e.g., Tilak 1989) has shown, gross enrolment ratios in education (GER) can be expected to have a positive effect on the level of economic development. In the production functions, time lag is also allowed, which yielded meaningful results. Here, using the data on 49 countries of the Asia-Pacific region,2 GDP per capita in 1999 is regressed on enrolment ratio around 1990 and we note that the regression coefficient is positive and statistically significant at 1 per cent level (Equation 1 in Table 11.4), indicating a significant effect of higher education on economic growth of the nations. The stock of adult population with higher levels of education (HEA) is an important indicator of the level of development of higher education. This stock indicator represents the cumulative efforts of a country Table 11.4 Regression estimates of higher education on economic development in Asia Dependent variable: in GDP/pc Eqn.

Higher Intercept Coefficient R-square Adjusted F-value Degrees education R-square of variable freedom

1

GER

3.3904

2

HEA

3.3943

0.0162 (4.005) 0.0195 (3.917)

0.2628

0.2464

16.038 46

0.3911

0.3469

15.343 28

Note: Figures in parentheses are t-values. All coefficients are statistically significant at 99 per cent level of confidence. Notation: GDP/pc: Gross Domestic Product per capita (PPP 1999); GER: Gross Enrolment Ratio (per cent) around 1990; HEA: Higher Education Attainment (Proportion of population with higher education) (latest: 1990s) Source: Author

Higher education and development in Asia 243 Table 11.5  Higher education attainment in Asia Pacific Percentage of adult (25+ age group) population having post-secondary education (latest available in 2001/02) Country

%

Country

%

Country

%

New Zealand Mongolia Philippines Korea Japan Taiwan Cyprus Kuwait Hong Kong, China Qatar Kazakhstan Tajikistan

39.1 23.4 22.0 21.1 20.7 17.8 17.0 16.4 14.5 13.3 12.4 11.7

Israel Turkey Bahrain Brunei Darussalam Singapore India Malaysia Macao Solomon Islands Thailand Fiji

11.2 10.8 10.3 9.4 7.6 7.3 6.9 5.9 5.6 5.1 4.5

Iraq Viet Nam Pakistan Indonesia Myanmar Maldives Afghanistan Bangladesh Sri Lanka China Cambodia Nepal

4.1 2.6 2.5 2.3 2.0 1.7 1.6 1.3 1.1 1.0 1.0 0.6

Source: UNESCO (1999)

in the development of higher education over the years. Table 11.5 presents the higher education attainment ratios (HEA) for countries in the Asia-Pacific region where this information is available. In Nepal, only 0.6 per cent of the adult (25+ age group) population have higher education; the corresponding ratio is 20 times higher in Japan, Korea and Philippines and 50 times higher in New Zealand. While Nepal and Cambodia figure at the bottom of the list of the countries in the region with respect to this indicator, in several developing countries of the region, the corresponding figure is less than 5 per cent; only in a few countries it is more than 10 per cent (Figure 11.2). In contrast, in the United States nearly half the adult population has higher education. This attribute is also expected to have a stronger effect on development, as the group considered here forms a part of the labour force; it indeed forms an important and even a large part of the skilled and educated labour force. The larger the stock of population with higher education, higher could be the economic growth.3 Equation 2 in Table 11.4 gives the corresponding results – the regression estimates for the relationship between higher education attainment and GDP per capita. As expected, this gives a better result, with a higher coefficient of determination, and the variable has a higher effect, as the value of the coefficient suggests. Both the equations make it clear that higher education makes a significant and positive

244  Higher education and development in Asia Nepal Cambodia China Sri Lanka Bangladesh Afghanistan Maldives Myanmar Indonesia Pakistan Viet Nam Iraq Fiji Thailand Solomon Islands Macau Malaysia India Singapore Brunei Bahrain Turkey Israel Tajikistan Kazakhstan Qatar Hong Kong, China Kuwait Cyprus Taiwan Japan Korea Philippines Mongolia New Zealand

% of Adult (25+) Population with Higher Education

0

50

Figure 11.2  Higher education attainment in Asia and the Pacific, 1990s Source: UNESCO (1999)

contribution to economic growth. Hence, it may not be proper to assume that its role is insignificant. It may be argued that simple regression equations of economic development on education suggest only correlation between the two, and not necessarily cause and effect relationship. Such an argument is partly pre-empted here, by allowing a time lag for higher education to cause economic development. Secondly, we also find very few countries with high levels of higher education being economically underdeveloped, while all the economically rich countries have not necessarily advanced in the development and spread of higher education. In the rapidly technologically changing world, technology makes a significant difference to the economic growth of the nations. UNDP (2001) developed a technology achievement index (TAI), based on the degree of creation of technology in a given economy, the extent of diffusion of old and recent innovations and human skills. The level of achievement in technology critically depends upon the level of higher education in a given economy. After all, it is higher education and

Higher education and development in Asia 245 research that help in developing new technology; it is higher education and research that contribute to innovations and their diffusion. So one can expect a very strong effect of higher education on the development of technology in any society. In fact, the level of achievement in technology may be a close indicator of economic growth itself. Most countries with high enrolment ratios in higher education became ‘leaders’ in technology, with high levels of achievement in technology (as shown in Table 11.6). The converse is also true: a large number of countries with low enrolment ratios (say less than 10 per cent) are ‘marginalised’ in the area of technology. Those with a medium level of enrolment ratios, nearly 20 per cent, like Singapore and Hong Kong, are indeed ‘potential leaders’ in technology. A few countries, like the Philippines and Thailand, with medium and high levels of enrolment ratios are classified by the UNDP (2001) as ‘dynamic leaders’. The rest, which did not expand their higher education systems well, are indeed ‘marginalised’. We find not even a single country with a low enrolment ratio (less than 10 per cent) in higher education to have achieved high or medium level in the technology index. The relationship between higher education and technology could be shown statistically as well. The simple coefficient of correlation between enrolment ratio in higher education and technology achievement index is as high as 0.8 and that between technology and higher education attainment is 0.65. Though the number of observations is small, the simple regression equations estimated here (Table 11.7) and Table 11.6  Higher education (GER) and technology (TAI) Technology achievement index

Gross Enrolment Ratio

High (>0.5) High (>20) Medium

New Zealand, Korea, Australia, Israel, Japan

(11–20)

Singapore

Medium (0.4–0.5)

Low (20.0 India 1984–85 15.0 1993! >20.0 Viet Nam South Korea India 1985 49.6 Private Taiwan Japan South Korea Philippines

Late 1980s 1971 1985 1985 1977

50.0 75.8 65.8 82.3 85.0

Non-Asian countries

Share

Norway France

1987 1975 1984 1986 1989 mid-1980s 1985 mid-1980s 1970–71

0.0 2.9 4.7 0.0 7.3 12.0 12.0 20.0 12.6

1988–89 1982–83 1987–88 early 1980s

6.4 15.0 14.0 0.0

1969–70

15.1

1984–85

14.5

1969–70 1984–85

38.6 38.7

Germany Italy Canada Netherlands Spain United Kingdom Universities Polytechnics Soviet Union USA

USA

Note: Nil or Negligible; * around 1980, unless otherwise mentioned Sources: Tilak (1997b, 2001a); Bray (2000); Catalano et al. (1992); Woodhall (1991); Asonuma (2002) and Department of Education, Australia (2001)

Higher education and development in Asia 253 these countries that the arguments for higher and higher levels of cost recovery are being proposed. The dangers of high cost recovery are to be noted. Even if it is feasible to raise cost-recovery rates to higher levels, it has to be seen whether it is desirable from the point of view of equity in higher education and the manpower needs of the developing economies. After all, the need for ‘democratisation’ or ‘massification’ of higher education is being increasingly felt everywhere. On the whole, private higher education in Asia is financed mostly by the students in the form of fees, and public universities are mostly financed by the state, except in Korea. But all systems of higher education in the region are undergoing rapid changes, increasing their reliance on fees and other private finances. The ‘profit syndrome’ is no more uncommon in several Asian countries. Private higher education Another closely related and important issue of concern in the development of education in the last quarter century refers to private higher education. Private education is not a new phenomenon in the Asian region, though modern private education is of recent origin. Many of the private institutions in the region are privately managed, but are funded by the State to a substantial extent. ‘Complete’ or ‘pure’ private institutions may now be very few in number; but they are rapidly increasing in number. Unfortunately, data are not available to make such a distinction and to find out the exact share of ‘true’ private sector in education. State support to private institutions is quite common in the Asian countries. Private higher education institutions in education have been growing rapidly in all countries of the region – not only in the transition economies of Central Asia but also in South Asia, East Asia, including China and the Pacific. The private sector meets a large part of the demand for higher education in Japan and Korea: its share in total enrolment in higher education is above 70 per cent in Japan, Korea and Taiwan. As high as 73 per cent of all universities, 84 per cent of all junior colleges in Japan are private, enrolling more than 70 per cent of total students in these institutions in 1992. Korea provides yet another example of extensive higher education operated by the private sector: 84 per cent of higher education institutions and nearly 80 per cent of higher education enrolment were in the private sector in 1993. Private higher education institutions in Taiwan out number public institutions two to one, capturing 70 per cent of the enrolment. The share

254  Higher education and development in Asia of private enrolment in higher education in Japan, Korea and Taiwan are among the highest in the world; and no country except the United States has enrolment in private institutions adding up to more than 10 per cent of the total enrolment in higher education, and even there the figure is only 10 per cent. In a sense, the Korean and Japanese experience combined seems to be in sharp contrast to the traditional welfarestate approach – not to mention the traditionally important role of the state in the provision of education that dominates the pattern of educational development in European economies such as the United Kingdom, Sweden, Switzerland and Italy, and in the United States and Canada as well. Many other economies of the region – Singapore, Taiwan, Hong Kong and China – do not rely on private financing to the extent that Korea and Japan do. Hong Kong was able to resist pressures to allow the establishment of private universities. The private (‘independent’) higher education sector is emerging slowly in China and a system of non-government-run higher education institutions is gradually taking shape, as non-state or private (or sponsored) institutions begin to take root. In Singapore, which has a very limited role for the private sector, the government takes the bulk of the responsibility for higher education. But the quality aspects of private higher education do not seem to be satisfactory. Despite flourishing growth and government support, private institutions in the region have failed to become top-quality institutions such as the ones founded in the United States. This shows us what happens when quality controls are weak and profit motives dominate other considerations. The universities in Korea are found to be producing ‘half-baked graduates’, necessitating huge investments by the government and the industry in R&D (Linsu 1998). As private universities cater to the demands of the large population, neglect of public higher education goes unnoticed. More importantly, since higher education is allowed to be guided by market signals, most higher education institutions tend to concentrate on professional fields. As Clark (1995, p. 159) notes, humanities and social sciences are thrown aside; doctoral programmes in not only social sciences but also physical sciences are ‘surprisingly weak’, most advanced-level education is ‘radically under-developed’ and the research-teachingstudy nexus has become highly problematic. This is believed to be mostly attributable to the dominant role of industry or private sector in higher education. It is generally felt that rapid growth in public sector spending on education has resulted in rapid growth in public sector enrolment everywhere, including in East Asia, and that such a relationship between

Higher education and development in Asia 255 private sector investments and enrolment in private institutions (or total enrolments in all institutions) cannot be found. On the whole, the private sector is rapidly growing in size, and most public policies or the lack of the same are conductive for its growth.

Conclusions and implications Higher education systems in many developing as well as developed countries including in Asia and the Pacific are also characterised with a crisis, rather a continuing crisis, with overcrowding, inadequate staffing, deteriorating standards and quality, poor physical facilities, insufficient equipment and declining public budgets. More importantly, higher education is subject to neglect and even discrimination in public policy. As Verspoor (1994, p. 2) rightly observed, ‘the crisis is in part the reflection of the economic adversity that many developing countries have experienced in the 1980s, but it is also a crisis of policy or very often, lack of policies’ (emphasis added). Higher education systems are undergoing rapid changes in Asia. Some have followed the British mode of welfare statism to some extent; others attach more value to individual economic gain (and thereby to the economic growth of the country) and expect the market to respond to economic incentives that higher education comes with;8 and a few others are indeed following ad hoc or no clear policies. Coherent long-term policies for the development of higher education for development of nations are needed. Public policy has to clearly recognise the critical importance of higher education in development. It is important to note that no nation that has not expanded reasonably well its higher education system can achieve a high level of economic development. International evidence shows that all advanced countries are those that have a gross enrolment ratio of above 20 per cent. Among the advanced countries there is no single country, where higher education was not well expanded. In most developed countries higher education is fairly democratised, and is accessible to all. In fact, there are significant trends towards massification of the base of higher education. The gross enrolment ratio in higher education in advanced countries varies between 20 per cent and as high as 90 per cent. In contrast, in most of the developing countries, it is restricted to a small fraction of youth. No country could be found in the group of high-income countries with an enrolment ratio of less than 20 per cent. It is not only international evidence, but also the evidence on Asian countries clearly shows the same. The high-income countries in Asia, viz., Japan, Korea, Singapore, Hong Kong, Israel, etc., have

256  Higher education and development in Asia an enrolment ratio between 20 per cent and 70 per cent. Many lowincome countries in the Asian region, except the Philippines, have an enrolment ratio much below – below 20 per cent. Thus 20 per cent enrolment ratio in higher education seems to be the critical threshold level for a country to become economically advanced. The experience of the Asian countries in general (Tilak 2001c), and with the policies of globalisation and structural adjustment is also rich (Tilak 1997a). Comparing the experiences of several countries in the region, one may conclude that these policies succeeded only in those countries that have invested heavily in education, including specifically higher education. The converse is also true. These policies could not yield good results in those countries that have made low and inadequate levels of investment in higher education, reflected in low levels of educational levels of workforce, as in countries in South Asia, and also in South-East Asia like Viet Nam, Laos, Cambodia, etc., compared to the countries like Korea, and, to some extent, Thailand, Indonesia and the Philippines. After all, globalisation, including international competition, to be successful, requires highly skilled manpower, produced by higher education systems. Empirically, it was found that globalisation has contributed to reduction in poverty and inequalities in East Asia, but ‘globalisation has not allowed South Asia’s progress towards poverty reduction to continue at its previous pace’ (Khan 1998). The reason could be found in the differences in investment in education, higher education in particular. Despite such an awareness, many countries in the Asian region are not able to accord due priority to higher education. South Asian countries lag far behind the other Asian countries in higher education. According to the predictions made by UNESCO (see Chapman and Adams 1998), many of the developing countries in Asia, particularly in South Asia will continue to be lagging behind the developed countries in the development of higher education and will have low enrolment ratios, unless significant policies of expansion of higher education are adopted. The case of Singapore and to some extent Hong Kong and Malaysia in the East Asian region, and of India in South Asia highlights the strengths of public higher education. The rapid growth in higher education in some of these countries owes largely to state funding. The role of the state is very important in providing and financing education everywhere. Excessive reliance of the governments on private sector for the development of higher education may lead to strengthening of class inequalities and even produce new inequalities, besides adding to the problems of quality. On the whole, it seems that initial government

Higher education and development in Asia 257 investments on a large scale are important in higher education; but only after some time, and certain level of educational and economic development is achieved, private sector may complement the state efforts in higher education. This also depends upon the role of the private sector in economic development in general. The East Asian sequencing of funding – huge public funding first, and then only some private funding – is quite important (Thant 1999).

Notes * This chapter originally appeared as ‘Higher Education and Development’, International Handbook of Educational Research in the Asia-Pacific Region, 11, 809–826 (Springer International Handbooks of Education, 2003). Reproduced with permission from Springer. With marginal revisions, the chapter also appeared as ‘Higher Education and Development in Asia’, Journal of Educational Planning and Administration, 17(2), 151–173, 2003. 1 The social rate of return to higher education in the Asian region was the second highest among the world regions, compared to 11.2 per cent in subSaharan Africa, and 10.6 per cent in Europe and the Middle East and North Africa. The rate of return was the highest in Latin America and the Caribbean region (Psacharopoulos 1994). However, a recent update (Psacharopoulos and Patrinos 2002) shows that Asia ranks second lowest among the world regions, after OECD. 2 All the countries in the Asia-Pacific region are considered on which required data are available. Data on education, economic growth and other indicators of development are largely collected from UNESCO (1999), UNDP (2001) and the World Bank (2000). 3 Instead of proportion of population, proportion of labour force with higher education could be expected to be more strongly related to economic growth. But such data are available for a small number of countries in Asia Pacific. 4 In both cases, n, the number of observations considered is very small, due to non-availability of data on their respective indicators. 5 This is also confirmed by intra-country studies (e.g., Tilak 2001b). 6 Some recent studies that gave elaborate accounts of development policies in higher education in Asia – both at regional levels and also by countries, include Yee (1995), Postiglione and Mak (1997), UNESCO-PROAP (1998) and Tilak (1994, 2001a, c), Lewin (1999) and Bray (2000) – covering all levels of education. 7 Other economies in East Asia – Singapore, Taiwan and Hong Kong – and even countries in other regions do not rely on private finances to the extent Korea does. 8 At the same time it may be wrong to argue that the principle of individual choice, a principle that is assigned a lot of weight by the state in European and North American economies, has been the guiding principle of state policies in financing (or rather under financing or not financing at all) higher education in Japan and Korea.

258  Higher education and development in Asia

References Asonuma, A. (2002). Finance Reform in Japanese Higher Education. Higher Education, 43(1), 109–126. Bray, M. (2000). Education in Asia: Financing Higher Education – Patterns, Trends and Options. Prospects, 30(30), 331–347. Castells, M. (1994). The University System: Engine of Development in the New World Economy. In J. Salmi and A. M. Verspoor (Eds.), Revitalizing Higher Education (pp. 14–40). Oxford: Pergamon. Catalano, G., Silvestri, P., and Todeschini, M. (1992). Financing University Education in Italy. Higher Education Policy, 5(2), 37–43. Chapman, D. W., and Adams, D. (Eds.). (1998). Trends and Issues in Education Across Asia. International Journal of Educational Research, 29(7), 581–685. Clark, B. R. (1995). Places of Inquiry: Research and Advanced Education in Modern Universities. Berkeley, CA: University of California Press. Department of Education, Australia. (2001). Higher Education Report for the 2001 to 2003 Triennium. Canberra: Commonwealth of Australia. Khan, A. R. (1998). The Impact of Globalization on South Asia [and] Growth and Poverty in East and South-East Asia in the Era of Globalization. In A. S. Bhalla (Ed.), Globalization, Growth and Marginalization (pp. 103–124 and 125–148). London: Macmillan. Lewin, K. M. (1997). Educational Development in Asia: Issues in Planning, Policy and Finance. Asian Development Review, 15(2), 86–130. Linsu, K. (1998). Technology in Asia. Far Eastern Economic Review, 48, May 14. Patel, S. J. (1985). Educational ‘Miracle’ in the Third World, 1950 to 1981. Economic and Political Weekly, 20(31), August 3, 1312–1317. Postiglione, G. A., and Mak, G.C.L. (Eds.). (1997). Asian Higher Education: An International Handbook and Reference Guide. Westport, CT: Greenwood Press. Psacharopoulos, G. (1994). Returns to Investment in Education: A Global Update. World Development, 22(9), 1325–1343. Psacharopoulos, G., and Patrinos, H. (2002). Returns to Investment in Education: A Further Update. World Bank Policy Research Working Paper 2881, Washington, DC. http://econ.worldbank.org/files/18081_wps2881.pdf Schultz, T. W. (1961). Investment in Human Capital. American Economic Review, 51(1), 1–15. Task Force on Higher Education and Society (TFHES). (2000). Higher Education in Developing Countries: Peril and Promise. Washington, DC: World Bank. Thant, M. (1999). Lessons From East Asia: Financing Human Development. In J.L.H. Tan (Ed.), Human Capital Formation as an Engine of Growth: The East Asian Experience (pp. 202–236). Singapore: Institute of Southeast Asian Studies.

Higher education and development in Asia 259 Tilak, J.B.G. (1989). Education and Its Relation to Economic Growth, Poverty and Income Distribution: Past Evidence and Further Analysis. Discussion Paper No. 46, World Bank, Washington, DC. Tilak, J.B.G. (1994). Education for Development in Asia. New Delhi: Sage Publications. Tilak, J.B.G. (1996). Costs and Financing of Education in Sri Lanka. Manila: Asian Development Bank/Brisbane: UniQuest. Tilak, J.B.G. (1997a). Effects of Adjustment on Education: A Review of Asian Experience. Prospects, 27(1), March, 85–107. Tilak, J.B.G. (1997b). Lessons From Cost Recovery in Education. In C. Colclough (Ed.), Marketising Education and Health in Developing Countries: Miracle or Mirage? (pp. 63–89). Oxford: Clarendon Press. Tilak, J.B.G. (2001a). Building Human Capital in East Asia. Working Paper, World Bank Institute, Washington, DC. Tilak, J.B.G. (2001b). Higher Education and Development in Kerala. CSES Working Paper No. 5, Centre for Socio-economic & Environmental Studies, Kochi. Tilak, J.B.G. (2001c). Education and Development: Lessons From Asian Experience. Indian Social Science Review (ICSSR, New Delhi), 3(2), July– December, 219–266. UNDP. (2001). Human Development Report. New York: Oxford University Press. UNESCO. (1999). Statistical Yearbook. Paris: UNESCO. UNESCO-PROAP. (1998). Higher Education in Transition Economies in Asia. Bangkok: UNESCO. Verspoor, A. M. (1994). Introduction: Improvement and Innovation in Higher Education. In J. Salmi and A. M. Verspoor (Eds.), Revitalizing Higher Education (pp. 1–11). Oxford: Pergamon. Woodhall, M. (1991). Student Loans in Higher Education. Paris: International Institute of Educational Planning. World Bank. (2000). World Development Report 2000–01. New York: Oxford University Press. Yee, A. H. (Ed.). (1995). East Asian Higher Education: Traditions and Transformations. Oxford: Pergamon. Ziderman, A., and Albrecht, D. (1995). Financing Universities in Developing Countries. Washington, DC: Falmer Press.

12 Universities An endangered species?*

A University is a place of concourse, whither students come from every quarter for every kind of knowledge. . . . There you have all the choicest products of nature and art all together, which you find each in its own separate place elsewhere. All the riches of the land, and of the earth, are carried up thither; there are the best markets, and there the best workmen. It is the centre of trade, the supreme court of fashion, the umpire of rival talents, and the standard of things rare and precious. It is the place for seeing galleries of firstrate pictures, and for hearing wonderful voices and performers of transcendent skill. It is the place for great preachers, great orators, great nobles, great statesmen. In the nature of things, greatness and unity go together; excellence implies a centre. . . . It is the place to which a thousand schools make contributions; in which the intellect may safely range and speculate, sure to find its equal in some antagonist activity, and its judge in the tribunal of truth. It is a place where inquiry is pushed forward, and discoveries verified and perfected, and rashness rendered innocuous, and error exposed, by the collision of mind with mind, and knowledge with knowledge. It is the place where the professor becomes eloquent, and is a missionary and a preacher, displaying his science in its most complete and most winning form, pouring it forth with zeal of enthusiasm, and lighting up his own love of it in the breasts of his hearers. It is the place where the catechist makes good his ground as he goes, treading in the truth day by day into the ready memory, and wedging and tightening it into the expanding reason. It is a place which wins the admiration of the young by its celebrity, kindles the affections of the middle-aged by its beauty, and rivets the fidelity of the old by its associations. It is a seat of wisdom, a light of the world, a minister of the faith, an Alma Mater of the rising generation. . . . Such is a University in its idea and in its purpose. —John Henry Newman (1854)

Universities: an endangered species? 261

The ‘Classical’ University ‘University’, drawn from its ancient designation of a ‘Stadium Generale’, or ‘School of Universal Learning’, is conventionally seen as an institution where scholars, interested in a wide variety of areas of study, come from all over the world and participate in the process of creation and dissemination of universal knowledge. They engage in serious scholarly discussions and debates, not only on their subject but also on wider issues of historical and contemporary importance – social, political, economic, philosophical, cultural, scientific and technological. A university is a place where new ideas germinate, strike roots and grow tall and sturdy. It is a unique space, which covers the entire universe of knowledge. It is a place where creative minds converge, interact with each other and construct visions of new realities. Established notions of truth are challenged in the pursuit of knowledge. (Government of India 2009, p. 9) Universities produce social thinkers, scientists, professionals, researchers, and above all they produce better citizens. In fact, as Nussbaum (1998) states, university’s finest end is the production of better citizens and this has been the unbroken thread throughout the entire history of higher education. Universities were set up in ancient and medieval periods with the same or a similar understanding. The world’s first university was established in Takshashila (spelt nowadays as Taxila) in the seventh century BC in India. More than 10,500 students from all over the world studied in more than 60 subjects in this university.1 The Academy in Athens or the School of Philosophy, founded by Plato in 387 BC is considered as the first institution of higher learning in Europe (see Patterson 1997). Along with his mentor, Socrates, and his student, Aristotle, Plato helped to lay the foundations of natural philosophy, science and Western philosophy in the Academy. The University of Nalanda built in the fourth century BC in India was one of the greatest achievements of ancient period in the field of education. According to available records,2 it was one of the world’s first residential universities. It had extensive dormitories and accommodated over 10,000 students and 2,000 teachers on the campus in its heydays. Considered an architectural masterpiece, the university was enclosed by a lofty wall and had eight separate compounds and ten temples, several lakes and parks alongside meditation halls and classrooms. The library was

262  Universities: an endangered species? a nine-storeyed building where meticulous copies of texts were produced and preserved. Courses of study were drawn from every field of learning, Buddhist and Hindu, sacred and secular, foreign and native. Students studied science, astronomy, medicine and logic as diligently as they applied themselves to metaphysics, philosophy, Samkhya, Yoga-Shastra, the Veda and the scriptures of Buddhism. They likewise studied foreign philosophy. The university attracted pupils and scholars from Korea, Japan, China, Tibet, Indonesia, Persia, Turkey and other parts of the globe. These institutions represent the concept of the university of ancient period.3 Thus, university as an institution is more than 2,500 years old. The University of Bologna, the first ‘modern’ university was set up in 1158 AD in Europe in the medieval period. This was followed by Oxford and the University of Paris around the same period in the twelfth century, and Cambridge, Arezzo, Palencia, Padua, Napoli etc., in the thirteenth century. Even if one ignores, as many do for no valid reason, the ancient period, modern university as an institution is nearly 1,000 years old. It may be expected to continue to exist even in distant future. This appearance of continuity does not mean that the nature, structure and functioning and even the concept of university remained the same. Partly influenced by socio-economic and political developments and partly on its own, the university as an institution has undergone tremendous transformation over the period. Few universities today could protect the unique identity and their historical traditions and compare favourably with the ideal ‘classical’ university of the past. Today universities are operating in a dynamic landscape of conflicts and contradictions. The dramatic changes that took place in the structure and functioning of the university during the recent period deserve serious attention as they seem to be drastically changing the very nature and definition of the university, its mission and its relationship to the society. Universities are getting transformed from research and knowledge centres to entrepreneurial institutions or profit centres. Interpretations and reinterpretation are made of the very concept of university, and researchers began dwelling at length on ‘what is a university in the twenty-first century?’ (see, e.g., Denman 2005). The transformation is not smooth; several tensions emerge between the tradition and modernity rather continuously, as modernity is also not static. As Jaspers (1946, p. 5) noted, ‘the idea [or university] is never perfectly realised. Because of this a permanent state of tension exists . . .  between the idea and the short-comings of the institutional and corporate reality.’ As tensions become alarming, they amount to crisis. Viewing the rapid and unprecedented changes of the recent

Universities: an endangered species? 263 past, some doubt whether university as an institution that developed over the last several centuries, will survive. To say that university is in a quandary is to play down a gigantic problem. Proud traditions are under serious threat from all sides – within and from outside. Quite a few years ago, Clark Kerr (1978) wondered whether the higher education paradise was already lost. Barnett (1990, p. 25) refers to the current phase as ‘the final stage’ in the idea of higher education. Brown (2009) refers to higher education as ‘the last nationalized industry’. Does it mean the end? A recent report of the UNESCO Forum on Higher Education, Research and Knowledge (Weiler et al. 2006) notes that research capacity, research productivity of the universities and research relevance are rapidly declining in many universities around the world and wonders whether universities as centres of research and knowledge creation need to be treated as ‘an endangered species’. I wish to argue that universities of the classic mode are indeed an endangered species and that just as we wish to protect the endangered species, we need to make very special efforts to recover the idea of the university and to revive, protect, nurture and promote the legacy of the past in such a way that the universities stand for the longcherished ideals with which university as a social, cultural and above all as an academic institution was originally set up. But before that, let me briefly note how the universities have been transformed from knowledge centres to entrepreneurial universities and even to profit centres over the years.

Generations of new universities The world has experienced an unprecedented growth in higher education during the twentieth century – particularly during the second half, and more strikingly during the last quarter of the century. But for minor exceptions, the growth seems to be continuing unabated during the present decade of the new millennium as well. At the end of the thirteenth century there were hardly 20 universities. Today there are several thousands of universities, apart from several thousands of other institutions of higher education. The growth of universities is characterised by drastic transformation of their very nature. Speaking about the evolution of universities, Wissema (2009) has identified three generations of universities: medieval universities, set up during the twelfth to the eighteenth centuries as the first generation universities; the second generation universities which include universities starting with Humboldt University founded in Berlin in 1810 to those that existed until the middle of the twentieth century; and the

264  Universities: an endangered species? present generation universities, which include the universities that got transformed themselves, with a series of experimentation, into entrepreneurial universities in the late twentieth century and in the new millennium. It may be proper to renumber the generations of universities into five generations – starting from the ancient universities of the ancient period which need to be considered as the first generation universities, to the very present universities of the twenty-first century as the fifth generation, covering in between the three generations that Wissema (2009) refers to.4 There are striking differences and some commonalities between the several generations of universities. The ancient and medieval universities pursued truth and knowledge. The rulers supported the universities as the institutions of higher education with scholars and students were recognised as noble institutions serving noble functions of creating and disseminating knowledge. Pursuit of new knowledge was not as much the main objective of the medieval universities as ‘protection of wisdom of the past’. The church in Europe supported the universities as it believed that learning was the best antidote to heresy and that studies in philosophy and theology would promote faith in church bringing stability to it; the civil authorities supported universities as studies in law would bring stability to state, and thereby in all, bring better social order. Note that theology, law and philosophy, besides medicine, arts (that include arithmetic, geometry, astronomy and music) and science were the main faculties in the universities of the period. Though the universities were supported by church and the state, they enjoyed full academic freedom and went on exploring new pathways into science and humanism. The main role of the universities was to defend truth, and they had the sole objective of education; accordingly they adopted scholastic method to create professionals, while the ancient universities pursued additionally advancement of knowledge. The second generation, i.e., the medieval universities could be regarded as those fitting Newman’s (1854) idea of a university, according to whom university ‘is a place of teaching universal knowledge; . . . its object is intellectual . . .  and diffusion and extension of knowledge rather than the advancement’. Universities during the ancient period received immense support from rulers but they remained at a distance from the kings. Universities during the medieval period in Europe were independent of church; but church is incorporated for its assistance, which ensured moral authority and integrity to the university, but as Newman (1854) notes, ‘not that its main characters are changed by this incorporation: it still has the office of intellectual education; but the Church steadies it in the performance

Universities: an endangered species? 265 of that office’. In fact, by the middle of the seventeenth century the influence of the church on the universities declined with the rise of the nation-state philosophy. The mission of the universities, for example of the University of Halle established in 1697 in Brandenburg, was to prepare leaders for the service of the state and universities were to be used as the lever to build a national identity (Tangchuang and Mounier 2010, p. 94). The third generation, i.e., the Humboldt model universities added research to their functions and integrated education with research. Research for advancement of knowledge was considered as the prime responsibility of the universities. It was held that the world can be understood by human experiences of the natural and social phenomena and by not faith or beliefs. The objective of the universities was ‘to stimulate the idea of science in the minds of the students to encourage them to take account of the fundamental laws of science in all their thinking’. Modern scientific method was the main principle of the universities of the generation. ‘Research was based on rationality, experimentation, argumentation and transparency, the latter allowing for verification and expansion of results by others; . . .’ universities were considered as ‘sanctuaries of pure science . . .  with scientific progress being the objective’ (Wissema 2009, pp. 13–14). The model was based on well-defined organisational and scientific principles. Specialisation and mono-disciplinarity were important characteristics of these universities. Research was pursued in the interest of the advancement of science. Universities were considered as instruments of understanding nature in all its forms as well as a national and individual tool for development and well-being. Universities were viewed as pride of the nation; they were paramount to development of the society and the state generously supported them. Student fee contributions were small and despite contacts of science and technology faculties in the universities with manufacturing industry, universities maintained a clear border between universities and industries. The third generation universities, somewhat in line with the origins of the medieval universities, could function as a community of scientists and scholars among whom there was close and fruitful interaction across the disciplines from physics to philosophy, and between senior and junior members such as professors, lecturers, research scholars, and graduate and undergraduate students and between students, faculty members and the community. As André Béteille (2009) notes, ‘such close and fruitful interaction did not take place always or everywhere, but it could at least be visualized as a realizable objective’ in the universities of this generation.

266  Universities: an endangered species? The Humboldt (also known as Berlin) model universities were to change a lot pressurised by several developments. As Béteille (2009) notes they were to respond to two major pressures: pressure from the growth and expansion of specialised knowledge on the one hand and the pressure on the universities to become socially more inclusive on the other. Along with these, there have been budget pressures as public budgets were squeezed. Public largesse was to be replaced by the need to generate non-governmental revenues. Then there were pressures of the powerful wave of globalisation on all the facets of the society, including on the universities and almost in every country. All this resulted in the emergence of the fourth generation universities, which began as a mix of Halle and Berlin models, i.e., as a mix of the second and third generation models, serving the welfare state in the post–World War II period (Tangchuang and Mounier 2010, p. 96), but slowly changed to a different type of its own. A fourth generation university is described as a seven-pointed star: in these universities the function of community service meant exploitation of research for economic gains; it functions in an internationally competitive system; it is a know-how carousel consisting of a bunch of R&D institutions, techno-parks, professional support organisations, techno-starters, etc.; its research is trans-disciplinary; it is a two-track university having fee-paying students as well as students with scholarships; it’s a cosmopolitan university, with English as the main language of instruction; and it is financed relatively more by private sources and financial management in these institutions is of an altogether different type (Wissema 2009).5 These universities can be described as ‘multiversities’ with not only a variety of constituents, but also multiple functions – ­academic and non-academic, sometimes conflicting with each other. The very concept of multiversity, as Barnett (1990, p. 26) observes, is a ‘testimony to the increasing incoherence of institutions of higher education: with their competing missions of service, scholarship, military and commercial research, access and income generation; they have no single sense of direction’ (emphasis added). According to Wissema (2009), Cambridge University is the best example of the fourth generation universities, though Massachusetts Institute of Technology (MIT) and Stanford University also belong to this category, where in addition to education and research, exploitation of knowledge for economic gains became an important objective. Scientific discoveries were to be turned into successful commercial products, which meant that the research in the universities was to be made market relevant. Cambridge University could successfully transform itself into performing the new role because there was already a

Universities: an endangered species? 267 well-established high-tech enterprise around.6 With active collaboration with universities of this kind, industrial organisations found it easy to abandon their fundamental and even applied research programmes and rely on universities and special research institutions for both fundamental and applied research. But the demand from industries for the latter is higher. In response to such demand, universities also tended to focus at the cost of basic research more on applied research that exactly and perfectly suits the needs of the industry. With active support of industry, universities became cradles of new economic activity. In these universities, as Weiler et al. (2006) noted, intellectual property replaces the phenomenon of intellectual philanthropy, an essential characteristic feature of the first three generations of universities. The fourth generation universities are hotbeds of new entrepreneurial activities in addition to the traditional tasks of research and education; they are in an internationally competitive market environment; they are network universities, collaborating with industry, R&D institutions, private financiers, etc.; they are cosmopolitan and they are also multicultural in their student composition. Their research is largely trans- or inter-disciplinary; and most importantly, their research is more fixed in a short-term framework. With these activities of quasimarket nature added, they became, in the words of Kerr (1963) ‘conglomerates of service stations’, serving the practical needs of various clients, clients being not just students but also more importantly, inter alia, corporate houses. Some of the signs of the fourth generation universities were noted in the very beginning of the twentieth century. For instance, John Jay Chapman stated in 1909: ‘The men who stand for education and scholarship have the ideals of business men. They are in truth business men. The men who control [universities] today are very little else than business men, running a large department store which dispenses education to the millions.’7 These people are regarded as academic entrepreneurs, and academic entrepreneurship is defined as a process of creating value by finding sustainable innovative opportunities for the universities to financially survive, in fact, to financially flourish. Whereas the universities of the earlier generations focused on, to use Béteille’s (2006, 2007) terminology, ‘delayed-return’ research, the priority in the fourth generation universities shifts to ‘immediate-return’ research. ‘Delayed-return’ research, like basic research is costly, both in terms of money as of effort and time. It aims at the accumulation of knowledge on a long-term basis; its course is uneven and its outcome not always certain. It cannot clearly anticipate its outcome in advance and say whether that outcome will be of immediate practical benefit

268  Universities: an endangered species? or mainly of intellectual value, or neither (Béteille 2007, p. 200). In a sense, practicality is not an important consideration in delayed-return research. Industry and other organisations that support research do not generally have a long-term commitment to enable the universities to accumulate intellectual capital. They would be averse to funding high-cost delayed-return research due to its lack of immediate demonstratable utility. Universities also began to get attracted to immediatereturn research, and client-centred research, as the returns from such research immediate, though they may have only short-term use. In fact, close collaboration with corporate sector leads to absorption of corporate values by the universities. Unfortunately the corporate values of hierarchy and control, efficiency, standardisation and obedience are anathema to the creation of new knowledge, therefore, to the core mission of the university. So the fourth generation universities might face serious problems of sustaining their research capacities in the long run. The ancient and medieval universities were universal in their thinking and approach, true to the concept of university; but as Wissema (2009) highlights, the third generation universities8 were largely national, as the nation-state philosophy became strong, focusing more on national development rather than universal values and knowledge; and the fourth generation universities are global. There is a difference between universalism and globalism. The former includes universal knowledge, universal values – human values – and approach to the whole universe in a holistic sense. As Yashpal Committee describes, universities have been regarded as the trustees of the humanist traditions of the world and they constantly endeavour to fulfil their mission by attaining universal knowledge, which can be done only by transcending geographical, cultural and political boundaries. By doing so, the university ‘affirms the need for all cultures to know each other and keeps alive the possibilities of dialogue among them’ (GOI 2009). This was the goal of the ancient and medieval universities and I doubt whether the global approach of the fourth generation universities means the same. The globalism practiced by the universities of the present generation is largely meant for the development of global capital markets, but not humanity at large. If Cambridge, MIT and Stanford Universities are considered as fourth generation universities, one should admit that much different fifth generation universities are already emerging very fast, though they also share several features with the fourth generation universities. The fourth generation universities represent a major phase of transition. They faced several dilemmas: to be conservative or radical, critical or

Universities: an endangered species? 269 supportive, competitive or collegial, autonomous or accountable, private or public, excellent or equitable, entrepreneurial or caring, certain or provisional, traditional or innovative, ceremonial or iconoclastic and local or international (Watson 2006). They tried to be both at the same time, often shifting towards new paradigms, and as a result, many of them slowly tend to get transformed into the fifth generation universities. Quasi-markets in higher education tend to get transformed into full markets – the ‘Education Bazars’ (Kirp 2003), the fifth generation universities. The fifth generation universities include public and private universities, conventional and open universities and universities within and across national borders. What are the characteristic features of these universities? Growth of teaching universities compared to research universities and integrated (teaching and research) universities of the Humboldt model is an important feature of the fifth generation of universities. Unlike the fourth generation universities which have strong education and research programmes but are also characterised by commercialisation, the fifth generation universities are essentially or predominantly characterised by commercialisation; their research activities are extremely limited – limited to revenue-generating activities – and their education programmes are weak. They are primarily or only teaching institutions with little serious research activities. That there are strong inter-linkages between teaching and research and that teaching and research mutually support each other are overlooked in these universities. While the harmonious links are well recognised and fostered in the third and to some extent in the fourth generation universities, many, particularly new universities of the fifth generation, are becoming increasingly and exclusively focused on teaching, with negligible doctoral and postdoctoral research activities. As a result, they are becoming truncated institutions, without research, which is a necessary, though not a sufficient ingredient for university education (Barnett 1990, pp. 128–129). That research is becoming costly is an important point. The fifth generation universities are on a cost-cutting mission so that they can be financially efficient. This also explains the selection of education programmes in these universities. These universities focus on marketable or revenuegenerating education programmes, which are also less expensive to offer at the same time. Humanities, social sciences and even natural and physical sciences are relegated to the background in these universities and areas like management, engineering, and technology are accorded high priority. In contrast to the past, there is a sharp change in attitude on the part of the state and society to university education.

270  Universities: an endangered species? As Barnett (1990, pp. 25–26) described, both economic value and wider social value of higher education are doubted. The state turned to maximizing its investment in higher education . . .  There is a new emphasis on value-for-money, accountability, planning, efficiency, good management, resource allocation, unit costs, performance indicators and selectivity, . . . Subjects within the curriculum are favoured to the extent that they make a clear contribution to the economy: the sciences and technological subjects are supported . . .  the humanities and social sciences subjects try to prove their worth, by developing skills-oriented courses. But even in case of skill-based programmes such as engineering and technology, the focus is unbalanced with modern subjects like IT (Information Technology) engineering becoming more fashionable and getting prominence over standard areas of engineering like civil, mechanical and electrical, as say, for example in India (Carnoy et al. 2009; Tilak 2009). In the area of management, subjects like hotel management and fashion technology are the trend of the moment and they are preferred to traditional courses in management. The education programmes of the universities also get confined to mostly undergraduate or first-degree programmes. Cost considerations may also necessitate cutting down the duration of education programmes, say from three or four years to two-year undergraduate programmes, even in advanced countries, for example, as proposed in the United States.9 The education or research programmes in these universities may not be trans-disciplinary or inter-disciplinary; in fact, they may be ‘antidisciplinary’ (Fuller 2006, p. 349). Since these universities do not have any substantial research programmes, there is nothing like collaboration with industry and hence they cannot generate any significant amount of funds from industry and corporate sector.10 These universities are heavily student funded, and are least reliant on public funds; there is also no other source of funds in these universities. The nature of financial management in these institutions resembles more of commercial institutions and business enterprises. Governments also tend to treat them in the same way.11 Both governments and universities themselves look at every centre of activity in the university as a cost/profit centre. Not only private universities, but also many public universities belong to this category. Further, the fifth generation universities resent government regulation; they want autonomy, rather total freedom from government, but

Universities: an endangered species? 271 they do not mind to forego academic autonomy in favour of monetary gains. They do not feel accountable to government, or to the society or to the people at large. Their accountability is essentially to the financiers as the clients. In the process there is a big erosion of democratic space in universities. With loss in democratic space, universities are in danger of becoming uncritical, losing freedom of expression, free thought, creativity, tolerance, equity, justice, integrity and transparency. Dulling the capacity for critical thinking would pose serious dangers to democracy (Fromm 1941). Further, these institutions are headed not necessarily by eminent scholars, but by successful managers who have proven experience in management, essentially in financial management – in generating funds, for whom discipline, authority and power matter more than freedom, tolerance, etc. The shift in emphasis – from accountability to state to accountability to the financiers – marks a significant change in ethics in higher education and research, as the financiers influence the nature of education programmes, research agenda, research priorities and even research results (see, e.g., Bok 2003). The academic capitalism (Slaughter and Leslie 1999) pushes the universities towards new research agenda, which is more relevant to the new global capital markets. Many fifth-generation universities also tend to be small in size and single-faculty institutions.12 I feel that the concept of a single-faculty university distorts the very nature of the university. ‘Faculties’ born spontaneously and which functioned like single-faculty universities in Europe until the twelfth or thirteenth century, having recognised the merit of becoming regular universities, later evolved themselves into regular multi-faculty universities. After all, universities are expected to be sites where scholars from various disciplines and backgrounds engage in discussion, and not just in classrooms, on a variety of academic and non-academic – social, political, economic, cultural, local, national and international – issues, contributing to cross-pollination of ideas and thinking. A single-faculty university serves to produce a somewhat homogenised product, but not human beings with rounded personalities. Knowledge production and dissemination takes places at a very low level in such institutions, because of lack of opportunity for the cross-pollination of ideas.13 This phenomenon described by Yashpal Committee as ‘fragmentation of knowledge’ or ‘cubicalization of knowledge’ (GOI 2009) is quite common in single-faculty universities, and even if this phenomenon exists in multi-faculty universities, there at least exits scope for avoiding it and to defragment knowledge. For the same reason, the Government of India (2009) committee recommends that all institutions of higher education, including institutions of

272  Universities: an endangered species? technology, science and management should diversify and expand their curriculum to cover other areas of study and should become full-fledged universities. Multi-faculty universities also have scope to offer courses on ethics and moral values, which are being recognised very important nowadays, along with technology, management and science subjects. In contrast to the third generation universities, the fourth generation universities are more inclusive – with students enrolled from social and economically backward sections of the society, and they are also characterised by diversity, with students and faculty drawn from diverse cultures. The general democratic pressures and specific public policies required these universities to be socially inclusive and diverse. But the fifth generation universities tend to practice exclusiveness. Since the financial performance is the most important objective of these universities, poor students cannot get admission into these institutions; there exist no sizeable scholarships programmes to attract academically brilliant but economically poor students. Diversity is viewed not as a virtue but as a problem. Hence class tensions become serious. Paradoxically along with globalisation and increasing numbers of international students in the university campuses, universities also tend to become very parochial institutions with no semblance of national character, if not a global character, in terms of students and faculty composition. I feel this, along with the lack of sociocultural and economic diversity in universities constitutes a great loss on academic side. It is true that nowadays many universities are competing with each other in attracting foreign students. But this is essentially for financial reasons – to raise revenues for the universities which are subject to a big axe in public budgets from national governments. Foreign students are charged high levels of fees, and few scholarship programmes are available for them. With differential subsidy, fee and scholarship policies, for example, for European versus non-European students, the European Education Area might be developed, as desired in the Bologna Declaration, but the European universities might tend to become regionally parochial. Regionalisation or regionalism, though it is not described as parochialism, in higher education is taking place in other regions, too (see Yépes 2006). Diversity is an important essential characteristic feature of ideal universities (IAU 2005). Sociocultural, linguistic and geographical diversity in universities would help enhance the levels of learning and teaching environment. Diversity, which can also be referred to as social pluralism, may be valuable for another point of view; it is in itself ‘a valuable contribution to academic autonomy’ (Minogue 2006, p. 10) that allows a critical look from different perspectives, even dissent and different points of view.

Universities: an endangered species? 273 Peer learning is an important though unplanned component of university education everywhere, sometimes more important than even classroom learning. It is generally felt that peer learning accounts for about one-third of total learning of the young minds. Students as well as faculty will learn better from colleagues drawn from various other parts of the world. Some good universities do testify to the significance of sociocultural and geographical diversity among students and faculty. Such a university system would promote social cohesion, harmony and better understanding among people – one of the most important externalities that universities can produce. Further with practices of social discrimination and inadequate public policies to counter them, universities in countries like India are getting reduced to specific religion/caste and community-based organisations. Disappearance of linguistic diversity is yet another important dimension of this aspect. As Wissema (2009) noted, most universities of the present generation are becoming cosmopolitan, i.e., universities are Englishbased as a daily language. English language has become the new lingua franca, a language which can be sold everywhere. Diversity of various kinds takes a backstage in the fifth generation universities. While the first three generations of universities recognise higher education institutions as public institutions and higher education as a public good or a social good, the fourth generation universities are in a dilemma and seem to treat education as a public good and at the same time as a private good. But the fifth generation universities treat higher education essentially as a private good, that can be sold and purchased in the markets – national and international, and as an individual botheration and not a social responsibility. The eighteenth-century Enlightenment that knowledge is valued for itself is completely replaced by the view that knowledge is for the sake of personal blossoming. It is clear that the universities of the five generations are not necessarily distinct as separate physical entities; most of the universities get transformed from one generation to another. As a result, the typologies presented earlier are somewhat overlapping and some of them coexist. In general, no more universities of the ancient and medieval generations exist today and most universities already got transformed from the third into the universities of the fourth and fifth generations. If there are still any of the third generation, they are on a fast track of transforming themselves into fourth and fifth generation universities. Most of the twentieth – and twenty-first-century universities belong to the group of fourth and fifth generation universities. The universities of the second and third generations can rightly be described as an endangered species, if not already extinct altogether.

274  Universities: an endangered species? Table 12.1  Changing interests of universities in education and research  

Conventional universities

Emerging universities

Motivation Main concern Area of interests Duration of research and education programmes Research and publication

Service Knowledge Generic Normal (long) term

Profit Skills Specific Short term

Publish/public good

Time schedule for research

Flexible

Strict confidential/ private good Rigid

Source: Adapted from Tilak (2006)

The overall changing considerations of universities and the overall recent trends in higher education are briefly summarised here respectively in Tables 12.1 and 12.2. Some of these trends are clear and significantly noticeable in developing countries, but the trends are not confined to developing countries. In a sense, the preceding trends are truly global. It is mainly the fourth and more importantly the fifth generation universities which drastically changed the very concept, definition nature, mission and functioning and almost every aspect of universities, and adopted altogether new definition and approaches to university education. The transformation of the third generation universities into and emergence of the fourth and fifth generation universities can be attributed to a variety of factors, some of which are mutually related. First, the neo-liberal, including the World Bank policies that prescribed drastic reduction in state subsidies to universities have had a significant, but a negative impact on the development of universities. World Bank recommended for a long time that developing countries should not invest much in higher education. Accordingly, either out of compulsion or in a few cases out of conviction, many governments withdrew their budgets away from higher education. In recent years even when the World Bank favoured expansion of higher education (Task Force on Higher Education and Society 2000; World Bank 2002), it meant that the expansion should be with the help of private funds and in private sector. These policies compelled public universities to go for privatisation of all their activities and enabled private universities to come up on a large scale. An equally important and related trend is globalisation. The wave of globalisation is so strong that even the universities that resisted

Universities: an endangered species? 275 many changes for a long period found themselves thrown into a vortex of changes. In general, the neo-liberal policies, including the policies of globalisation contributed to weakening of the role of the state in higher education and research which resulted in weakening of the public higher education systems and to rapid growth in the number of private universities. In contrast to the situation when the state played an active role in sustaining and, indeed, advancing higher education and research, there seems to be a growing tendency nowadays for the state to yield all its functions including regulatory and supportive functions, to the market and the private sector; this, as Weiler et al.

Table 12.2  Emerging trends in higher education Conventional system (first three generations of universities)

Emerging system (fourth and fifth generations of universities)

Higher education as a public good Welfare approach Public higher education Nature of universities: diversity Public financing State-financed institutions No fees Low levels of fees No student loans or governmentsubsidised loans

Higher education as a private good Market approach Mixed and private higher education Exclusiveness Increasingly private financed Student-financed institutions Introduction of fees High levels of fees Extensive reliance on commercially viable least-subsidised student loan programmes Commercial motives; profit motives

Philanthropy and educational considerations Financial management: wise spending Cost-cutting Government-recognised institutions Private institutions requiring no government recognition Degree-awarding institutions Non-degree (diploma/certificate) awarding institutions Emphasis on formal/full-time Open/distance/online/part-time education education Scholarly/academic disciplines of Commercially viable/profitable study disciplines of study Selection criteria for heads of Selection criteria for heads of institutions: academic background institutions: expertise in financial/ Vice chancellors money management and in resource generation Venture capitalists Academic institutions Entrepreneurial and commercial universities Source: Adapted from Tilak (1999)

276  Universities: an endangered species? (2006, p. 7) rightly note, ‘places higher education and, especially, university research into a new kind of jeopardy and at the mercy of forces that are not necessarily interested in the advancement of open and autonomous research’. Third, massive increase in demand for university education has forced transformation of some of the universities into becoming fourth and fifth generation universities. There has been veritable explosion in student demand for higher education in all countries of the world, the share of developing countries in it being higher. At the same time, there have been significant democratic pressures on equitable expansion of higher education, so that higher education becomes more accessible to all and it becomes socially and economically inclusive. Higher education is seen no longer as a luxury; it is essential for survival; ‘higher education is the modern world’s “basic education” ’ (Task Force on Higher Education and Society 2000). This recognition led to demand for massification of university education. Widespread access to higher education is a cornerstone of higher education policy in most countries – developing and developed. The demographic pressures reflected in student numbers and democratic pressures for equitable expansion do not allow many universities to focus on costly and long-term research, expensive education programmes, improvement in quality, etc. Fourth, the weakening of the state is also reflected in the weakening of the fiscal capacity of the state, which strained government funding of universities. In fact, government funding for university education could not keep pace with the increasing numbers of students and universities. The existing resources were thinly spread over an increasing number of students and institutions. In many countries public budgets for higher education – in absolute terms, total and per capita, at best remained stagnant or at worst declined. Several countries also experienced decline in public expenditure on higher education as a proportion of total national budgets and national income (see Tilak 2008). The overall inadequacy of government funds to meet increasing demand for higher education necessitated universities to adopt several measures of cost recovery, including specifically introduction of or steep raise in student fee, launching or revising or restructuring of student loan programmes, diversification of education programmes, adoption of cost-cutting methods, etc. (see Tilak 1997). Fifth, the overall general trends in privatisation of higher education and the advent of WTO/GATS in higher education strengthened the forces of commodifcation of higher education, a phenomenon which many of the fifth generation universities gladly embrace and vie with each other in trading higher education in the international market.

Universities: an endangered species? 277 The WTO is considered by many as a ‘threat to the future of higher education in the world’ (Guarga 2009, p. 81; see also Tilak 2007). But the fifth generation universities are very comfortable with it and with the new terminology that entered along with it into university education, such as consumers for students, sellers for teachers, market places for universities, export, import and trade for international education, higher education markets/bazaars in general and stakeholders for the rest of the society including parents, the corporate sector and the government. The new terminology has altered the very landscape of higher education. There are many other developments that directly or indirectly seem to be contributing to the rapid progress in the transformation of universities. Among the other developments, the global revolution in information and communication technology (ICT) is an important one that has fastened some of the developments that I have described earlier. As Harpur (2006) notes, the development of information technologies has helped a lot in transforming the university into an innovative entrepreneurial institution and sharpened dispute between innovation sand tradition.14 Further, technology revolution has also revolutionised the thinking on the source of knowledge: now it is believed that the authority of knowledge rests very much in technology not in philosophy or sciences; and that universities must produce techno-scientific knowledge as a marketable commodity. Lastly, global rankings and the idea of world class or super league universities (see Salmi 2009) have uneven effects on the development of higher education in many countries, as the public attention tends to get focused on a few potentially good universities and to neglect others, which tend to become the fifth generation universities of the most undesirable form.

Resurrection of the Classical University ‘While people are generally aware that universities have a long history, and that they have survived a number of crises. . . . There is far less consciousness of the value of university heritage: the accumulated experience of universities as well as their material culture which have been transmitted from one generation to the next, and the role this heritage plays today’ (Sanz and Bergan 2007, p. 49). I have tried to present here a snapshot of the history of universities in the world. In all, I note that there have been five generations of universities, as they developed over the last several centuries, from ancient universities in India and Greece to the Phoenix and other universities of the twenty-first century. Some of the universities of various generations

278  Universities: an endangered species? coexist. Recent trends are indeed alarming. ‘The universities of the world have entered an age of endless turmoil,’ as Burton Clark (1997, p. 291) observed. He further stated, ‘National systems of higher education cannot count on returning to an old stage of steady state, nor of achieving new stage of equilibrium.’ Yet the need to recover the idea of the university, to revive the traditional role of universities, and to ‘dismantling the corporate university and create true higher learning’ (Aronowitz 2000) is widely felt, as the recent developments are in the interests of neither the faculty members nor the students, nor indeed of the higher education and national development. Nothing short of a process of radical transformation of the universities is sufficient in this regard. How to revive the noble idea of the university? First, the ‘ideal’ university of the past need not necessarily be treated as utopian or as a thing of the past. It has to be noted that the traditional goals of higher education are as important as ever. It may be possible to realise the ideal university along with some of the desirable and less harmful modern functions, which are necessitated by changing socio-economic conditions, without at the same time becoming multiversities or entrepreneurial institutions. Nevertheless, it should be noted that balancing the conflicting interests is indeed difficult. But that is a challenge we should be ready to take up. It is important to clearly recognise the potential vital contribution of higher education. As Kerr (1963, p. xiv) observed, ‘the university’s invisible product, knowledge, may be the most powerful single element in our culture, affecting the rise and fall of professions and even of social classes, of regions and even nations.’ Such a recognition compels us to revive the public good nature of higher education. Higher education is a public good, producing a huge set of externalities, or wider social benefits that span over social, economic, political, cultural and technological area – all spanning over generations. Among many, higher education is vital for sustaining freedom, democracy and human development; it helps in cultural regeneration and development, and national renaissance. Higher education is not only a public good, but also shapes, produces and helps in realising other public goods. In this sense, it can be regarded as a very special public good of a high order (e.g., see Tilak 2008). A clear recognition of the role of higher education in national development and its public good nature will automatically necessitate resurrection of the role of the state in higher education. It can no more be left to the markets and private sector. State will have to assume a vital role in policymaking, planning, providing and funding higher education, with least reliance on private sector. It has been almost

Universities: an endangered species? 279 unanimously felt by all that the severe squeeze of the public budgets in the 1980s is the most important factor that led to the emergence and growth of fourth and fifth generation universities which are getting bereft of lofty educational goals that societies cherished for centuries. Hence generous state funding becomes an important necessary, though not a sufficient condition for university development. After all, nations are recognised nowadays by the kind of universities they have. Fourth, it is important that every university is required to necessarily have a major research component along with teaching. The attempt should be towards developing a strong, vibrant and high-quality research programme and equally high-quality education programmes in the universities. After all, knowledge creation and knowledge dissemination are the two important functions of a good university and a good university should engage in both, and in knowledge creation ‘not just for the learner but also for society as a whole’ (GOI 2009, p. 3). Fifth, all universities need to be necessarily multi-faculty universities. Single-faculty universities have no place in a good university system. Highly advanced and specialised research centres though can be considered as an altogether different category. The approach should be to go beyond specialised knowledge and boundaries of disciplines. Universities per se have necessarily to be multidisciplinary. The objective should be to produce not only skilled manpower, but also critical thinkers. Universities have indeed a very unique role in producing and nurturing critical thinking abilities. After all, critical thinking is the only weapon and defence which man has against the dangers of life (Fromm 1941); and in this sense, higher education empowers people with weapons against the dangers of life. This vital role can be performed by multi-faculty universities that have not only science, engineering, technology and other professional and technical education faculties, but also humanities, social sciences, liberal arts, etc., and have a multidisciplinary approach in their education and research programmes, and not much by single-faculty institutions. As it is liberal education that helps in ‘total transformation and emancipation of the individual student’ (Barnett 1990, p. 121) and it is liberal education that is necessary for ‘cultivating humanity’ (see Nussbaum 1998), this may have to become a necessary part of all universities, including universities of science and technology. Universities have to be truly universal in their character. Diversity has to be noted as an important essential characteristic feature of a strong university system. Every effort should be made to have students and faculty from different social, economic, cultural-ethnic, religious and geographical backgrounds. Universities have to be genuinely

280  Universities: an endangered species? inclusive of diverse groups of population for ensuring a rich and challenging learning environment. Certainly regional parochialism should have no place in good universities. Lastly, there is a need for expansion in higher education in many countries, but not necessarily in the number of universities of all kinds. Rather, we need to expand, strengthen, re-energise and revitalise the dying public university system. It should be liberally funded by the state, which would guarantee enhanced levels of equitable access and improved levels of quality and excellence, producing better human beings. The march should be towards building a true university system which will be genuine centres of intellectual life, and which would produce not only skilled manpower for industrial development, but also more importantly intellectuals, in fact, ‘organic intellectuals of the people’, necessary for the very sustenance of the societies and not ‘organic intellectuals of global capital’ (Patnaik 2007).

Notes * This chapter originally appeared as ‘Universities: An Endangered Species?’, Journal of the World Universities Forum, 3(2), 109–127, 2010. Reproduced with permission. It is a revised version of the plenary address delivered at the World Universities Forum at Davos, Switzerland (9–11 January 2010). 1 See ‘Taxila’, available at http://en.wikipedia.org/wiki/Taxila 2 See ‘Nalanda’, available at http://en.wikipedia.org/wiki/Nalanda 3 Al-Azhar Muslim University, another university of the ancient period was established in 970–72 AD in Cairo, Egypt, which continues even today to serve as a mosque and the home of Muslim scholarship. 4 I refer hereafter to the renumbered generations. 5 Wissema (2009) is, however, not critical of these universities; in fact, he describes how to make them operationally efficient through modern management approaches. 6 Similar is the case with quite a few other universities, which claim to have made impressive gains from such a transition into commercial environment (see, e.g., Harman 2006). Harman seems to be arguing that some of the dismal interpretations made against these universities are not warranted, at least as far as some Australian universities are concerned. 7 Quoted in www.encyclopedia.com/doc/1G2-3468300066.html 8 In Wissema’s classification they are the second-generation universities. 9 The Times of India (New Delhi), December 24, 2009, p. 21. 10 New ways of collaboration do exist, for example, campus recruitment: corporate sector coming to the campus to recruit fresh graduates. But such collaboration may not generate much revenue. 11 For example, higher education in the United Kingdom is being located in the mega-ministry of Business, Innovation and Skills and is no longer in a Ministry of Education (Brown 2009, p. 91).

Universities: an endangered species? 281 12 For instance, many universities – ‘institutions deemed to be universities’ which have swelled in number in recent years – in India are single-faculty institutions. 13 For instance, we often find that even simple issues relating to religion, history and society are completely alien to the faculty and students in a major institution focusing on management or engineering. 14 At the same time, it is also widely noted that there is also a growing danger of a digital divide leading to a technology divide, which further leads to a knowledge divide.

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Universities: an endangered species? 283 Tangchuang, P., and Mounier, A. (2010). Higher Education: Towards an Education Market. In A. Mounier and P. Tangchuang (Eds.), Education and Knowledge in Thailand: The Quality Controversy (pp. 91–108). Chiang Mai: Silkworm Books. Task Force on Higher Education and Society. (2000). Higher Education in Developing Countries: Peril and Promise. Washington, DC: World Bank. Tilak, J.B.G. (1997). Lessons From Cost Recovery in Education. In C. Colclough (Ed.), Marketising Education and Health in Developing Countries: Miracle or Mirage? (pp. 63–89). Oxford: Clarendon Press. Tilak, J.B.G. (1999). Emerging Trends and Evolving Public Policies on Privatisation of Higher Education in India. In P. G. Altbach (Ed.), Private Prometheus: Private Higher Education and Development in the 21st Century (pp. 113–135). Westport, CT: Greenwood Publishing. Tilak, J.B.G. (2006). Higher Education Between the State and the Market. In G. Neave (Ed.), Knowledge, Power and Dissent: Critical Perspectives on Higher Education and Research in Knowledge Society (pp. 235–254). Paris: UNESCO. Tilak, J.B.G. (2007). Internationalisation of Higher Education – GATS: Illusory Promises and Daunting Problems. Journal of Indian School of Political Economy, 19(3), July–September, 371–418. Tilak, J.B.G. (2008). Higher Education: A Public Good or a Commodity for Trade? Commitment to Higher Education or Commitment of Higher Education to Trade. Prospects (UNESCO), 38(4), December, 449–466. Tilak, J.B.G. (2009). Demand, Supply and Quality in Engineering Education in India. Paper presented in Tenth International Academic Conference on Economic and Social Development, State University Higher School of Economics, Moscow, April 7–9 (draft). Watson, D. (2006). Values and the University. London: Institute of Education, University of London. Weiler, H. N., Guri-Rosenblit, S., and Sawyerr, A. (2006). Universities as Centers of Research and Knowledge Creation: An Endangered Species. Paris: UNESCO Forum on Higher Education, Research and Knowledge (mimeo). Wissema, J. G. (2009). Towards the Third Generation University: Managing the University in Transition. Cheltenham: Edward Elgar. World Bank. (2002). Constructing Knowledge Societies: New Challenges for Tertiary Education. Washington, DC: World Bank. Yépes, C. de P. (2006). World Regionalization of Higher Education. Higher Education Policy, 19(1), March, 111–128.

Index

academic (educational) entrepreneurs 150, 267 Academic oligarchy 228 – 9, 233 accountability 46, 59, 111, 232, 233, 270 Adam Smith 16, 35 Adiseshiah, M.S. 90, 128 adjustment policies (also structural adjustment policies) 1, 36, 104, 148, 161 admission 13, 44, 88, 103, 112, 126, 146, 201, 242, 270 admission policies 190, 214 Afghanistan 241, 244 Albrecht, D. 82, 84, 87, 92, 249, 259 AICTE see All India Council for Technical Education All India Council for Technical Education 159, 235 Alonzo, R.P. 125 Altbach, P.G. 23, 26, 29, 53, 69, 166, 180, 184, 189, 201, 212, 218 – 19, 283 Arcelus, F.J. 14, 72, 92, 94, 120, 124, 129 Argentina 61, 74, 92, 120, 129 Aristotle 261 Armenia 180, 205, 241, 250 Armstrong, L. 189, 201, 219 Aronowitz, S. 277, 281 Arrow, K.J. 18, 23, 29, 39, 40, 44, 51, 83, 87, 90, 92, 102, 115 Asia 92, 95 – 6, 98, 117, 120 – 1, 136 – 67

Asian Drama 231, 236 Asian model 155 Asia Pacific 7, 53, 58, 63, 69, 117, 193 – 4, 196, 217, 221, 223, 237 – 8, 241 – 4, 248, 253, 255, 257 Australia 19, 30, 61, 80, 82 – 4, 87, 91, 108, 117, 136, 148, 189 – 91, 193 – 7, 200 – 5, 222, 238, 241, 249 – 50, 252, 280, 282 Austria 61, 107, 148, 197, 203, 205 autonomy 3, 8, 46 – 7, 59, 105, 158, 178, 208, 210, 231, 233 autonomy, academic 179, 195, 232, 270 – 2 autonomy, administrative 232 autonomy, financial 158, 232 Aviram, A. 8, 281 Azerbaijan 241, 250 ‘babysitting’ 41, 71, 105 Bahrain 189, 241, 243 – 4 Bangladesh 120, 146, 241, 243 – 4, 249 – 50 Barnett, R. 263, 266, 269 – 70, 279, 281 Barr, N. 83, 85, 93 Bashir, S. 20, 29, 196, 215, 219 basic education 28, 56, 87, 91, 105, 167, 174, 248, 275; see also primary education Bates, R. 90, 93, 112, 115 Baum, S. 16, 29 Becker, G.S. 37, 62 Becker, R. 201, 219

286 Index Behrman, J.R. 28 – 9, 38, 51 Belfield, C.R. 161, 165 Belgium 61, 79, 121, 128, 152, 197, 203, 205 Benjamin, G. 124, 127, 132, 137 Béteille, A. 27 – 9, 265 – 8, 281 Birdsall, N. 90 – 1, 93 Blair, R. 81, 93 Blaug, M. 28 – 9, 39, 44, 51 – 2, 71 – 2, 82, 90, 93, 97, 101 – 2, 104, 115, 132, 136 Bok, D. 25, 30, 62, 69, 110, 115, 158, 165, 271, 281 Bologna 193, 206, 262 Bologna declaration 26, 213, 272 Bortolotti, B. 159, 165 Botswana 77, 81 Bowen, H.R. 16, 28, 30, 90, 93 Bray, M. 77, 80, 90 – 1, 93, 252, 257 – 8 Brazil 6, 61 – 2, 68, 80, 84, 91, 107, 120 – 1, 124 – 5, 130 – 1, 133, 139, 168 – 83, 282 BRIC countries 6 – 7, 168 – 84 Brinkman, P.T. 43, 52, 75, 96, 137 British Council 172, 217 Brown, G.H. 263, 280 – 1 Brunei 241, 243 – 4 Buddhist 262 budgets 1, 4 – 5, 19 – 20, 36, 42, 67, 71, 73, 81, 86 – 7, 104, 106, 114, 119, 123, 128, 154, 157, 172, 176, 255, 266, 272, 274 – 5, 277 Burma see Myanmar business management 46, 59 C9 League 173 Cambodia 92, 143, 205, 241, 243 – 4, 248, 256 Cambridge 20, 112, 189, 262, 266, 268 Canada 20, 61, 80, 84 – 5, 116, 128, 148, 152, 190 – 1, 193, 195 – 6, 199, 202, 212, 218, 228 – 9, 252, 254 capital markets 40, 52, 109, 116, 232, 268, 271 capital markets, imperfections in 39, 102, 162, 232

Caribbean 58, 63, 92, 99, 118, 193, 199, 257 Carnegie Commission 16, 30 Carnoy, M. 184, 270, 281 Castells, M. 67, 69, 237, 258 Central Asia 58, 193 – 4, 238, 253 Checchi, D. 18, 30 Chevaillier, T. 44, 55, 79 – 80, 86, 94, 112, 115 Chile 19, 61 – 2, 74, 79 – 80, 84, 93, 108, 120, 133, 139, 218 China 6, 77, 86, 91, 107, 120, 143, 146, 151 – 4, 160, 168 – 83, 186, 195, 197 – 9, 204 – 5, 216, 222, 224, 240, 243 – 5, 250, 262 Clark, B. 228, 235, 254, 258, 276, 281 Clark’s triangle 228 – 9 classical markets 206 cognitive achievement 73 Cohn, E. 81, 94, 120, 136 Colclough, C. 13, 30, 33, 40, 52, 70, 72 – 3, 77, 83, 85 – 7, 90 – 2, 94, 102, 107, 109, 115, 259, 283 Coleman, J.S. 125, 136 commercial good 209 commercial institutions 47, 60, 62, 149, 159, 270 commercialisation 27, 100, 109 – 10, 130, 150, 178, 209 – 10, 269 commercial presence 7, 185, 190, 211 commoditisation 23, 26 – 7, 169 consumption abroad 7, 192 consumption goods, collective 11, 28 corporate university 277, 297 Costa Rica 74, 80, 205, 218 cost(s) of education 75, 79, 82, 86, 88, 154, 196, 239 cost recovery 7, 30, 33, 41, 44 – 5, 52, 70 – 99, 103 – 4, 106 – 8, 112, 114, 132, 134, 144, 168, 212, 249 – 51, 253, 275 cost-sharing 59, 176; see also cost recovery costs of education, private 79, 81 costs of education, social 79, 81 crime 17 – 18, 38, 162 cross-border supply 185, 190

Index  287 Cubas, A.G. 162, 165 Cyprus 120, 126, 137, 216, 241, 243 – 5, 250 Dasgupta, A. 132, 136 demand, differentiated 6, 119, 141 – 2 democracy 15, 17 – 18, 38, 41, 105, 162, 169, 209, 271 democratisation 75, 131, 253 Denman, B.D. 8, 262, 281 Denmark 61, 84, 193, 197, 203, 205 Desai, M. 12, 30 Devidal, P. 208, 220 dictatorship 178 Dill, D.D. 14, 162 diversity 15, 17, 21, 49, 121, 132 – 3, 154 – 5, 158, 172, 185, 187, 211, 272 – 3, 279 Doha 190 – 1 Dubai International Academic City 189 Dubai Knowledge Village 189 earnings 35, 48, 70 – 1, 81 – 2, 85, 87, 126, 196, 226, 239 earnings, lifetime 82, 239 Eckaus, R.S. 101, 115 economic benefits 101 economic gains 8, 21, 266 education, access to 71, 83, 103 – 4, 107, 109, 161, 210 educational entrepreneurs 150 education bazar 269, 276 education cess 87 – 9 Education For All 1, 56, 78, 91, 99, 119, 211 education market 29, 146, 150, 159, 165, 196 – 7, 206, 208, 212, 219, 231, 276 EduGATS 204 – 5 EduGATS Index 204 – 5 efficiency: efficiency, external 6, 22, 48, 123, 126, 151; efficiency, internal 6, 71, 75, 88 – 9, 104, 123, 125, 151 Eicher, J-C. 44, 52, 79, 86, 112 Eisemon, T.O. 75, 94 elasticity 72, 77 – 8, 86, 91

engineering 24, 60, 127, 132, 146, 151, 154, 159, 169 – 70, 181, 213, 230, 269 – 70, 278, 281 entrepreneurial universities 5, 47, 60, 62, 113, 159, 165, 263 – 4, 282 equality of opportunity 39, 101, 162 Europe 35, 58, 63, 66, 107, 148, 151, 170, 182, 191, 197, 204, 210, 213, 254, 261, 264, 272 Europe, Eastern 193 – 4, 196 Europe, Western 121, 155, 164, 193 – 4, 196 European Union 29, 190 – 1, 193, 204, 216 excess demand 6, 119, 126, 141 – 2, 185 expenditure per student 90, 123, 125, 177 export of education 11, 21, 196 externalities 3, 5, 10, 13, 17 – 18, 28, 35, 38, 44, 50, 72, 75 – 6, 100, 105 – 6, 112, 122 – 3, 142, 161, 226, 232, 273, 277 externalities, dynamic 17, 38, 76, 113, 162 externalities, normal 17 externalities, technological 28, 38 fashion technology 24, 231, 270 federal system 178 fees, discriminatory 82, 89 fees, token 89 fees (student fees) 5, 12, 21, 45, 57, 60, 70, 86 – 9, 101, 107, 112, 126, 130, 144, 153, 158, 168, 172, 175 – 7, 183, 188, 190, 201, 233, 250 – 3, 272, 279; see also tuition fee waivers 154 fertility 17 – 18, 76, 113, 247 – 8 Fiji 241, 243 financial management 279 Finland 61, 84, 107, 203 foreign policy 11 foreign students 103, 112, 170, 185 – 6, 193, 198, 201 – 3, 211, 272 foundation universities 164 France 61, 80, 86, 121, 148, 193, 203, 218, 228, 268 free-riders 13, 44, 112

288 Index free trade 169, 200, 207 – 8 Friedman, M. 42, 87, 105, 207 Fromm, E. 271, 278 Fuller, E. 270 GATS 112, 142, 161, 185, 188, 203 – 15, 247, 275 Geiger, R.L. 121, 128, 130, 143 gender development index 49 gender empowerment index 247 General Agreement of Trade in Services see GATS Germany 61, 80, 148, 193, 205, 252 Ghana 77, 81, 205 Gini coefficient 174 globalisation 1, 10, 15, 66, 112, 169, 186, 206, 237, 256, 266, 274 global public good see international public good global university rankings see university rankings gold standard 20 government colleges 125, 130 graduate tax 86 – 7, 89, 134 Gresham’s law 161 gross enrolment ratio 49, 57, 65, 77, 155, 171, 241, 255 Harambee 136 Hayek, F. 36, 52 Higher education attainment 63, 243, 245, 248 higher education for all 119, 139, 211 high-income countries 19, 57, 65, 255 Hinchliffe, K. 73, 77 Hindu 262 Hong Kong 64, 80, 143, 151, 189, 199, 241, 254 hotel management 231, 270 human capital 17, 22, 37, 40, 60, 66, 86, 102, 108, 187, 226 human development index 247 – 8 humanities 24, 129, 152, 169, 208, 230, 254, 269, 278 human rights 18, 25, 91, 220 Humboldt model 265 – 6, 269 Humboldt university 261, 263 Hungary 19, 61, 205

IMF (International Monetary Fund) 20, 36, 142 Independent Regulating Authority for Higher Education 235 India 22, 51, 73, 77, 87, 108, 113, 126, 132, 144, 151, 154, 159, 168 – 83, 186, 190, 197, 203, 215, 235, 240, 250, 261, 271, 276 Indian Institute(s) of Technology 153, 171 Indonesia 62, 125, 143, 155, 199, 240, 256 inequalities 1, 6, 22, 36, 41, 49, 68, 73, 88, 106, 124, 132, 172, 174, 226, 232, 256 inequalities, socio-economic 124, 174 infant mortality 18, 76, 113, 248 information technology 170, 204, 230, 270 INSEAD 179 institutions deemed to be universities 146, 281 internal rate of return see rate of return international (global) public good 16, 28, 213 International Association of Universities 185, 212 internationalisation 2, 7, 112, 169, 185 – 224 International Monetary Fund see IMF Ireland 61, 193, 205 Israel 61, 240, 243, 255 Italy 61, 148, 195, 229, 254 Jamaica 19, 77, 83, 109, 205 James, E. 119, 123 – 4, 141 Japan 66, 84, 124, 130, 132, 148, 160, 170, 190, 200, 212, 228, 248, 254, 262 Jaspers, K. 262 Jimenez, E. 22, 41, 71, 104, 135 Johnson, G.E. 16, 43, 76, 106 Johnstone, B. 46 – 7, 78 Jomtien Conference 56 Kaneko, M. 125 Kerala 90, 128

Index  289 Kerr, C. 263, 267, 277 Keynes, John Maynard 35 Kirp, D. 27, 110, 157, 269 Knight, J. 11, 21, 185, 192 knowledge 13, 22, 24, 35, 150, 159, 226, 237, 260, 263 – 8, 271, 278 knowledge, fragmentation of 271 knowledge capitalism 24 Knowledge Commission 151, 235 knowledge economy 170, 181, 190 knowledge hubs 189 knowledge societies 15, 57, 67, 237 Korea (South/Republic of) 62, 66, 79, 108, 124, 135, 143, 155, 182, 199, 241, 253 – 4 Kothari (Education) Commission 215, 226, 235 labour market 16, 48, 79, 126 – 7, 181, 226 laissez-faire /laissez fairyism 2, 4, 55 – 68, 125, 142, 160, 178, 234 Latin America 66, 121, 131, 155, 182 Levy, D. 125, 131, 133, 160 Lewin, K. 83, 109 liberalisation 1, 20, 26 – 7, 191, 205, 209 liberalism 41 life expectancy 18, 76, 113, 246, 249 Lisbon Convention 213 loans, income-contingent 86, 108 loans, mortgage-type 82 – 3 loans, student/educational 5, 25, 77, 82 – 5, 89, 103, 108 – 9, 134, 168, 175, 249, 279 local public goods 11 low-income countries 57 – 8 Lucas, R.E. 16, 38, 76, 112 Maharashtra 132 Majumdar, T. 44, 111 Malawi 77, 81, 91 Malaysia 61, 127, 143, 152, 156, 189, 197, 202, 241, 256 manpower 15, 51, 67, 133, 170, 181, 226, 237, 248, 256, 278 marginal cost 11, 13, 102 Marginson, S. 196, 202

market approach 7, 279 market control 228, 231 – 2 market economies 50, 121, 141, 169, 178 marketisation 1, 4, 23, 37, 45, 55, 250 market reforms 37, 50, 113, 189 Marshall, A. 35, 109 massification 7, 11, 23, 27, 38, 81, 269, 271, 291 MCI (Medical Council of India) 159 McMahon, W.W. 18, 44, 70 – 1, 105, 111 McPherson, M. 13, 142 medicine 129, 146, 262, 264 merit good 5, 13, 14, 26, 38 – 9, 42, 45, 50, 58, 72, 76, 101, 105, 114, 142, 162, 227 Mexico 61, 205, 218 Middle East 58, 63, 257 middle-income countries 19, 58, 75, 169, 183 Mishan, E.J. 35, 70 Mishra, R. 50 MIT 266, 268 mixed good 14 modernisation 15, 27, 67, 225, 237 Musgrave, R. 11, 38, 72, 101 Myanmar 241, 249 Myrdal, G. 231 NAAC (National Assessment and Accreditation Agency) 159 Nalanda 186, 261 NASSCOM 151 natural persons 7, 185, 190 negative dowry 109 Nelson, P. 14, 136 neo-classical economics 164 neo-liberalism 20, 41, 148, 172 Nepal 243, 248 Nerlove, M. 38, 83 Netherlands 81, 121, 128 Newman, J.H. 264 New Zealand 20, 108, 189, 196, 205, 238, 243, 249 non-state universities 164, 254 North America 66, 152, 155, 193, 210, 212, 257 Nussbaum, M.C. 279

290 Index Okun, A. 55 open universities 196, 269 overseas students 21, 195, 211 – 12 Oxford 20, 112, 189, 262 Panchamukhi, P.R. 76, 208 parallel colleges 128, 138 parochial(ism) 272, 280 Patnaik, P. 28, 280 Patrinos, H. 103, 125, 134, 157 Patterson, G. 261 payroll tax 86 – 9 performance indicators 201, 214, 270 perverse effects 41, 43, 82, 106, 123, 132 philanthropy 48, 60, 66, 149, 155, 157, 168, 211, 267 Philippines 62, 66, 121, 125 – 7, 131, 143, 148, 155 – 7, 199, 243, 256 physical sciences 24, 208, 254, 269 Plato 261 political economy 35, 75, 157 population control 8, 76, 113 poverty 1, 18, 38, 162, 226, 247, 256 PPP see public-private partnership primary education 41, 43, 55 – 6, 62, 65 – 6, 73, 76 – 9, 91, 106, 190, 216, 239, 241 – 2; see also basic education primary education, free 78 private good 2, 4, 12, 14, 24, 49, 109, 158, 230, 273 private institutions, aided 122 private institutions, unaided 122 private schools/schooling 78, 92, 125, 175 private sector 2, 6, 23, 47, 56, 66, 75, 100, 110, 112, 121 – 35, 141 – 62, 168, 173, 178, 187, 211, 231, 253, 274 private universities 5, 8, 49, 62, 79, 113, 124 – 6, 130 – 4, 146, 152, 204, 214, 254, 269, 274 privatisation, extreme 6, 122, 132, 144 privatisation, moderate 6, 47, 122, 132, 144

privatisation, pseudo 47, 122, 132, 144 profit maximisation 150 Project 2011 173 Psachropoulos, G. 40, 43, 70, 72, 82, 104, 106, 123, 132, 134, 240, 257 public interest 15, 23, 27, 50, 133, 159 public-private partnership (also PPP) 100, 103, 110 – 11, 157 – 8 public subsidies 40, 43, 50, 102, 114, 123, 130, 164, 195 public universities 24, 47, 58, 108, 124, 131, 151, 176, 253, 274 pupil/teacher ratio 124 quality of life 5, 18, 37, 50, 60, 113, 196 quasi-markets 206, 250, 269 quasi-public good 5, 50, 72, 112, 124, 134 rate of return, private 40 – 1, 43, 72, 75, 104, 111, 181, 239 rate of return, social 40, 44, 75, 90, 104, 111, 127, 239, 283 rate of return (internal rate of return) 62, 75 – 6, 187, 239 – 40 religious education 121, 142 Robbins Committee 83, 109 Romer, P.M. 28, 38 Rudolph, L. 132, 139 Rudolph, S. 132, 139 Russia (also Russian Federation) 6, 61, 107, 168 – 83, 196 salaries 158, 180, 182 Sanyal, B.C. 125 – 6 scholarships 19, 45, 57, 88, 102, 112, 128, 154, 169, 187, 189, 195, 198, 211, 249, 266, 272 Schutlz, T.W. 28, 37 – 8, 42, 62, 90, 237 secondary education 66, 78 – 9, 171, 190, 216 secondary schooling 39, 72; see also secondary education secular education 66, 78, 142, 171, 190, 216, 239

Index  291 Smith, Adam 16, 35 Snower, D. 17, 113 social control 8, 225 – 36 social development 233, 246 social good 36, 90, 112, 273 social investment 5, 42, 72, 76, 113, 123 socialisation 15, 67, 225, 237 social mobility 17, 113 social responsibility 133, 225, 273 social sciences 24, 127, 152, 208, 213, 230, 254, 269 – 70, 278 social welfare 36, 50 Socrates 261 South Africa 108, 186, 196, 200 South America 49 South Asia 67, 121, 182, 210, 238, 241, 256 Soviet Union 80, 107, 170, 216; see also Russia Sri Lanka 143, 242, 251 Stanford 189, 266, 268 state control 46, 59, 178 – 9, 228, 232, 234 state grants 19, 21 Stiglitz, J. 12 – 14, 39, 71, 83, 105, 117, 162 stipends 102, 154, 250 Stone, D.L. 136 student loans (educational loans) 5, 25, 48, 60, 77 – 8, 82 – 9, 103, 107 – 9, 134, 168, 175, 249 student mobility 7, 185 – 6, 193 Sub-Saharan Africa 67, 193, 196, 210 subsidies 38, 40 – 3, 71, 73, 89, 102, 106, 125, 130, 157, 185, 190, 211, 274 Summers, A.A. 18, 33, 75, 112 Sweden 83, 85, 107, 109, 128, 197, 228, 254 Switzerland 79, 197, 254 Taiwan 76, 152, 251, 253 tax(es), general 2, 5, 85, 88, 90, 114 taxation 5, 25, 43, 101, 106, 114 taxes, earmarked 77, 85 – 8 Taxila (also Takshashila) 186, 261 teacher recruitment 146, 159

teachers 16, 65, 71, 88, 104, 124, 179, 201, 214, 226, 238, 261, 276 teachers’ organisations 229 – 30 technology 24, 63, 230, 244 – 5, 265, 269, 272, 276 technology achievement index 64 – 5, 245 Thailand 77, 108, 121, 127, 157, 160, 199, 241, 256 theology 264 Tomasevski, K. 25 – 6, 158 Tomilinson, T.R.G. 72, 98, 101, 118 Tooley, J. 21, 33, 41, 53, 105, 118 Torstel, P.A. 106, 118 Trade Related Aspects of Intellectual Property Rights see TRIPS training 15, 25, 86, 213, 250 – 1 training, on-the-job 250 transaction costs 17 transnational 21, 204, 206, 212, 222, 224 TRIPS (Trade Related Aspects of Intellectual Property Rights) 24 – 5 tuition 25, 46, 52, 59, 73, 91 – 3, 95, 103 – 4, 106 – 7, 109, 130, 136, 144 – 5, 154, 175 – 6, 190, 217 UGC (also University Grants Commission) 159, 178, 235 UK (also United Kingdom) 19 – 20, 36, 61, 80 – 2, 85, 107, 109, 121, 148, 189, 193, 195 – 7, 200, 202 – 5, 252, 254 Umakoshi, T. 147, 164, 166 – 7 under-investment 102, 104, 109 UNDP 42, 53, 68 – 9, 73, 98, 244 – 6, 259 unemployment 32, 48, 71, 85 – 6, 96, 126 – 7 UNESCO 2, 14, 56 – 7, 91, 114, 212, 218, 229, 256, 263 UNESCO Institute of Statistics 145, 164, 167, 238 United Kingdom see UK United Nations 10, 25, 91, 179 United States (of America) see USA universities, ancient 186, 264, 276 universities, fifth generation 8, 264, 269 – 77 universities, first generation 263 – 4

292 Index universities, fourth generation 8, 266 – 9, 272 – 3 universities, history of 276 universities, medieval 263 – 5, 268 universities, multi-faculty 271 – 2, 278 universities, second generation 84, 263 – 4, 280 universities, third generation 265 – 6, 268, 272 – 4, 283 university(ies), modern 258, 262 University Grants Commission see UGC university rankings 152 – 3, 166, 179, 182 Uruguay 61, 74, 76, 190 – 1 USA (also United States) 20, 61 – 2, 71, 79 – 82, 84, 95, 107, 120 – 1, 123 – 5, 127 – 8, 130 – 2, 135, 148, 154, 170 – 2, 179 – 82, 189 – 91, 193 – 9, 201 – 5, 217, 228 – 9, 243, 251 – 2, 254, 270 user charges 12, 21, 77, 91, 176 US model 155, 164 Vaizey, J. 35, 42, 44, 53, 101, 105, 113, 118 van der Gaag, J. 72, 94 Varghese 90, 92, 98, 134 – 5, 139, 206, 223 Venezuela 76, 79 – 80, 83 – 4 Verger, A. 191, 204 – 5, 209, 212, 224 Verspoor, A. 255, 259 Viet Nam 143, 241, 243 – 4, 250, 252, 256 Vincent-Lancrin, S. 187, 222 Waldavsky, B. 197, 224 Walford, G. 136, 140 Weale, M. 28, 33, 44, 53 – 4, 90, 98, 111, 113, 118 Weiler, H.N. 263, 267, 274 Weisbrod, B.A. 13, 16, 34, 72, 98, 110, 114, 118

Welch, A. 198 – 9, 200, 224 welfare approach 48, 60, 279 welfare pluralism 15, 50 West, E.G. 42, 54 Williams, G. 80, 98, 135, 140 willingness to pay 43, 94, 97, 108, 111 Winston, G. 13, 27, 34, 142 Wissema, J. 263 – 6, 268, 273, 280, 283 Woodhall, M. 39, 52, 82 – 3, 98 – 9, 101 – 2, 123, 134, 139, 259 Woodhouse, D. 189, 202, 217, 224 Woods Dispatch 90 World Bank 1, 20, 22, 34, 36, 40 – 1, 53 – 8, 69 – 70, 75, 78, 83, 95, 99, 104 – 5, 109, 114, 118, 134, 140, 142, 181, 184, 212, 229, 259, 274, 283 World Conference on Higher Education 2, 9, 34, 114, 212, 220 World Intellectual Property Organisation 179 World Treaty Organisation 3, 10, 20, 24 – 7, 112, 142, 161, 188, 190, 192, 203 – 4, 209, 211 – 12, 217, 275 world university rankings see university rankings World War II 101, 266 WTO see World Treaty Organisation Xinyu, Y. 198 – 9, 224 Yashpal (Committee) 268, 271, 282 Yemen 241 Yépes, C. de P. 272, 283 Zambia 81 Zemsky, R. 10, 26, 34 Ziderman, A. 82, 84 – 7, 249 Zimbabwe 79, 81 – 2