Thursday, January 05, 2017

The 'For-Profit' Solution and Why It Won't Help UK Higher Education

The UK Government's proposed Higher Education Bill, which, among other things, makes it easy for For-Profit Universities to get degree-granting status, is expected to face steep opposition at the House of Lords (see this story). This is a long-awaited move, and many For-Profit operators, primarily from the US who are having a terrible time at home, are looking forward to this bill. UK Higher Education has a global reputation - arguably an average UK university is better regarded globally than an average US university - and being able to grant an UK degree is indeed a big prize when mass Higher Education is expanding so rapidly in Asia and Africa. Now, one could regard the House of Lords' stance as a retrograde one, and see this as a battle of entitlements - a few privileged people, retired academics among them, fighting for their corner, but this will be a mistake. The expansion of For-Profit Universities is likely to affect UK Higher Education - its effectiveness at home and its reputation abroad - negatively, and therefore, the concerns of the House of Lords is perfectly legitimate.

It is hard to see why the Government wants For-Profit Universities in the UK. Other countries allowed a private Not-for-Profit or For-Profit universities to set up in order to cope up with demands of an expanding Higher Education system. However, UK's student numbers in Higher Education is likely to DECREASE, at least till 2020, and even its long term projection is one of a small increase. Its Gross Enrollment Ratio is already quite high, and graduate unemployment rate is quite low. It also has a large and mature skills training sector, which provides opportunities for young people to pursue vocational and technical career paths. It is hard to justify plans for a sudden expansion of the sector by infusion of private investment as some other countries have done.

The Government's case for For-Profit universities is based on COMPETITION. As a justification, this is not very original. The ideologues may think only For-Profit opertaors can introduce competition in an otherwise stagnant sector, but anyone with more familiarity will know that the business of running an university today is anything but. Many UK universities are on visible parts of various ranking tables, and the top ones are constantly competiting with the very best in the world. While the university sector may have problems that need solving, lack of competitiveness is not one of them.

Another reason why Governments generally like For-Profits is EFFICIENCY, the assumption that market competition drives these institutions - for themselves as well as for the Sector as a whole - to innovate for efficiency, as in lower costs and better outcomes. But, looking at For-Profit track record, this has hardly been the case. In fact, in a setting where the Government funds the students, either through grants or subsidised loans, the For-Profits usually drive up the fees. The only efficiency For-Profits can reasonably claim credits for are in marketing and sales - queuing up in McDonald's to sell to the unsuspecting servers the unsustainable dreams of an office job, for example - and their models are usually based on moving costs away from delivery and more into sales, because that is the common-sense way of maximising profits. And, one does not have to look for American examples to predict the havoc For-Profit can wreck: This government's very own experience with student loans in its initial days, as recently as 2013, led to those recruitment bureaus at supermarkets, aimed at elderly and minority students who were enrolled with the lure of 'maintenance grants' and who dropped out of the course after they bought their shoes and handbags, never bothering to pay student loans as they were 'income contingent'. 

I must own up that I did argue for diversity of the sector in previous posts, particularly for the sake of INNOVATION in terms of technology and curriculum. Because the For-Profits, when they are allowed to operate within a sector with established, state funded, institutions, try to differentiate themselves in terms of curriculum and the way it is delivered, they have, in the past, introduced newer areas of study and newer modes of learning in the sector. These are historical examples, but For-Profits often created or took the lead in Book-keeping and Management, Medical Schools, Distance Learning and Online Education and more established universities only later caught up with these. This may not be the case Government is making, but it is possible to argue that For-Profit Higher Ed would introduce newer ideas in the UK Higher Ed sector. Unlike competition by itself, innovation and new ideas about the institutional purpose and format are indeed in short supply in UK Higher Education, as is expected in a tradition-bound, process driven sector operating in a sellers' market. However, one could argue that incentives for such innovation can be created by focusing, through regulatory and raking mechanisms, on employment outcomes of the students - how quickly they got a job and what starting salaries - which is already very much the case in the UK. Besides, the innovation in curriculum and methods, historically, has happened in the protean fringe of the For-Profits through trial-and-error, rather than the failsafe and sanitised Corporate For-Profits, which only move after established segments 'that can scale'.

Finally, it is worthwhile to consider the argument from the point of view of For-Profit investors: Whatever the government's justifications may be, how does one see UK For-Profit sector as an attractive opportunity? The recent experiments in For-Profits, one from 2005 powered by easy visas and then one from 2012 fuelled by free-for-all student loans, were unsustainable. The matured markets, decreasing domestic student numbers and caps on International students have proved disastrous for For-Profit projects in general. The case in point is the College of Law, which was bought with an eye-popping £200 million by Montagu Private Equity, became a full-fledged University (they already had degree granting status at the time of the sale), but then could deliver little of the anticipated growth in the declining sector of Law education: It was sold again in 2015, for 'an undisclosed amount', which is the private-equity speak for a 'huge profit', or as in this case, a 'huge loss'. And, while the University of Law, struggling in the legal education, imagined getting into business education would solve the problem, the Pearson College, an entity within the global conglomerate, started with the idea of an innovative format of business education, and saw the panacea in Legal Education as they struggled to win away students from more established business school (despite their billion-dollar brand name). At this current turn of the markets, as economies are facing a long period of uncertainty and low growth, resulting in stagnating demand for lawyers coupled with a global decline of MBA education, it is hard to see why any investor would think setting up an UK For-Profit is a good idea, even if the Government allows an easy path to University status. 

I shall argue that at least a part of the answer to this riddle lies in INTERNATIONAL. The UK Degree granting status is attractive to For-Profit institutions primarily for an International play, though the current visa regime rules out an expansion of international student numbers in the UK in any shape or form. The growth of Asian and African economies, the perceived value of an UK Education and increasing prosperity that makes an 'education premium' affordable, are the factors which make UK university licenses attractive to For-Profit providers. And, if we follow this logic, the principal innovation that this new turn in For-Profit education may bring to UK Higher Education sector is an advent of 'dematerialised campuses', not just forms of distance and online education, but perhaps 'non-teaching' universities, which are really franchise owners of UK degrees who does not play, or only play a minor role, in the delivery of education. This is not new - in fact, UK universities have been quite good with franchising their courses - but one may see this to become the principal business of some of the new universities.

The 'dematerialised campus' is the new utopia sweeping For-Profit education, but this does not work. Those who hold this world-view operates with two assumptions: First, that we are at a moment of a 'globalisation apocalypse', that the world is becoming 'flat' and all markets are becoming 'similar' or moving towards the higher, Western, forms of business; and, second, they believe that they are operating in a vacuum, nothing of the cultures, practices and institutions in the growing African and Asian economies have any value, and they will be swept aside the moment their regulatory structures crumble under the weight of market reforms. The reality, however, is very different. The growing economies, as they find their feet, are increasingly looking to build their own Higher Ed capacity and even mental models. The story of international student movements, university ranking tables and global research patents and educational innovations, was not one of Anglo-American dominance, but a much greater variety coming into play, with diversity of innovation and a range of regional centres developing. The UK Higher Education, with its tradition, high standards cosmopolitan communities and reputation of integrity stand to profit from this new alignment: This needs a cultural transformation from the inside, for sure, but the ideas are already there. But a new scramble, led by For-Profits as it will invariably be if they are unrestrained and empowered, would undermine the UK Higher Ed (as some of the misadventures of its universities did earlier) both by destroying the fabric of UK's regulatory structures and by unleashing on the world a new rapacious education imperialism whose time has clearly passed.



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