The Ideology Behind University Privatization

With tuition continuing to rise at public colleges and universities across the country in order to compensate for the decline in state funding, one group advocating reform seems more interested in fulfilling an ideological agenda than in actually working to find reasonable solutions to the problem.

Public universities can learn a great deal from the business community about how to focus on performance and efficiency, and initiate sensible, beneficial changes. Often, however, media pundits and some academicians co-opt the practical, commonsense arguments and add their own radical ideological twist.

In a recent article in the highly respected Governing magazine (“Public Universities Reach a Tipping Point”), Peter Harkness writes that the “higher education system’s vocal critics are increasing, particularly among conservatives. Political commentator Pat Buchanan is probably the most blunt: Higher education, he asserts, is ‘one of the biggest rackets going today.’

“The academic underpinnings for that critical view come most prominently from Richard Vedder, Harkness continues, “a self-described ‘dyed-in-the-wool conservative’ who is a retired economics professor from Ohio University and director of the Center for College Affordability and Productivity. His message is that state support for higher education is falling fast, so the schools are being forced to privatize, which is a good thing. ‘I’m increasingly thinking the government should get out of the business of higher education,’ he has said…”

In fact, Vedder has been thinking this way for many years.   He is an influential critic of public universities, with frequent contributions to the Wall Street Journal and Forbes.  He has been a principal force in the annual Forbes’ “America’s Top Colleges” rankings, notable for their preference for private institutions and their emphasis on postgraduate salaries as a strong indicator of quality.

Vedder is also a proponent of the Austrian School of Economics, which, at least in its American manifestations, argues that market forces rule and that government has no business in…well, business, or in just about anything else.   This is all well and good, as far as individual views go, but the point here is that the position advocated by Vedder, Pat Buchanan, and others is narrow and ideological in the extreme, to the point where not only the decline but the death of many public universities can be dismissed with a shrug.

On January 12 of this year, Vedder concluded one of his regular pieces for Forbes with these words: “like the market-driven private sector, higher education will face something rarely seen in the past: the creation of obvious winners and losers, with the latter group of schools facing, in many cases, extinction.”

The statement encapsulates the ability of ideological critics to use the language of business while embracing radical solutions.  Yes, in business there are “winners and losers” and many business suffer “extinction.”  But many in the business community, especially in Texas where Vedder’s attacks on UT Austin and Texas A&M have brought educators and business leaders together in support of the universities, are pragmatic and concerned enough to see that the Darwinian demise of a large number of public universities is not good for the state, the nation–or for business.

And, while failed business are often replaced fairly quickly by new ventures, the same process is unlikely for universities, leaving many fewer to choose from and fewer students able to afford the ones that remain.

(Full disclosure: I am an alumnus of UT Austin.)

Vedder has repeatedly cited the University of Virginia as an institution headed for privatization. And it is true that UVA only receives about 7 percent of its funding from the state and is raising $3 billion in private donations. The UVA student body now resembles those of the Ivy League more than it does those of other public universities, with only 8 percent of students coming from low-income families, versus 20 percent in other Virginia universities.

In an article by Julie Davis Bell for the National Conference of State Legislators, UVA economist David Breneman, a specialist in the economics of education, said that some highly selective and well-funded schools can survive by going the privatization route whole other schools less fortunate have little to gain and a great deal to lose. “The blunt fact,” he said, “is that there are many more of the latter than the former.”

One example of where Vedder’s ideology might lead can be found in the private, for-profit schools that he so frequently promotes.  In a March post on the friendly site about a new report on the concerns of university leaders, he wrote that to him “the most interesting finding is that public and private schools have somewhat different top-level issues they ponder, and that the for-profit schools are clearly more student-centered in their concerns than the not-for-profits, a marked contrast to what to some is conventional wisdom.” [Emphasis in original.]

It is true that the for-profit schools are now doing a better job of retaining students through the first year and of seeing students complete short degree or certificate programs.  But when it comes to four-year degrees, the outcome is very different.

At about the same time Vedder was writing his article on “extinction,” the National Center for Education Research found that “a sample of students enrolling at for-profit colleges in 2004 were making, on average, between $1,800 to $2,000 less annually than students attending other types of institutions. Six years after entering college, for-profit students are also more likely to be unemployed — and to be unemployed for periods longer than three months.”

The report also found that students at for-profit schools default at a much higher rate: 26 percent with loans of $5,000–$10,000 in student loans defaulted. At community colleges, the rate was 10 percent and at four-year schools it was 7 percent. Students at for-profit schools with loans of $10,000–$20,000 in loans defaulted at a rate of 16 percent, compared to 3 percent at community colleges and 2 percent at four-year colleges.

As a radical solution, some might like these outcomes, so long as the ideology can be served.  But for business and university leaders seeking practical solutions, it doesn’t look so good.

John Willingham