Thursday, 5 August 2010

The discourse of privatisation

I have just been working at restructuring some of this chapter, so much of this posting is a re-work of an earlier (and now deleted) post. I am trying to show the influence of privatisation even though it failed quite hopelessly. If you have advice for me, please let me know!

One of the key economic concerns of the early to mid 1980s was Australia’s low export ratio. Helen Hughes, based then as Professor of Economics at the Australian National University, was keen to reinvent higher education as an “export market” to help improve the national balance of trade – and in so doing, improve the perceived contribution and thus reputation of Australian universities.  It was a view the government shared. As a result, in 1986 Susan Ryan (along with then minister for trade, John Dawkins) gave universities permission to offer courses to international students at fee rates that universities would set themselves.  Helen Trinca, editor of the Higher Education Supplement reflected widespread opinion within the universities by describing the policy as an “experiment in privatisation”:
It is something of an off shore coup for the free-marketeers in higher education, a dry-run for deregulation, if you like, that could well spill over to the domestic system.
Susan Ryan, who was by no means a “free-marketeer” did not see it like that. What she found especially irksome about discussion around establishing an international export market was that it added volume to the pro-fees lobby, whose voices had already been growing louder by the day.  And it was the volume of the discussion, rather than the outcome of privatisation policies and experiments, that had the most sustained influence on higher education.
Privatisation of government-owned organisations had been a topic of debate in politics and economics starting with the Liberal Fraser government in the mid-1970s and continuing into the subsequent Hawke and Keating Labor governments from 1983. In higher education, it had been an issue commenced by those who had opposed Whitlam’s abolition of tuition fees in 1974, escalating to a point that by 1986 Anwyl and Jones (between them representing the two major centres for research in higher education at Melbourne and New England universities) said that “privatisation was entrenched in higher education jargon”, but that it now referred to a much broader suite of potential reforms and was the site of a wider range of ideologically-driven debates.  It was now also more than just talk. Deregulation of international student fees combined with new private sector initiatives to make privatisation real. Some of these realities were making spectacular claims for their new role in the sector. The most prominent of these was Bond University.

Don Watts, the first Vice-Chancellor of Bond University, had long been the loudest of the pro-fees lobby. The notion that a marketised higher education system would produce an improved “product” was a faith held he held with vehemence. In 1987 Watts said:
Education in Australia, in the absence of even a modest fee, provides no real contractor-customer relationship.
It was in the obligation to the consumer that Watts idealised university quality:
The institutions simply are not accountable to a market. Students, the real market, have no incentive to question institutional performance.
And he was convinced that exchange-value, where an item is attributed value by its connection to the fee paid for it, was the best way of demonstrating the value of education to society:
In commercially-minded societies almost everything has a price and thus a value. There is clear evidence that the Australian society does not understand the value of education. This is not surprising. Goods obtained by gift are difficult to place in an ordered system of values.
The only real way, in Watts’ mind, for higher education to regain its status in Australia was an affirmation of knowledge’s value with an explicit price.  With this in mind, Watts sought the creation of an explicitly private sector in higher education – such as there was already in schools.  The first of these was Bond University, named after its founder, Alan Bond.
Bond University embodied the 1980s free-market utopia in higher education. It was naturally therefore also the centre of the debate surrounding privatisation, a debate that raged through universities and in which everyone had an opinion. Bond Corporation proposed the scheme mid-1986 and later that year partnered with a Japanese company, EIE Development, to commit $125 million to stage one, with a view to enrolling 800 to 1000 students in 1989. It was a shocking proposal, to many (most vocally the staff associations), who saw the university tradition being appropriated by one of the corporate sector’s most prominent figures in Alan Bond.  This, many thought, had potentially disastrous consequences for the (now economically important) international reputation of Australian university standards.  Privatisation advocates described this argumentation as “entirely predictable” and even “elitist”.  On the other hand, supporters of Bond University were predominantly “right-wing loonies” according to an advocate of more “rational” privatisation schemes.  It was a period that demanded name-calling.

While some members of the Commonwealth opposition supported Bond University as an exemplar of privatisation , the Minister for Education, Senator Ryan and the Labor government were not in favour of the private university – largely because if private funding was to enter the system, they believed that it should go to public universities , relieving the treasury:
The stated aims of the Bond proposal are to attract private money in higher education, to bring industry and education into a profitable partnership and to tap the market for wealthy overseas students. All of these things can be done, and are being done, by our public institutions….The Bond proposal offers nothing new or constructive in these areas.
However, Bond, like every other university, was created by an Act of the State government (in this case Joh Bjelke-Petersen’s Queensland), and the Commonwealth could do nothing to prevent its existence. Both hopes and fears proved to be unfounded, however, for Bond University was unable to live up to its own fanfare.  No one had really understood how much it would cost to establish a world-class university overnight. Bond’s poorly stocked library would scrape by on interlibrary loan agreements, but two months before students were due to walk through the doors, Watts had to relinquish any hope of offering undergraduate science due to inadequate infrastructure.  Attracting students had been tough. Amidst talk that Bond was only for the rich and stupid, the Commonwealth’s determination that a private university would receive no public benefit at all led Watts to the awkward position of claiming that student income support (unlike tuition fees) was a civic right.  Only slightly more than 300 students commenced at Bond in May 1989, just as Watts announced it was having short-term difficulties meeting its operating costs and was arranging an $80 million bridging loan in anticipation of a $200 million, 14-year loan to be able to run the university (which had originally been planned to break even within four years).  While in August 1989 Bond University “promised to pay its bills”  , by October Alan Bond himself was exposed as having more than $1.6 billion in debt: one of many precursors to Bond Corp’s ultimate collapse and Alan Bond’s eventual imprisonment.  While the university did better than the man, it would still be some time before Bond University could extricate itself from financial and reputational difficulties.

Despite its reassurances in August 1989, only one month later Watts went to the Queensland government to ask for a short term loan. This renewed speculation that Watts had contributed to the political demise of the former premier (ousted by political coup) who had been refused a loan earlier in the year, when Watts had gone to see him with Alan Bond.  Watts, feeling that Bond himself might be an impediment, decided to see the new Premier without him to talk about the loan. Bond University scraped through what must have been an excessively stressful year for Watts. Never again did the university use its original strategy of elitism in its advertising, which had originally compared Bond to Harvard  . Based on his faith that everyone would associate the cost of education with its value, Watts had thought this would be convincing. That it was not demonstrates that education was not as easy to commodify as advocates of a free-market approach to higher education had claimed. Watts resigned from Bond University in 1990, shortly after being labelled “Captain of the Titanic” – he was still saying that everything was fine. 

The ethic of the free market was so compelling to its faithful that their rhetoric was sustained even when market logic failed in reality. Other private initiatives of the 1980s, as Simon Marginson has shown, failed (or struggled, to the point of failure or near-failure in subsequent decades) as well.  Privatisation initiatives were more successful in the public universities, such as at Melbourne University under David Penington. It was the partial privatisation of the Melbourne business school, Marginson demonstrates, that led to the failure of the private Tasman University.  This is not just that public funding (and Melbourne University’s accumulated wealth) provided a more secure financial foundation for privatisation: Melbourne University Private, an initiative of a later Vice-Chancellor, lasted only seven years. 

No failures of reality, no matter how spectacular, could impede the contributions privatisation made to discourse. This was its real, sustained contribution to higher education. The unshakable faith of free-market economists bludgeoned every discussion of potential reform in higher education, informed every debate about improving universities’ relationship to the community and – despite abundant evidence of its failure in fact – seemed to offer a solution to the system’s financial woes. Discourse about the functions of education as a commodity that some – such as economist Jon Stanford – started to consider education to be somehow inherently commodified. He said: “education is an economic commodity and should be treated as such”.

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