The UK Embraces For-Profit Universities and Market-Based Competition

Howard Hotson bemoans the fact that the people in charge of higher education in the UK think it is wise to try to emulate higher education in the US. He would argue that the UK already has the best university system in the world, while the example they wish to copy is bloated, overly expensive, and academically and financially corrupt. His article, Don’t Look to the Ivy League, appears in the London Review of Books.

Hotson bases his arguments for the superiority of the traditional UK system on an analysis of the Times Higher Education (THE) rankings for 2010-11. The THE rankings attempt to order the top 200 universities in the world. Hotson points out that the results tend to be similar each year with the US garnering about 13 of the top 20 slots, while the UK acquires four. One can be dubious about the meaningfulness of such rankings, but Hotson’s arguments are sufficiently general to be of interest regardless of any perceived ranking fallacies.

By just counting top 20 slots the US has a three-to-one lead on the UK. Hotson argues that the US has five times the population of the UK, so on the average more students in the UK get to study at a top 20 university than in the US. He further argues that the US economy is proportionately bigger and it expends more of its wealth on higher education.

“No less important, Americans spend a far higher proportion of their national wealth on higher education than the British. According to the OECD, the UK spends 1.3 per cent of GDP on tertiary education, precisely the EU average. The US, on the other hand, spends 3.1 per cent, far more than any other country in the world. So America not only has 6.5 times the UK’s financial resources, it also spends 2.4 times as much of those resources on tertiary education. That adds up to more than 15 times as much investment in higher education in the US than in the UK. And yet, according to these world rankings, that 15-fold investment nets barely a three-fold return in educational excellence. The UK has somehow managed to maintain top-ranked universities for only about a fifth of the US price.”

He also delights in telling the reader that the performance of US schools falls off quickly once one looks beyond the top 20.

“So the 72 US universities in the top 200 represent fewer than 5 per cent of those offering four-year degrees. The US university system overall appears to offer poor value for money: none of the funding, public or private, pouring into 95 per cent of the higher education institutions in America makes any impact at all on the world university rankings. By comparison, the 29 UK universities in the top 200 represent nearly a fifth of the 165 listed by the Higher Education Statistics Agency. So British universities appear, on average, to be almost four times better at breaking into the global top 200 than their American counterparts.”

If the UK system has been so successful, why is the current government intent on changing it? Hotson pinpoints ideology.

“It isn’t difficult to see how these tables have helped push government policy towards its current infatuation with markets. All but one of the 13 American universities which have routinely topped the tables are private institutions, and those inclined to neoliberal ways of thinking are unlikely to see this as a coincidence. If the global supremacy of US private universities is the product of their exposure to competitive markets, then the sooner such markets are introduced into UK, the sooner we can begin to watch their magic ‘driving up standards’.”

Hotson then proceeds to explain how markets actually work in US higher education. He does not paint a pretty picture.

The top schools, or at least those that wish to be considered top schools, all charge about the same exorbitant tuition. Someone observing this from Mars or London might assume that the market is working and forcing each academic provider to adhere to a market-determined price. What is actually happening is that one institution decides it can get away with charging a higher tuition, so everyone else raises theirs in order to keep up. One could call that a type of market, but not one that the UK should want to see duplicated within their borders. Hotson provides this explanation:

“Wherever a small and strictly limited supply of a highly desirable commodity – such as places at Harvard – is introduced into a genuinely open market, the wealthiest cohort in society will drive its price up to levels only they can afford. This is essentially what has been happening at the upper levels of the US university league since the income gap began to open up in the 1980s.”

The situation may be a bit more complicated than that, but his main point, that the market will drive prices up not down, is spot on.

Hotson then makes a claim that is a bit more of a stretch, but one that bears some consideration.

“Way back when, the average mark in the US was supposed to be a C. Nowadays, the more expensive the university, the higher the average mark, with the average in private universities now an A-minus. Why is grade inflation so closely correlated with fee inflation? The reason can easily be guessed. If you’ve attended one of America’s hundred costliest colleges or universities and paid upwards of $200,000 for a four-year degree, then it had better be a good one. Ignore this demand and an institution’s levels of ‘student satisfaction’ will plummet, as will the number of wealthy people willing to invest in its degrees.”

The author gets back on safer ground when he returns to ways in which the market drives up costs. He quotes Jonathan Cole, former provost at Columbia University, who attributes the run-up in educational costs partly to the

“perverse assumption that students are ‘customers’, that the customer is always right, and what he or she demands must be purchased. Money is well-spent on psychological counselling, but the number of offices that focus on student activities, athletics and athletic facilities, summer job placement and outsourced dining services, to say nothing of the dormitory rooms and suites that only the Four Seasons can match, leads to an expansion of administrators and increased cost of administration.”

Finally, and perhaps worst of all, the UK officials have allowed US-style for-profit universities to gain a foothold. Nearly all of the income of these outfits comes from government-provided student loans. If any country should realize how hard it is to eradicate a pest once it is introduced it should be England. Hotson was so outraged by this development that he wrote a separate background piece pointing out how bad this was going to be. There is an outfit called BPP University college of Professional Studies that has recently been given permission to grant university degrees. It has 14 campuses with 36,500 students.

“And with regard to standards, the American company that owns BPP University College.....recently lost its appeal in the US Supreme Court after being found guilty of defrauding its shareholders and is under investigation by the US Higher Learning Commission for deceiving students about the career value of its degrees.”

That certainly sounds like the UK has some exciting times to look forward to. And who is this US owner? None other than the Apollo Group, best known as the owners of the University of Phoenix with its 9% six-year graduation rate, and its billionaire founder. Yes, markets and higher education work wondrously well together.

We wish the UK well. One has to assume that they had some problems with their existing system that they were trying to fix. But if only they had asked—we could have told them so much.