‘The rising tide that lifts all boats’
The myth of the “invisible hand” and the fetish of competition in UK higher education reform
David Ridley (PhD Candidate and Graduate Teaching Assistant), Department of Political Science
and International Studies (POLSIS), University of Birmingham. Email: dbr401@bham.ac.uk
I have worked on many different areas of the
public sector over the past 30 years. The biggest
lesson I have learned is that the most powerful
driver of reform is to let new providers into the
system. They do things differently in ways that
none can predict. They drive reform across the
sector… It’s the rising tide that lifts all boats.
Currently, one of the main barriers to alternative
providers is the teaching grant we pay to publiclyfunded HEIs [higher education institutions]. This
enables HEIs to charge fees at a level that private
providers could not match, and so gives publiclyfunded HEIs a significant advantage. Our funding
reforms will remove this barrier, because all HEIs
will – in future – receive most of their income
from students via fees. This reform, of itself,
opens up the system.
David Willetts, in a speech to the vice-chancellors
of England’s universities in Febuary 2011
But…
Why do we need reform?
Why ‘open up the system’?
This presentation will argue that the
reforms are driven by an irrational belief in
the myth of the invisible hand (which is a
symptom of neoliberalism)
Why reform UK Higher Education?
A Brief History
• 1997 Dearing Report: crucial text
– ‘Free tuition is unaffordable in the mass system of higher
education which we now have.’ (Barr & Crawford 1998)
– Student numbers rose from 5 per cent in the early 1960s
to a mass 30 per cent by the mid 1990s
• Three economic problems with HE in 1997 addressed
by Dearing Report:
1. Universities were poor
2. Students were poor
3. Top-up loans were mortgage style rather than incomecontingent (IC loans)
•
Main reason for not switching to IC loans was that they were
classified as public expenditure (a problem now solved!)
Tuition Fees begin with Labour
(not the Tories!)
• New Labour
– 1998, following Dearing’s recommendations, introduced
£1000 tuition fees
– In their second term of government, increased tuition fees to
£3000
• Ironically
– Labour had promised not to increase tuition fees in 2001
election manifesto
– Conservatives were opposed to tuition fee increases - Iain
Duncan Smith said fees were a ‘tax on learning’
– Even Queen stated in her 2003 speech that ‘up-front tuition
fees would be abolished for all full-time students’.
The Browne Review
• One of the concessions made to opposition to
Labour’s reforms in Parliament was a full review
• Lord Browne, then Chairman of British Petroleum,
recommended the following reforms (and others):
–
–
–
–
–
Removal of tuition fee cap
No cap on student numbers
Loan repayment threshold raised to £21000
Scope for removal of funding for non-priority subjects
Super-quango to be created for regulation of HE
The quality of teaching and of the awarded
degrees is the foundation upon which the
reputation and value of our higher
education system rests. Our
recommendations in this area are based on
giving students the ability to make an
informed choice of where and what to
study. Competition generally raises quality.
The interests of students will be protected
by minimum levels of quality enforced
through regulation.
Lord Browne (2010: 2)
Securing a Sustainable future
for Higher Education
The Coalition and Austerity
• Tory-Liberal Coalition government
– Browne Review pick ‘n’ mix
– Concessions to Liberals (interest linked to inflation)
• Austerity agenda
– The 2011 White Paper:
‘We were given the [Browne] report in an environment
when public funding had to be reduced and we
accepted the main thrust – that the beneficiaries of
higher education would need to make a larger
contribution towards its costs’
So, how successful have
the reforms been so far?
Not very!
They have arguably been a
complete failure!
Have we reduced public spending on HE?
(Ridley 2014)
• Coalition “gamble”? That even after an estimated
30% of loans written off (after 30 years),
government would still save £1billion
• However, recent estimations have revised this
figure to 45%, ‘all but nullifying any savings to
the public purse’
• London Economics have predicted that if the
write-off exceeds 48.6% then the cost of the
reforms will exceed the cost of the system it
replaced.
Will market reforms increase quality?
(Ridley 2014)
• National Audit Office published report (2nd Dec 2014)
that shows 20% drop out rate for “alternative” (i.e.
for-profit) HEIs in 2012-2013
• Drop-out rate at HEFCE funded (public) HEIs: 4%
• In 2012 Senator Tom Harkin published in-depth (2 year
project) report on 30 US for-profit HEIs and found
• 64% average drop-out rate
• relatively little amount of money spent on instruction – 22.4% on
marketing and advertising, 19.4% on profit distributions and only
17.7% on instruction.
SO
WHY
CARRY
ON?
Neo-liberalism
• Critics of market reforms often invoke the
concept of “neo-liberalism”
• Example: for Henry Giroux (2009) Neoliberalism:
– assaults all things public
– mystifies the basic contradiction between democratic
values and market fundamentalism
– weakens any viable notion of political agency by
offering no language connecting private
considerations to public issues
Criticisms of “neo-liberalism”
usage
•
Often used in an apocalyptic way
– Undermines action, which is felt as futile
•
Functions like a conspiracy theory
– Simplistic: makes sense of an otherwise confusing mess of reality (Barkin 2003)
– Empowering (psychologically): makes conspirators feel like a special group, and everyone who
disagrees is part of the ‘brainwashed herd’ (Barkin 2003)
– Latour?
•
No self-respecting neoliberal refers to themselves in such a way!
– ‘Increasingly functions as a rhetorical device’ (Flew 2012)
– Has acquired “negative normative valence”: refers to the bad ideas held by others (Boas &
Gans-Morse 2009)
– Term is often undefined
– Employed evenly across ideological divides
– Used to characterise an excessively broad variety of phenomena
•
Example of “inflationary critique” (Foucault, talking about “state-phobia”)
– ‘General disqualification by the worst’
– ‘Elision of actuality’ – often idealistic and doesn’t help understand real policy
Neoliberalism is the resurgence of
ideas associated with Laissez Faire
economic liberalism beginning in the
1970s and 1980s,whose advocates
support extensive economic
liberalization, free trade, and
reductions in government spending in
order to enhance the role of the
private sector in the economy
Wikipedia
SO, IS NEOLIBERALISM JUST A RETURN TO
CLASSICAL LIBERALISM AND LAISSEZ FAIRE?
WELL… YES AND NO
IT’S JUST NOT THAT SIMPLE
NO
Foucault’s 1979 lectures on
The Birth of Biopolitics
• For Foucault, liberalism is a form of critical reason
(founded in enlightenment)
• Neoliberalism arises in post-WW2 (West) Germany as
an answer to the question of how to found a liberal
state (after Nazism)
• This transforms liberalism from negative critique
(laissez faire – ‘hands off!’) to a positive plan for the
creation of a liberal-capitalist ‘art of government’
• With German neo-liberalism (or Ordoliberalism) we
find the need for a liberal social policy
The Social Construction of the Market
• In classical liberalism, “laissez faire” means the noninterference of the government in the “natural law” of the
market
• German neoliberals agree, in principle, and condemn all
economic intervention (i.e. Keynesianism) as ‘leading to
the concentration camps’ (an example of “inflationary
critique” for Foucault)
• However, Ordoliberals also argue that:
– Inequality and competition are necessary, not exchange
between equal partners
– Monopolies are created by state intervention, not natural
consequence of market
– Competition is ideal not real (or natural) must be created and
maintained by social policy (i.e. government)
‘The market
requires an active and
extremely vigilant
policy’
Willhelm
Röpke
The neo-liberal state: contradiction?
• Apparent contradiction in “neoliberalism”
– As a return to “laissez-faire” (or market fundamentalism) –
minimal state (or anarchism)
– Becoming more active and involved in social life (Gray
2010)
• Privatising public services
• Bailing out banks
• Commitment to minimal welfare
• With Foucault neoliberalism (liberalism after WW2)
– Active involvement of government in social life
– Government must create the social conditions for a
successful market
FOUCAULT
[According to the Ordoliberals] competition is an
essential economic logic that will only appear and
produce its effects under certain conditions which
have to be carefully and artificially constructed
The Invisible Hand
• Arguably what unites liberalism and neo-liberalism is a
belief in the “invisible hand”
• The myth of the Invisible Hand
– Unintended secondary benefits of self-interest
• Hidden hand epistemology
– No agent (including government) can know the market as a
whole – like Kantian critique
– Therefore only rationality is self-interest, which somehow
manages to benefit all (but no explanation, mystical)
The Invisible Hand: Neoliberalism
• We see in neo-liberalism an expansion and
consolidation of this epistemology
• The creation of a neo-liberal social theory:
– Self-interest is the limit of human rationality
– Therefore all that exists are units of enterprise
(individuals and corporations/companies)
– Competition is the ideal social relation for this
epistemology and ontology
– Government must respect (leave market alone) and
implement (active social policy) this social theory
Neoliberalism as positive social theory
• Human Capital Theory
– A positive neoliberal social theory (Gary Becker 1993)
• Not just a negative account of society (hands off!)
• Is capable of reducing the extra-economic (cultural values) to economic (costbenefit)
• Designed to inform public social policy
– A solution to the Marxist analyses of
• Labour theory of value
– Capital is created through investment and saving
– Investment in self through education
– Profits are a reward for saving (putting off consumption)
• Falling rate of profit
– New markets are created by innovation
– Innovation comes from the self-investment of individuals
– (Sandra) Becker & Wößmann’s (2009) critique of Weber’s Protestant Ethic thesis
• Welfare
– Welfare should be responsibility of individuals (not capital’s fault, see above)
– Poverty comes from a lack of investment in insurance
Neoliberal “governmentality”
• Neoliberal ‘art of government’ based on the social
theory of the market
• Ongoing critique of government by market
– Still liberalism as critique
– But now market critiques government from the point of
view of its utopian social theory
– Government social policy judged according to
enterprise (cost-benefit, efficiency, supply/demand)
– Does policy create monopolies (bad) or competition
(good)?
How can we use “neoliberalism”?
• Neoliberalism as “ideal-type” (Freund 1966)
–
–
–
–
Characteristic, distinctive, or “typical” elements are stressed
“Ideal”: isn’t ‘encountered in all its purity in real life’
Heuristic, open to revision (how useful is it?)
“Neo-liberalism” has arguably functioned as an ideal-type,
but one based on a lack of historical material
• Neoliberalism as a world-view
– Hegemonic “truth” is socio-historically contingent
knowledge
• Wilhelm Dilthey’s “critique of historical reason” (Ermath 1978)
• Foucault’s “critical philosophy” (Gutting 2013)
– Doesn’t matter if individual policies are shown to be wrong
(“truth” is a matter of commitment)
So, why markets?
Deep belief in the social theory of the invisible hand
– State cannot know the best way to distribute the scarce
resource of higher education (epistemology)
• State interference (public funding and regulation) has created
monopolies
– Students and HEIs are enterprises (ontology)
• Let enterprises (students, HEIs) decide based self-interest (costbenefit)
• Self-interest will drive up quality and lower/regulate prices (the
myth of the invisible hand – evidence shows otherwise)
– The only “rational” solution is to create a market in higher
education (social policy)
Problems
• If the “truth” won’t ‘set us free’, how do we (as
academics, or professional intellectuals) fight the
reforms?
– What good is theory and critique when you are only ever
preaching to the converted?
– What is the role of the “public intellectual”?
• The neo-liberal reforms to HE originate not as market
fundamentalism, but as a (possibly opportunistic)
neoliberal solution to the problem of funding and
expanding mass HE
– What are viable alternatives to marketisation?
– Is HE a public good? Was it ever? Should it be?
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