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More from The Economist My Subscription jricardo_Salgado@hot… Subscribe World politics Business & finance Economics Science & technology Culture Blogs Debate Multimedia Print edition Special report Excellence v equity Top of the class A pearl in the desert Mix and match A flagging model Not classy enough Mar 28th 2015 | From the print edition Special report: Privatisation Mix and match Both provision and funding of higher education is shifting towards the private sector THE STUDENT STRIKE in Quebec in 2012 did not just bring down the province’s government; it also revealed deep cultural differences in ideas about university funding. French Canadian students, influenced by European thinking, were outraged that their government had proposed raising tuition fees from C$2,168 ($2,168) a year to C$3,793; the rest of Canada, used—Americanstyle—to much higher fees, was baffled by their fury. In most European countries the state pays 80100% of the costs of tuition. The main advantages of this model are equity and cost control. Where it works well—in northern Europe—graduate education levels are uniformly high. Where it works badly—in southern Europe—they are uniformly low. American uses mixed funding, with individuals paying most of the costs of tuition and the government helping out with loans and grants. In some countries with similar models, such as Japan and South Korea, individuals and families pick up the tab. These systems tend to be better funded and more expensive than the European ones (see chart 4) because people fork out readily, and costs are harder to control. The mixedfunding model is spreading. That’s partly because Universities Tweet 26 Advertisement Follow The Economist Latest updates » The Economist explains: Everything you want to know about the Iranian... The Economist explains | Apr 5th, 23:50 The week ahead: April 5th 2015: Long memories International | Apr 5th, 13:34 A globalising papacy: Easter is for extroverts Erasmus | Apr 5th, 11:43 Election 2015: The daily take: A deficit of debate Britain | Apr 4th, 17:23 This week's issue: Urban land, Greece's cash Comment (8) Timekeeper reading list Email Reprints & permissions Print 2.4k Like

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  • 06/04/2015 Privatisation:Mixandmatch|TheEconomist

    http://www.economist.com/news/specialreport/21646991bothprovisionandfundinghighereducationshiftingtowardsprivatesectormix?fsrc=scn/fb/te 1/4

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    Mar28th2015| Fromtheprintedition

    Specialreport:

    Privatisation

    MixandmatchBothprovisionandfundingofhighereducationisshiftingtowardstheprivatesector

    THESTUDENTSTRIKEinQuebecin2012didnotjustbringdowntheprovincesgovernmentitalsorevealeddeepculturaldifferencesinideasaboutuniversityfunding.FrenchCanadianstudents,influencedbyEuropeanthinking,wereoutragedthattheirgovernmenthadproposedraisingtuitionfeesfromC$2,168($2,168)ayeartoC$3,793therestofCanada,usedAmericanstyletomuchhigherfees,wasbaffledbytheirfury.

    InmostEuropeancountriesthestatepays80100%ofthecostsoftuition.Themainadvantagesofthismodelareequityandcostcontrol.WhereitworkswellinnorthernEuropegraduateeducationlevelsareuniformlyhigh.WhereitworksbadlyinsouthernEuropetheyareuniformlylow.

    Americanusesmixedfunding,withindividualspayingmostofthecostsoftuitionandthegovernmenthelpingoutwithloansandgrants.Insomecountrieswithsimilarmodels,suchasJapanandSouthKorea,individualsandfamiliespickupthetab.ThesesystemstendtobebetterfundedandmoreexpensivethantheEuropeanones(seechart4)becausepeopleforkoutreadily,andcostsarehardertocontrol.

    Themixedfundingmodelisspreading.Thatspartlybecause

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  • 06/04/2015 Privatisation:Mixandmatch|TheEconomist

    http://www.economist.com/news/specialreport/21646991bothprovisionandfundinghighereducationshiftingtowardsprivatesectormix?fsrc=scn/fb/te 2/4

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    risingdemandhasincreasedtheburdenthathighereducationplacesongovernmentbudgets.SohasBaumolsdisease,whichincreasestherelativecostoflabourintensiveindustries,suchashealthandeducation,astechnologicalchangeliftstheproductivityofcapital.Ageingpopulationsarepushinguphealthbills,soeducationanotherhugechunkofgovernmentspendinglosesoutandsincethesocialbenefitsofprimaryandsecondaryeducationareclearerthanthoseoftertiaryeducation,universitiestendtosufferthemost.

    Oneoptionistoallowqualitytodeteriorate.ThathashappenedinmanyEuropeancountries.InGermanystudentscommonlypacklecturehallsintheirhundreds.Wehavemoreandmorestudents,saysGeorgKrckenofKasseluniversity,butthenumberofprofessorsdoesntgrowatthesamepace.

    Anotheroptionistomakeindividualspaymore.InAmerica,retrenchmentinstatebudgetshaspusheduptuitionfees.InCalifornia,forinstance,theyhavetripledover15years,andafurther28%riseisproposed.OutsideAmerica,thefirstbigshifttowardsprivatefundinghappenedinAustralia,wheretuitionfeeswerejackedupinthelate1980s.Ahostofothercountriesfollowed,includingNewZealand,Chile,SouthAfrica,someoftheformerSovietrepublics,BritainandThailand.Chinausedtoimposenofeesatallnowitcharges5,00010,000yuan($8001,600)ayear,notmuchforanurbanfamilybutalotforaruralone.Countrieswithgooduniversitiesincreasinglyrelyonforeignstudentswhotendtopaymorethandomesticonesasasourceofrevenue.InBritain,forinstance,nearlyafifthofstudentsareforeigners.Internationalflowsofstudentsareupfrom1.8min2000to3.5min2012.

    Anothersourceofprivatefundsforuniversitiesisphilanthropy.EndowmentsatsomeAmericanuniversitiesdwarfincomefromfees.Institutionselsewherearescouringtheglobeforwealthyalumni.Cambridge,whichhasdonebestoutoftheBritishuniversities,hadcollected4.9billion($7.6billion)by2012.Sometimesphilanthropyextendsacrossborders:in2013StephenSchwarzman,chiefexecutiveofBlackstone,aprivateequitycompany,handedover$100mtoestablishascholarshipprogrammeatTsinghuaUniversity.

    HorsesforcoursesThebiggestproviderofhighereducationthatnobodyhaseverheardofisLaureate,anAmericanforprofiteducationcompanywithrevenuesof$4billion,nearly1mstudentsand70,000staff.Itdoesnotpromoteitsbrandbecauseitpreferstobeknownthroughthenamesofthe80plusuniversitiesandcollegesitownsallovertheworld.

    Privateprovisionisgrowing.Insomesystems,privatecolleges(usuallynonprofitones)provideafirstclasseducation.ThatistrueinAmericaandisbeginningtohappenelsewhere,includingIndia.PhilipAltbach,directoroftheCentreforInternationalHigherEducationatBostonCollege,describesIndiashighereducationsystemasaseaofmediocrityinwhichislandsofexcellencecanbefound.ButthoseislandssuchastheIndianInstitutesofTechnologyareaccessibleonlytoaluckyfew.Newprivatenonprofitinstitutionsarehelpingtobroadentheprovision,includingAzimPremjiUniversityinBangalore(whoseeponymousfoundermadehisfortunefromWipro,anITcompany)andShivNadarUniversitynearDelhi(themoneyforwhichcamefromHCL,anotherITcompany).ThesenewnonprofitsaretoofewandfarbetweentotransformIndiassystem,buttheymaywellcreateawiderchoiceofhighqualityislands.

    InmuchofLatinAmerica,governmentshavehandedoverthejobofprovidingmasshighereducationtotheprivatesector.Theresultsarepatchy.Insomecountries,suchasBrazilandColombia,thestatedoesadecentjobofprovidingqualityassurance,andtherearemanygoodprivatesectoroutfits,bothlocalandforeignowned.Laureatehas11collegesanduniversitiesinBrazilninehaveseentheirscoresimprovesinceLaureatetookthem

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  • 06/04/2015 Privatisation:Mixandmatch|TheEconomist

    http://www.economist.com/news/specialreport/21646991bothprovisionandfundinghighereducationshiftingtowardsprivatesectormix?fsrc=scn/fb/te 3/4

    over,onehasdeterioratedandtheremainingonehasbeenboughttoorecentlyfortheeffectstohavebecomeclear.

    Inmostoftheworldtheprivatesectorisactiveatthemarginsofhighereducation.Privateforprofitcompanies,suchasKaplanandApollo,bothAmericancompaniesservingtheglobalmarket,tendtosupplythemorevocationalend,likecoursesinlawandaccountancy.Theycatertoolderstudents,oftenworkingpeopleorparents,forwhomthestandardcampusbasedthreeorfouryeardegreeisnotsuitable.Theyalsobringinternationalstudentsuptotheleveloftherichcountryuniversitiesinwhichtheyhaveenrolled.Thenumbersinbothcategoriesarelargeandgrowing,sothesearehealthymarkets.

    AstheprotestsinQuebecshowed,raisingtuitionfeescanbepoliticallyexplosive.SeveralGermanstatesintroducedsuchfeesadecadeagoandallhavesinceabandonedthem.TuitionfeesdidntfitwellintotheGermantradition,saysProfessorKrcken.Herehighereducationisseenasapublicgood.InChile,studentprotestsagainstthecostofhighereducationhelpedoustthegovernmentin2013thenewgovernmentiscommittedtoeliminatingtuitionfees.AndBritainsLabourPartypromisesthatifitwinsthegeneralelectioninMay,itwillbringdownthemaximumfeefrom9,000to6,000ayear.

    HewhopaysthepiperAdvocatesofprivatefundingsaythatitmakesstudentsmoredemandinganduniversitiesmoreresponsive(thoughtheyoftenforgettoaddthatitmayalsoincreasethepressuretoinflategrades).SirSteveSmith,vicechancellorofBritainsExeterUniversity,sayshisuniversityspent470min200914,raisedfromdonations,borrowing,thegovernmentanditsowncash,ongettingthecampusuptoscratch:studentspayingfatfeesexpectdecentfacilities.Theuniversityisalsomakingextraacademicefforts:ithas,forinstance,promisedthatstudentswillgetessaysmarkedandreturnedwithinthreeweeksofsubmittingthem.

    AdecadeagoExeterhad11,000students.Nowithas19,000andplanstoexpandto22,000.Asbetteruniversitiesgetbigger,worseoneswillcomeunderpressure.Morerelianceonphilanthropywillmeanthatrichuniversities,whichtendtoproducerichalumni,willgetricherstill.Greaterindependencefromgovernmenttendstomakehighereducationsystemsmorestratified,andthusmoreAmericanjustwhenAmericaitselfisincreasinglyworriedaboutitsownsystem.

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  • 06/04/2015 Privatisation:Mixandmatch|TheEconomist

    http://www.economist.com/news/specialreport/21646991bothprovisionandfundinghighereducationshiftingtowardsprivatesectormix?fsrc=scn/fb/te 4/4

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