Adam Smith Institute

Traditionally, higher education has been a luxury - something for wealthier people, and wealthier countries. Over the last 35 years, however, it has become more of a necessity. Whatever their income, people are getting more of it. Countries today are sending a higher percentage of their youngsters through higher education than countries with the same GDP level back in the early 1970s. People think of the US as the leader in higher education, but in fact countries like Korea and Japan have higher penetration: modern technology needs well-educated workers.

And countries with higher proportions of young people have higher life expectancies. Maybe it's just that richer countries can afford more education and more healthcare. But there's more to it. After the collapse of the Soviet system, Russia's GDP nosedived. So did life expectancy. But the life expectancy of university graduates continued to rise. Perhaps education helps people to deal with changing events.

The link between education an longevity has another aspect. Inequalities in GDP between different countries haven't changed much since the 1970s. There has been a slight narrowing, but a gap between rich and poor persists. However, even the very poor are now getting more education, and living much longer than before. And people value life very highly: when you take that into account, world inequality is much less than the GDP figures suggest.

With graduates earning more and living longer, there are certainly gaps, even within countries. But you don't close that gap by taxing graduates. Higher education delivers a good return on investment: you want more of that, not less. And the way to create a thriving education sector is just the same as for other sectors, be it manufacturing, utilities, telecoms or transport – end the state monopolies and let competition flourish.
 

An article on the BBC’s website entitled ‘UK slipping down graduate league’ attracted my attention. Interesting, I thought, this must be an evaluation of how the quality of students popping out of British universities has slipped below that of other countries. Not the case. Instead, the article read like a fistful Blairite nonsense about the knowledge economy, and how we need more people in universities in order to compete with the rising economies of China and India. You get the idea.

The article suggests that politicians may need to suck us for more taxes to raise the number of young people going to university to upwards of 60 percent. No thanks. As I was wisely told when I was a kid: “just because everyone else is doing it, that doesn’t mean you have to”. Countries competing in graduates to improve their economies remind me of synchronized swimmers at the Olympics: a lot of splashing, looks pretty, but not much result. A lesson can be learned from Eastern Europe. When working in a bar to pay for my own questionable education, a fair number of the ubiquitous Polish waitresses had been educated ad infinatum, persuaded by massive state subsidies. Little good it did them. There were no jobs in Poland. Their universities did not deliver a growing, competitive economy.

The solution to all this is simple, but frankly beyond the stomach of most politicians. Free universities from the state, and in so doing allow the market to decide the price for education. If it is value for their time and money, the student will choose to go to university. We don't an aribitrary target, be it 50 percent, or 60 percent, or whatever. The economy is far more dynamic and flexible than that.

What about the poor? Well, the poor are not stupid. And if they are, they really should not be thinking about going to university. Thus, if it is worth their time and money, they can borrow the money to invest in their future. If people don’t go to university they can do an apprenticeship, start a business or get a job. All potential paths to personal wealth that will also benefit the economy. Simple.

Last week The Times reported that the America's Ivy League group of elite universities has begun to actively target Britain's top students. I'm pleased to hear it – the competition will do Britain's complacent universities some good.

It's not hard to imagine the UK's brightest school-leavers being tempted across the atlantic. For starters, being private (rather than state-financed) institutions, the Ivy League schools have built up enormous endowment funds to help people pay for their studies. At Yale, for instance, " students with a family income of less than £34,000 a year do not have to pay for anything. Even those whose parents earn a joint salary of up to £70,000 are eligible for some support." Better funding also means better facilities, smaller classes, and so on.

But I think the main reason British students would want to go to the US is that universities there actually teach their students. Because they rely on their students (not the government) for funding, American universities are much more attentive to their needs and requirements. Of course, there are some excellent universities and top-notch academics in the UK too – but all too often what Adam Smith said over 200 years ago still stands:

"[T]he great part of the public professors have, for these many years, given up altogether even the pretence of teaching."

And...

"The discipline of colleges and universities is in general contrived, not for the benefit of the students, but for the interest, or more properly speaking, for the ease of the masters."

The solution? More independence from the state, and more private funding. You can read Terence Kealey's briefing on 'Transforming Higher Education" here.