ISSN: 1391 - 0531
Sunday March 23, 2008
Vol. 42 - No 43
Financial Times  

What ails our university system?

Group of university students. Should the lack of resources in universities be blamed on the government or should universities fund there own resource base?

It was a function at the university and all the people in the gathering were university dons. I was the only outsider who was there on a special invitation.

The discussion invariably drifted towards the present status of the university system in the country. Everyone at our table had something to contribute by way of either diagnosis of or prescription for what was perceived as ailments of the system. “Our main problem is the inadequate resource base. The government has cut our funding year after year,” one professor commented.

“That’s true. Higher education in the country is being given step-motherly treatment by policy makers,” another professor said, endorsing his view. “Providing university education to all is the responsibility of the government. So, we should fight for increases in funding,” the professor next to me gave his prescription and the rationale for same.

It appeared that all the dons were holding practically the same view. All of them were finding fault with the Treasury for not raising the funding of universities. Their argument was that university education raises human capital and, if the country is deprived of that opportunity, it would slow its future economic development.

I enjoyed listening to them, because it aptly summarised the common view of university academics on a very crucial issue affecting them all. When they started to cast glances at me, I no longer could remain the passive listener. Hence, I also had to make my contribution to the discussion.

“I would like to look at the problem from a different angle, so that I could find a different solution,” I said. “My premise is that we should abandon the practice of examining the issue on the stand that the government should fund university education. It would give us a chance to diagnose the ailment differently and also find a different solution.”

This appeared to surprise them, because it was outside their line of thinking. I, therefore, felt that I owed them an explanation. So, I continued. “Suppose universities are not funded by the government. Then, how could you finance your operations? By finding your own resource base.” “That’s why we’re against privatising universities,” one of them interjected.

“It’s not a privatisation. It’s simply a different business model. You raise your income by selling your services. You can sell it to a number of people. You can sell it to students directly by charging them. Or to the government wholesale. Or, on the other side, students can arrange funding from employers and there, you sell it to employers. Likewise, there’s a number of ways of generating revenue for your system. When you earn your own income and it’s under your control, you can decide your own destiny,” I said.

They obviously did not like my line of thinking, but did not make objections. So, I continued; “Universities are the richest institutions in the modern world. But, they sit idly on that vast resource base. They’ve the highest concentration of human capital within them and that human capital can produce a marketable product. If the universities sell that product, they can earn more revenue than any private company. Unfortunately, this human capital base remains unused. That’s the cause of your ailment.” “You mean to say selling degrees? Then, it would become a shop and not a centre of higher learning,” one professor expressed his disagreement openly.

“But, look at your current model,” I said, “It’s not different from your discredited ‘shop model’. You sell your degrees wholesale to the government and the government has chosen to distribute it free of charge to students. But, it’s distorted your governance structure. The government is the buyer, but, it isn’t the consumer. So, it can’t assure your quality. Students are merely a throughput. So, they too can’t insist on the quality. How can an input in a production process insist on the quality of the final output? It’s as simple as that! The final user is the employer. When he finds your output is sub-optimal, he looks for quality products elsewhere, usually foreign degrees. So, your degrees become unattractive day by day.”

“But, how does it affect our funding?” one of them asked.

“It’s because the government is the monopoly buyer and it can fix the total price of buying your services. That’s why you have to plead with the buyer for enhanced funding. When goods are distributed free of charge, they’re priced at cost and the government has the incentive to give you minimum funding by pricing your services at the lowest. So, you’re at a disadvantage in price fixing in this monopolistic or single buyer arrangement. “So, what’s the solution?”

“You’ve got to move away from this ‘damn the shop-keeper philosophy’. You should sell your products in the market. The best product you can sell is your research output. There’s a market out there for it. That’s how US universities in 1960s became financially independent, when the government cut the funding. Instead of keeping the research output confined to papers, they sold it to the private sector. A good example is research on information technology. They sold it to the private sector and it helped establish the Silicon Valley in California”

“But, South Asia hasn’t gone for this type of a model. Has it?” one professor commented.

“No, that’s wrong,” I said. “India, Pakistan, Bangladesh and Nepal have all have set up private universities. The model adopted has several variants. One is where both funding and production are being done by the government. This is the classic free education model. Another one is also free education where the government provides funding and the private sector does the production. Yet a third one is the classic private fee levying model where both funding and production are done by the private sector. And also, there’re cases of public universities levying fees on students. In this model, funding is done privately, but the production is done by the government. These new model South Asian universities are in fact attracting our students who can’t get admission because of capacity limitations in our universities. This should be an eye-opener for all of us because, if we don’t change, our university system will soon wither away.”


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