Don’t Look to the Ivy League

At the heart of the Browne Report and the government’s higher education policy is a simple notion allegedly grounded in economics: that the introduction of market forces into the higher education sector will simultaneously drive up standards and drive down prices. The confidence displayed by ministers in predicting these effects would be more reassuring if it were not at odds with the evidence that precisely the opposite is happening. The list of universities committed to charging something near the £9000 upper limit of fees is steadily lengthening, contrary to what Vince Cable has repeatedly told them is in their rational economic interest. And with regard to standards, the American company that owns BPP University College – which David Willetts granted university status only last year – 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. Since one of the justifications for funding university teaching primarily through tuition fees was to open up the English university sector to the beneficial influence of private providers, this news throws further doubt on the wisdom of government policy.

Whenever university standards are talked about, the basis for comparison is taken to be the annual THE-QS World University Rankings.* Every year since 2004, these tables have appeared under some variation of the headline ‘US Universities Dominate World Rankings.’ And every year the picture has been more or less the same: on average, US universities have occupied 13 of the top 20 positions, while British universities have occupied four. US universities outnumber their UK rivals further down the league table too, and no other country remotely challenges America’s effortless supremacy.

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’. The government’s zeal to marketise UK higher education, to emulate American universities and to invite US corporations to set up private universities in Britain are all of a piece. Because the dominance by US universities of the upper end of these tables is thought to be so absolute, their role in informing the political consensus underlying government policy is rarely discussed.

Yet all those journalists and politicians who have leaped so nimbly from league tables to university policy have apparently overlooked the fact that the US is larger than the UK: its population of 311 million is five times the UK population of 62 million. Already, the American three-to-one lead in the World University Rankings looks far less impressive. In fact, over the past seven years, the UK has had more top 20 universities per head of population (one per 15.5 million) than the US (one per 23.9 million). And since the UK institutions in the top 20 are on average slightly larger (20,500 students) than the US ones (17,300 students), almost twice the proportion of the UK population has been studying at top 20 universities (1 in 756, compared with 1 in 1383). In economic terms, the two countries differ by an even larger margin: US GDP (at $14.658 trillion) is 6.5 times larger than UK GDP (at $2.247 trillion). For the past seven years, the UK has been maintaining fully twice as many top 20 universities as the US for each unit of financial resource.

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.

The top ten or 20 places typically grab all the attention. What happens when we consider all 200? No summary of the mean rankings of the top 200 universities over the past seven years is available, but we can examine the data in the THE rankings for 2010-11. In the top 50 places, US outnumber UK universities by five to one. In the second tier (places 51-100), American universities begin to lose their edge, and the proportion drops to three to one. In the bottom half of the table (places 101-200), the number of places held by both countries is much reduced, as universities from other countries crowd onto the table, but the significant point is that here the US and UK universities are virtually at level pegging. UK universities are distributed fairly uniformly throughout the table, which suggests that there is a smooth and gradual transition from the top tier of universities to the next level down, and so on. The US university system, by contrast, appears to concentrate a hugely disproportionate share of resources in a small group of very wealthy and exclusive private institutions.

If anyone thinks the lower reaches of the table are inconsequential because only the top 100 universities in the world really matter, they should think again. According to Unesco, there are 5758 recognised higher education institutions in the US, about 1600 of which grant four-year degrees. 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.

An even less flattering picture emerges if a few necessary corrections are factored into the data. If we first adjust the figures by head of population, the UK is a match for the best of the US from the start: according to the most recent data, the two countries have virtually the same number of top 50 universities per capita. But as we move from the top 50 to the bottom 50, the UK opens up a commanding lead: there are four times as many universities per capita in the bottom half of the table (101-200) in the UK as in the US. If we further adjust for the ratio of GDP between the two countries (6.5 to 1), the data show that the UK makes better use of its smaller per capita resources in every tier of the rankings. And if we factor in that the US invests more than twice as much of its GDP in higher education as the UK, even in the top tier, where the strength of the American system is concentrated, UK investment in higher education seems to be yielding almost three times the return. In the bottom half of the table, British universities appear to be offering a staggering 12 times better value for money.

The data which appear, at first glance, to demonstrate the great strength of the US university system are revealed, on even the most rudimentary analysis, to demonstrate nothing of the kind. Measure for measure, US universities are manifestly not the ‘best of the best’. If value for money is the most important consideration, especially in an age of austerity, the American model might well be the last one that Britain should be emulating.

This analysis has serious implications for government policy. There is no evidence here that private sector competition drives up academic standards, but there is clear evidence that market competition drives up prices, since academic excellence apparently costs much more in the US than the UK. Why is this? It isn’t in fact difficult to see why the introduction of market pricing into a small cohort of elite universities will drive prices up, not down. 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. For several decades, tuition fees have been rising at double, triple and even quadruple the rate of cost-of-living inflation, first at the most exclusive universities, and then throughout the private sector, so that there are now more than a hundred private colleges and universities in the US charging students at least $50,000 annually for fees, room and board.

One might think this a peculiarly American phenomenon – an offshoot, perhaps, of some particularly ‘advanced’ form of consumer culture – but in fact the logic at work becomes even clearer in the context of the smaller education market in England. The introduction of competition drives down prices only in markets for commodities that can be readily produced. If a firm is producing things inefficiently, or skimming off too much profit, it can be undercut by more efficient methods of production or leaner business models. But there are some things which cannot be readily produced, and ancient universities are an excellent example. Oxford and Cambridge have a 600-year head start on their English rivals. Many of the advantages they enjoy are the product of their long histories: their architectural settings, their libraries and archives; their unique systems of tutorial teaching, collegiate organisation and self-government; and the academic prestige accumulated by two dozen generations of scholars, philosophers, scientists, poets and prime ministers. Their competitors cannot produce these things at any price, much less one that undercuts theirs. And because the ‘student experience’ they offer is one that many find uniquely attractive, they could, if freed from the constraints of government legislation, charge as high a price for this experience as the market would bear, without the risk of being undercut by anyone but each other.

So, imagine what would happen in England if the fee cap were removed, a real market introduced, and universities allowed to pursue their own economic interests without regard for anything else – i.e. act even more ‘rationally’ than Vince Cable thinks they should. Oxford and Cambridge would jack up their tuition fees dramatically, first of all to recoup the roughly £8000 of their own resources they currently invest in educating each student every year on top of what they receive through fees, government grants and research income. Rich parents would relish the opportunity to drive fees even higher, beyond the reach of less wealthy parents of more able children. The hyperinflation in Oxbridge fees would provide headroom for every other university in England to start increasing its fees; some, with lucrative professional degrees to offer, would raise them to levels above those of an Oxbridge arts degree. Further down the English academic league table, the rate of fee inflation would gradually fall until, somewhere near the bottom, universities would be competing on price within the £6000-£9000 band, as ministers intended all along.

Market forces are the reason American private universities have become so expensive, but why does all the extra money pouring into US universities generate such a poor return in the rankings? Evidently, a large fraction of this funding is being invested in something other than academic excellence. This haemorrhage of funds has not gone unnoticed by American university leaders, who have traced the source of the leak to another aspect of market-driven academic culture which the government plans to start importing from America: the ‘student experience’.

Jonathan Cole, former provost and dean of faculties at Columbia, wrote in the Huffington Post last year that in addition to fee inflation, a major contributor to the increased cost of higher education in America stems from 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.

If Cole is correct, then the marketisation of the higher education sector stimulates not one but two separate developments which run directly counter to government expectations. On the one hand, genuine market competition between elite universities drives up average tuition fees across the sector. On the other, the marketing of the ‘student experience’ places an ever increasing portion of university budgets in the hands of student ‘customers’. The first of these mechanisms drives up price, while the second drives down academic value for money, since the inflated fees are squandered on luxuries. To judge from the American experience, comfortable accommodation, a rich programme of social events and state of the art athletic facilities are what most 18-year-olds want when they choose their ‘student experience’; and when student choice becomes the engine for driving up standards, these are the standards that are going to be driven up.

What’s worse is that British government ministers, on visiting a beautifully manicured US campus for the first time, respond in the same way as American teenagers. Familiar as they are with the shoddy physical condition of even the best English universities, they cannot help but be impressed by the quality of the facilities offered by rich American institutions. What they forget is that the dilapidated state of so many English university buildings is the product, not of a lack of academic competitiveness, but of deliberate government policy these last 20 years. By holding university income firmly down, raising student numbers and prioritising research through the RAE, they have attempted to push up academic performance at the expense of teaching and the maintenance of existing buildings, not to mention the construction of new ones.

Might markets have the beneficial side effect of driving up academic standards? Much depends on the measure you use; but the academic standard that markets are most likely to drive up is the one that matters most to high-fee-paying students: marks. 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. Fortunately, these private universities are not required to employ external examiners to even up standards across the system, so there is nothing to prevent them meeting the student-led demand for higher and higher grades. Thus the net effect of introducing market forces driven by student demand is, yet again, precisely the opposite of what ministers intend: the value of academic credentials is debased across the system.

But might free-market competition drive up levels of actual academic achievement as well as grades? Not according to the World University Rankings. The only place in the world where private universities compete with one another and with a far larger group of public universities is the United States, and the US data clearly indicate that this competition drives the quality of public universities down, not up. Consider the top 20 institutions in the aggregated THE-QS rankings for the past seven years. Moving down the table, past all those famous Ivy League names, one finally comes to a solitary American public university, the University of Michigan, in 20th place, just below the best public universities in Canada (joint 17th) and Switzerland (19th), and below the Australian National University in Canberra (14th). Canada’s population and economy are about a tenth the size of its neighbour’s, so the data suggest that the Canadian public university sector narrowly outperforms the American on a tenth of the assets. Switzerland manages to pip the US despite having a GDP ¹/₃₀th and a population ¹/₄₀th the size. And the Australians somehow managed to beat the American public university sector in this seven-year period with only ¹/₁₄th the people and ¹/₁₂th the money. As for the UK, with only a single small private university until recently, it contributes all four of the best public universities: their mean rank positions are second, joint third, seventh and 12th. If we factor back in the five-fold difference in population, UK citizens have 20 times more opportunity to study at first-class public universities than their American cousins.

Another interesting pattern emerges if we examine the geographical distribution across the United States of the top 100 universities in the THE rankings for 2010-11. The wealthiest private universities at the top of the league table – including the whole of the Ivy League – are concentrated on the northeastern seaboard of the United States, from Massachusetts in the north to North Carolina in the south. If proximity to the energising influence of private universities drives up standards, as Willetts seemed to imply, we would expect to find the great public universities clustered in this same area. But the opposite is the case: the more distance between them and the rich private universities, it seems, the higher their level of achievement. Overwhelmingly, the best-represented state university system is California’s, with two universities in the top ten and a total of nine in the top 100. This seems impressive, but we should bear in mind that California’s GDP is almost as large as that of the UK, which boasts 14 public universities in the top 100. A striking contrast is provided by New York, California’s economic and intellectual counterweight. One might imagine it would benefit from market competition with Columbia, Cornell, NYU and the Ivy League institutions to its north and south, yet although New York State’s economy is fully half the size of the UK’s, its top-ranked public university – the State University of New York at Stony Brook – slots in at a humble 78 in the global rankings. Of the 14 other US public universities in the top 100, ten are located in southern, midwestern and western states that don’t have large private universities: Michigan (joint 15th), Washington (23rd), Georgia Tech (27th), Wisconsin-Madison (joint 43rd), Minnesota (52nd), Ohio State (66th), Colorado-Boulder (67th), Virginia (72nd), Utah (joint 83rd) and Arizona (joint 95th).

Thus, once again, the empirical data directly contradict current government assumptions. The great private universities in the US do not provide the competition needed to energise lethargic public institutions. Instead, they hoover up a hugely disproportionate share of the resources in the system, thereby impoverishing their neighbours. They have the money to build the best labs, stock the best libraries and buy up the most high-profile professors. Their facilities attract the best and the wealthiest students, cornering the market in social as well as intellectual prestige. They drain the area around them of all the resources needed to sustain good public universities. Most of the public universities that break into the top 100 operate as far away from the Ivy League as America’s vast landmass allows. Outside the top 100, American performance falls sharply to a low level.

The natural interpretation of the World University Rankings flies in the face of the key assumption underpinning current British government policy. Market competition in the United States has driven up tuition fees in the private universities and thereby sucked out the resources needed to sustain good public universities, while diverting a hugely wasteful share of these resources from academic priorities to improving the ‘student experience’ and debasing academic credentials through market-driven grade inflation. The partially privatised university system in the United States is not ‘the best of the best’. In terms of value for money, the British system is far better, and probably the best in the world. Willetts should follow the example of the health secretary, take advantage of a ‘natural break in the legislative process’, and go back to the drawing board.