'The Political Economy of Higher Education Finance'

Author discusses his new book on the politics of tuition policies in OECD countries.

September 28, 2016

In the United States, Hillary Clinton is pushing to make public higher education debt-free for most Americans. Britain, meanwhile, is adjusting to much higher tuition rates than have been the norm. And policy makers in many countries are debating the significance of countries without tuition.

A new book -- The Political Economy of Higher Education Finance: The Politics of Tuition Fees and Subsidies in OECD Countries,1945-2015 (Palgrave Macmillan) -- aims to put these developments in context. Julian L. Garritzmann, the author, is a postdoctoral researcher at the University of Konstanz and the University of Zurich. He responded via email to questions about his book. This conversation has been edited for length and clarity.

Q: How similar were the leading Western nations on tuition policy in the immediate post-World War II years?

A: After World War II, the higher education systems of all Western nations were almost identical in many important respects. Firstly, enrollment levels were very low in all countries. That is, hardly anyone studied. In all countries about 5 percent of each cohort attended higher academic education. The U.S. was somewhat ahead of the other countries at this time, but even here enrollment was still very low, well below 10 percent. Secondly, access to higher education was strongly stratified in all countries. Whether kids made it to college or not mainly depended on their parents’ educational and financial background. It was mainly the children of higher socioeconomic strata that made it to college. Thirdly, the systems were also highly similar regarding their funding. In the late 1940s and 1950s, tuition fees were very low or even nonexistent in all Western countries. The U.S., Sweden and Germany, for example, looked still highly similar at this time. Finally, there was no public financial aid to support students. In short, the higher education systems resembled each other very closely in many respects in the immediate postwar period.

Q: Many Americans assume that the role of private higher education in the United States makes comparisons between the U.S. and European countries difficult. Does it?

A: I don’t think so. First of all, whether higher education is privatized or not is a political decision, so it is interesting and necessary to compare countries that have made different decisions. A comparative perspective can clearly help us here to understand the causes and consequences, the advantages and disadvantages of privatization. In the U.S., for example, most of the early higher education institutions were private. Public institutions were only founded later to expand access (by the land-grant acts and other bills), which is why there are many more private institutions on the East Coast than in the rest of the country, as the settlement moved westwards.

Consider Japan as a second example: its first higher education institutions were all public, designed after the role model of the European medieval elite universities. When demand for more higher education increased in the 1960s, the government had to respond. Japan was governed by conservative parties at this time, who were unwilling to spend more public money on education, so they “outsourced” the enrollment expansion into the private sector. As an effect, the Japanese system today doesn’t look too different from the U.S. one in terms of privatization and in terms of tuition amounts (it differs in other important respects, though). The same holds true for many Eastern European countries. That is why I think that a comparative perspective analyzing higher education systems across countries and time can help a lot in understanding the broad variety of systems around the globe, their advantages and disadvantages, and potential challenges for the future.

Q: Why did the U.S. and many European nations diverge on tuition policy?

A: That was exactly the question that got me interested in higher education policy. I found this especially puzzling against the background that the higher education systems had been so similar at the end of World War II. Why is it that seemingly similar countries have diverged in these different directions over the postwar period? When I looked into the existing literature, two arguments were predominant: some scholars argued that the divergence is due to different economic circumstances. Others believed it is due to different cultures. I don’t believe either is true. And I didn’t find any empirical proof for these arguments in my research.

Rather, I found -- and show in my book -- that it’s all about politics. Whether countries have tuition fees today or not and whether they support students financially depends on which parties were in office during the immediate postwar decades and how long they were in office. In some countries -- like Sweden -- left-wing, progressive parties were predominant in government. They kept tuition low and installed generous student financial aid to expand enrollment levels and to make access more equal. In other countries -- like Japan -- conservative parties were constantly in office. They held very different goals: they were very concerned that an expansion of higher education would lead to a decline of the quality of higher education. So they tried to slow the enrollment expansion down, did not install any student aid and introduced tuition fees to bring additional money in and to make students pay for their own education.

These cases illustrate why right-wing-dominated countries today have high tuition fees and low student aid, while left-wing-dominated countries combine low tuition fees and high student subsidies. I also found, however, that some countries -- like Germany -- have low tuition fees and low student support, whereas others -- like the U.S. -- charge tremendous tuition fees and simultaneously offer far-reaching student aid (grants, and -- increasingly -- loans). I show in my book that this is again due to politics: it matters not only which parties were in government, but also how long they governed.

Taken together, my research shows that, first, countries used to be highly similar; second, today they fall into four different groups regarding their tuition-subsidy systems (I label these the Four Worlds of Student Finance); and third, the divergence can be explained by the partisan composition of office and the duration of parties in office.

Q: Britain is moving toward an American model, with high (for the U.K.) tuition charges. How significant is that?

A: The change in the U.K. is considerable, even path breaking. As said before, my research shows that the advanced democracies fall into four groups with regard to their tuition-subsidy systems. Over time, these four worlds have become increasingly resilient. In countries with tuition fees -- like the U.S. -- tuition keeps constantly increasing. In countries without tuition fees -- like Sweden or Germany -- no attempts are made to install tuition. Although there was a lot of policy change in the 1960s and ’70s, there has hardly been any change since the 1980s. Political scientists call these continuities “path dependencies.” Against this background, the introduction of tuition fees in the U.K. in 1997 was a considerable, path-breaking change. In fact, the U.K. is the only country that has changed from one world of student finance to another.

The U.K. example also shows, however, what the political consequences of such a dramatic policy change can be: the Labour party, which introduced the fees (because the Conservatives had pushed for them for more than two decades, emphasizing the decline of the quality of higher education), lost many votes among young adults and their parents in the subsequent elections. The same happened to the [Liberal Democrats] when they promised not to raise fees but still did so in the end. Moreover, the tuition introduction had a number of socio-economic consequences, some of which are visible already and some that will become much more visible in the future. I am convinced, for example, that we will see an increase in wage inequality in the U.K. in the next years due to the introduction of fees. Educational inequality is also likely to rise. That all said, I think it is noteworthy to point out that it is only England and Wales -- and to a lesser degree Northern Ireland -- that installed tuition fees. In Scotland, most students still study free of charge. This is again due to party politics….

Q: In the current presidential campaign in the U.S., Bernie Sanders and Hillary Clinton proposed to make public higher education free for most Americans. Critics say this is impossible, but proponents point to European nations. How relevant are the policies in Scandinavia and Germany to the debates in the U.S.?

A: On the one hand, I believe they are very relevant because they are good examples that one can achieve high-quality higher education and stable economies with considerable economic growth while simultaneously maintaining low private costs. While many U.S. citizens call Sanders’s higher education program “socialist,” it rather appears a moderate Social Democratic program to many Europeans. The countries’ different trajectories can thus stimulate the debate and offer options for policy diffusion.

On the other hand, my research shows that whereas parties and politicians had much leeway in designing the higher education systems in the 1950s through the ’70s, their room for maneuver has become smaller and smaller over the decades. I show in my book that this is mainly due to what political scientists call “positive feedback effects.” That is, the existing higher education institutions shape people’s preferences and affect public opinion. As the share of the population that themselves had paid tuition fees increases year by year, it becomes more and more difficult to reverse track. People of course do not want to “pay twice,” first for their own, then for others’ education. So at this point I agree with the more pessimistic view that it is highly unlikely that we will see free higher education in the U.S. (although for different reasons than those usually brought forward in the U.S. debate).

Q: Do you think the U.S. could make public higher education free without sacrificing its quality?

A: Theoretically yes, practically no. In principle, it is of course possible to have a system with low or no tuition fees but high quality. Denmark, Finland, Germany, Norway, Sweden and Switzerland are but some examples. But this only works at the expense of high public costs. Of course the funding has to come from somewhere -- if not from tuition, then from taxes. So in principle, it would of course be possible to substitute the immense tuition fee amounts in the U.S. with public money by increasing taxes. One does not even have to look at Europe to see this. Historically, the U.S. was much closer to this system in the mid-20th century. In practice, however, I don’t believe that could politically be a viable option in current U.S. politics. This is mainly due to the Republicans’ (and especially the Tea Party’s) vetoing and demonization of any suggestions in this direction. As these debates are so salient and prominent in the current debate, more progressive policy making is impossible, at least in the short and medium run.

Q: So what can be done to make the system more just while maintaining its quality?

A: I can imagine several options. Consider two: first of all, while I don’t believe that radical and large policy change is possible, I suppose that small, incremental change is possible. Political actors seeking more equality of opportunities in higher education could try to establish tuition models that defer the costs to the time after graduation. Instead of paying up front, students could be charged income-contingent tuition fees. That is, students would pay fees -- but only after graduation and when they are in paid work. The amounts could then differ on their respective wages. This is the case in Australia and the U.K.

A second -- in my view crucial -- policy change would be to simplify the funding system as much as possible. At the moment the U.S. higher education funding system is way too nontransparent. It is entirely unforeseeable for most students how high the tuition amounts will be and how much financial support they will receive. This is so because of the higher education institutions’ increasing use of “personalized” tuition amounts and due to the nontransparent multitude of funding streams (some state and some federal funding, several public and private grant and loan systems, etc.). This nontransparency is worrisome, because we know that children from lower socioeconomic and educational strata are much more likely to overestimate the costs and to underestimate the benefits of higher education.

Thus, one reason why the U.S. is far away from achieving equality of access is the complexity of its funding system. Simplifying this a lot (to, say, two simple rules) and making highly transparent for each student what the costs and benefits of higher education are could be a second crucial policy for the U.S. system. In fact, the Obama administration has already tried to go some steps in this direction, but overall much more needs to be done for this to be successful. If nothing changes, tuition and student debt amounts will keep increasing, and educational and wage inequalities will continue to increase. In the long run, this might not only have worrisome political and social effects, but also macroeconomic effects, as the total [national] student debt amount by now is larger than total credit card debt and total auto debt.


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