International Higher Education, Spring 2002

Humanizing the Spectre of the Higher Education Market

Lara Couturier
Lara Couturier is project manager of the Futures Project: Policy for Higher Education in a Changing World. Address: Box 1977, Brown University, Providence, RI 02912, USA. E-mail: <Lara_Couturier@brown.edu>. For a footnoted version of this and other articles, visit <http://www.futuresproject.org>

Much to the surprise of many, the economic theory of supply and demand has been borne out even for higher education. Increased demand has led to significant changes in supply. Historically seen as a government-supported service, higher education has now entered the marketplace fray. Universities that had a virtual monopoly for decades and even centuries are now encountering a range of competitors—virtual consortia, global branches of universities, for-profit institutions—that are vying for revenues and profits, even if they are nonprofit in principle. New technologies that improve the teaching and learning process and a savvy breed of students with higher expectations are adding to the pressures. Perhaps most important, there is an increasing tendency for governments to rely upon the market to encourage greater responsiveness from the higher education system.

What Really Matters
Why research the extent to which higher education systems rely on market forces? Because we know that markets can indeed encourage institutional responsiveness, but also that markets do not always serve society well. Two examples: market reform of the healthcare system in the United States has been blamed for leaving approximately 43 million people without health insurance. Who is excluded? Those most likely to be sick, and those least able to pay for health insurance. In New Zealand, a highly decentralized and market-oriented primary and secondary education system resulted in schools polarized by student ethnicity and socioeconomic status.

The discussion about markets in higher education is often distant and abstract, so let’s zero in on what really matters. What will a competitive and market-oriented higher education system mean for individuals and society?

The Downsides
What impact might a market-oriented higher education system have on Nik, a 19-year-old high school graduate wishing to live at or near his university? Tuition revenues from high-enrollment, low-cost disciplines such as business or education have historically supported a university’s ability to cross-subsidize low-enrollment, high-cost disciplines such as the classics or pharmacy. We have seen examples from South Africa to the United States where new, for-profit providers cherry-picked the more lucrative disciplines, threatening the ability of the established nonprofits to offer the more expensive, low-enrollment disciplines. For Nik, a budding international relations–focused political scientist who will—unbeknownst to him now—someday find the key to nuclear disarmament, the danger is that his university may not offer the courses or disciplines that will prepare him for his important future.

A focus on the bottom line can also undermine a university’s willingness or ability to offer experiences that contribute to educating civically minded citizens, such as student government and intramural sports. This concern is especially strong in those countries trying to build new democracies. Nik and his fellow citizens may be denied experiences that would someday help them to run an effective participatory government.

The Futures Project, a higher education think tank located at Brown University, is not based on the assumption that the traditional university is going to disappear into a cloud of virtual reality. The threat lies not in extinction, but in the danger that competition will force institutions—nonprofit and for-profit alike—to focus on revenue streams to the exclusion of other activities. The quest for cash has the potential to chip away, slowly and irreversibly, at higher education’s quality and the foundation of its public role.

The Needs of a Mother of Three
Tonya, a mother of three children who grew up in a poor, rural area with limited educational opportunities, cleans the offices of a multinational corporation. She knows her employer would like to hire more local talent for administrative positions, which pay significantly more than her current job, but she lacks the necessary skills. Will a competitive higher education market help, or harm, Tonya?

One benefit to a market in higher education is that, as new competitors proliferate, students like Tonya will be able to find a program that can be built around her schedule, choosing from more schools offering courses at different locations and times, even virtually. The pressures of competition will also force institutions to be more concerned with efficiency, driving down the overall costs of higher education.

One of the biggest threats to a low-income student like Tonya is that she may not be able to participate in a more market-oriented system. If governments do not intervene in the market, institutions will seek out those students who help them to maximize revenues—namely, students who are able to pay and students who are easy to teach and require fewer resources. One of the perverse consequences of the market is that, in many countries, the wealthiest students are the best prepared and therefore gain entry into the prestigious and free public universities. The less-prepared and lower-income students are left to find ways to pay for a private education. An unanticipated consequence of the market in the United States, where tuition is nearly always charged, is that financial aid originally designed to boost participation of low-income students has been twisted into a competitive tool. Financial aid is now widely used as an incentive to attract the “best” students, with less focus on financial need.

What Must Be Done?
New policies, if thoughtfully constructed, can provide the necessary balance between taking advantage of the opportunities of the market while simultaneously controlling the threats. The Futures Project is investigating policies that address the degree to which universities are free to compete in the market, the availability of good information about universities for students, and how to improve preparation and financial aid to ensure success for a broader portion of the population. Academic leaders and policymakers need to come to an agreement about what is needed from higher education and then renew the compact between higher education and the society it serves. Then, via policy, it is possible to ensure that the private interests pushed by the market are working for higher education, and higher education is working for the public.