Gresham's Law is Alive and Insidious in University Financing. (August 9, 2007)

    In 1558 Sir Thomas Gresham, Queen Elizabeth I's financial agent elucidated that "in economics 'bad money drives out good.' In this case it referred to the fact that if coins containing metal of different value have the same value as

Sir Thomas Gresham

legal tender, the coins composed of the cheaper metal will be used for payment, while those made of more expensive metal will be hoarded or exported and thus tend to disappear from circulation."

Now Bernard Lane writes in The Australian that "the revenue that comes with the influx of foreign students has brought only marginal benefits in long-term teaching and research capacity".

And in fact even that view may be overly optimistic. A 50 page report which has been compiled by Simon Marginson and Henk Eijkman at the Centre for Economics of Education and Training, Monash University is now available at http://www.cshe.unimelb.edu.au/pdfs/Marginson_Eijkman_July07.pdf

"We've underestimated the extent to which international education has changed the universities and drives the universities," lead researcher Simon Marginson told Mr Lane. "We need to step back and look at whether we want that change to occur, whether it's the right balance."

Senior managers at the universities of Melbourne, Ballarat and South Australia told the researchers that while the dramatic expansion of overseas markets was seen as good they worried about their dependence on this revenue.

What the report shows is that foreign exchange has underwritten a massive expansion of non-academic university services, from marketing through to help with English language as well as major capital works such as new buildings and equipment [but] "if the criterion is resources for research then the benefits are marginal, and it appears that the research mission may have been partly crowded out -- at least in terms of front-rank facilities and staff development -- by the commercial mission."

And to sheet home the message Mr Lane writes:

Just as universities preferred to hire non-academic staff who could be more easily replaced than tenured academics, capital works were chosen over recurrent expenditure partly because they looked better in the accounts.

 

In 2005, when Professor Marginson and Henk Eijkman carried out the interviews, Melbourne was about to build a $120 million economics and commerce building.

 

"With $20 million a year for six years in Australia you could fundamentally transform the research effort, even of the ANU," Professor Marginson said.

While the study was centred on three universities, Melbourne, Ballarat and South Australia, the authors believe it "points to the influence of resources, prestige and mission in differentiating the benefits and problems of the international student experience as currently configured." In their concluding remarks Professor Marginson and Dr Eijkman state:

All three universities had strong financial incentives to supply international student places, although Melbourne was uncomfortable with the tension between mass international education and its elite mission and was tempering those incentives accordingly... Financial dependence was particularly high at South Australia and was growing rapidly at Ballarat. Concerns about dependence and risk were voiced in all three institutions though only Melbourne, with its decision to stop growing, seemed close to exercising control over the problem.

 

The question of whether these universities were better off in resource terms as a result of mass commercial international education is, like the accounting question of whether they generated a technical financial ‘surplus’, murky and assumption-governed.

 

It seems that for many in the institutions, a culturally deep approach to international education is a pandora’s box that they will not open or even seriously acknowledge the existence of for fear of the resource implications, which are likely to be considerable. It is an illustration of the manner in which the commercial imperatives operating uniformly across the sector tend to dumb down the potential for both advanced educational development as a whole, and also boutique high quality provision in selected cases.

 

It became apparent during the investigation that not only is resource dependency in itself a significant driver (admittedly, not a new insight in the literature), the administrative terms on which resource dependency plays out can also be profoundly important, for example the accounting systems.

 

The overall conclusion of the report is given as:

The study suggests that consideration should be given to information systems that would enable better, more strategic judgements about priorities for development, particularly the respective development of commercial teaching capacity and research capacity and the interfaces and tensions between them. For example at all three institutions there were inadequate breakdowns (1) between income ploughed back into the business and income used to augment other facilities or for cross-subsidization of other areas of teaching or research; (2) between additional expenditures for academic purposes and for administrative purposes; (3) between new academic expenditures for teaching and for research purposes; (4) between new teaching expenditures of a temporary and casual nature which did not augment longer term capacity either in international programs and research, and new expenditures on teaching that were associated with expanded long term capacity in teaching and research via ongoing staff appointments. A more systematic and transparent approach to the risks attached to different development decisions is also suggested.

It is highly doubtful that the federal Coalition government will take heed of the cautionary advice outlined in this report, and as to a possible Labor government, they remain an unknown quantity.

Though on present form it would seem from academe's viewpoint, "better the devil you don't know than the one you do"

But how much?