This Little University Went To Market

The income contingent loan (ICL) is the Hills Hoist of Australian higher education policy. We might think about upgrading the garden furniture, putting in a pool, deregulating fees, but there, proudly in the middle, will remain the Higher Education Contribution Scheme (HECS, now Higher Education Loan Programme) mechanism. There’s something about the way that HECS mixes egalitarianism and capitalist pragmatism that has made it such a success in Australia. Whether pegging up the fees for a law, business or medicine degree on the upwardly mobile side, or nursing, teaching or generic BA/BSci degree on the mundane middle-class side, we can be confident that there will be enough room for all and the sunny Australian economy will steadily evaporate the debt. If the rain persists, we won’t have to pay. Most importantly, there are no upfront costs for installation. As university enrolments have risen from 15% to nearly 40% of the population (by age) over the last generation, the line of HECS repayments in our tax statements has become as ubiquitous as the demountable rotary clothesline in our backyards.

It helps that ICLs in higher education were first introduced in Australia and that the architect, the ANU economist Bruce Chapman, is the kind of deprecating and affable bloke we’d all like to have as a neighbour. He subtitled his 2014 Cunningham Lecture to the Academy of Social Sciences ‘the journey of naive academic in the shark-infested waters of public policy’, telling the HECS story with the laconic ease of Len Beadell relating the surveying of Maralinga test site. (The would-be architect of the deregulation of Australia’s universities, the Grattan’s Institute’s Andrew Norton, by contrast, has the permanent poker face of the secret agent – the kind of neighbour you only glimpse as he pulls into his automated garage.)

Quite a few countries now use ICLs for student fees, but only in Australia do they hold such an unimpeachable place in ongoing debates about the financial and social logic of higher education. When spruiking his ill-fated deregulation proposals in 2014, Christopher Pyne boasted that Australia’s ‘world renowned HECS system’ would still take pride of place in his new design. The status of HECS is not so much a matter of national pride, though, as a reflection of the way that universities and higher education have come to be regarded in this country. Public debate rarely touches on the nature and importance of universities as institutions, the perceived value of which was once bipartisan, focussing relentlessly instead on the kinds of opportunities that they can provide for individuals. Questions of social justice pertain to fair access to these opportunities.

Australia is one of only six OECD countries in which private spending exceeds that of the state for tertiary education, and yet the only policy options centre on reducing public investment and increasing the burden on students. The loss of so much ground has to be seen as a consequence of the lusty embrace of neoliberal economics on both sides of politics. It is also a result, perhaps unintended, of the Hills Hoist effect. That reassuring suburban clothesline of a funding model has blinded us to the consequences of moving student fees ever closer to centre of the funding model. While our universities have fiscally been remoulded in the image of ‘student choice’, with sometimes devastating intellectual consequences, it seems that higher education policy only attracts attention when bears upon equity of access.

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In 2014, Christopher Pyne’s deregulation proposals pushed the question of higher education funding into the mainstream of political debate for the first time in a generation. The prospect of ‘hundredthousanddollardegrees’ made people wonder just how much weight the Hills Hoist could bear. (Or, more literally, whether they’d ever be able to afford a house with a backyard if that HECS/HELP debt was soaking up so much income.) Pyne’s vision was ‘Americanisation’: an unAustralian attempt to turn ‘uni’ into ‘college’. Even Norton admitted, in retrospect, that the move to price degrees, which he strongly had advocated for twenty-four months earlier, had gone too far, too quickly.

Among the papers for this year’s pre-election budget was a thoroughly revised policy platform tabled by the Coalition’s new education minister, Simon Birmingham. Driving Innovation, Fairness and Excellence in Higher Education is an utterly dull collection of words that appears to restore higher education policy to tinkering and empty rhetoric. Instead of Pyne’s fees arms race, with universities inflating their prices to shore up consumer perceptions of their ‘positional goods’, we were given what looks like a bit of fiscal pruning. What’s more, the policy goes to the electorate on July 2 as a set of ‘options’, allowing for a swift retreat should anything unnerve voters. Yet the options included in this paper, all of which will be tacitly mandated with the election of a Turnbull government, are a frontal assault on the social logic that informed the design of HECS, and could set the sector on the path to an even purer form of deregulation than that which Abbott and Pyne had tried to ram through.

In particular, it sets out to compromise the three fundamental aspects of the HECS design that secured its passage into law twenty-seven years ago:

1) that, owing to the public good that universities serve, the state remains the major investor in a student’s university education;
2) that the litmus for determining that a student has benefitted financially from their education is above national average income;
3) that students can only access HECS if they attend a public institution which is mandated to serve the public good.

Pyne tried to use HECS to give his unprecedented price-based policy the aura of security. Birmingham’s debt-oriented approach will act more like acid on the civic character of Australia’s public universities, ensuring that the sole purpose of universities will be the creation of ‘market citizens’  and that the deregulation of fees in the long run is inevitable.

The HECS Hills Hoist was never just a matter of guaranteeing access; it was about protecting the backyard too. (I’ll explain what I mean by this in a moment.) In that most characteristic of capitalist metamorphoses, the Income Contingent Loan is being reified; which is to say, something that had been a process pertaining to the social relations between people is being frozen into a thing that conceals those processes. To see just how radically Birmingham’s reforms depart from the policy logic that inaugurated HECS, we need to look again at the history of that reification — including the botched deregulation attempt. The following is a story about the way in which the politics around the economics of higher education have shifted so that an economic solution that attempted largely to keep faith with the Menzies-Whitlam consensus around public universities has become a political tool for their final capture by markets.

Whitlam’s Ghost

Gough Whitlam died on October 21 2014. On the schedule of bills before the Senate in Federal Parliament a week later was the second reading of Pyne’s ‘Higher Education and Research Reform Amendment Bill 2014’, following its consideration by a Senate committee. The second chapter of the committee’s report outlines the post-war history of higher education policy leading up to the proposal to deregulate fees. Like revisionist histories of Chinese state capitalism, it presents the socialist past as though it were part of the teleology of the triumphant capitalist present. A single two-sentence paragraph covers Whitlam’s contribution. It notes that: ‘In the mid-1970s, the Whitlam Labor Government abolished university tuition charges in an ambitious effort to spread the benefits of tertiary education to all parts of Australian society’, before adding a comment from Glyn Davis, the promethean Vice Chancellor of the University of Melbourne: ‘full Commonwealth financial responsibility for higher education and free tuition for students made sense in the politics of the time’. The report then briskly moves on.

The response to Whitlam’s death, however, demonstrated that the sentiments of his time have not yet expired in ours. A powerful nostalgia for the era of fully subsidised university education was brought to the surface, ghosting the policy debate just as Pyne was trying to exorcise it from the system once and for all. While it was predictable that left-liberals such as Cate Blanchett would pine, even Clive Palmer was out defending it: ‘Education should be free in this country […] free means free […] we’re a low debt country in the world, why shouldn’t we invest in our people and our children’.

Whitlam once again got his timing right: a last gasp martyrdom for one of his great reforms. Yet the nostalgia for the short era of free university education brought on by his death was obscuring in some respects. It seemed as though he had personally invented the concept of universal state-funded tertiary education. Nostalgia in fact hid a deeper amnesia about what was once a bipartisan consensus on the importance of public universities. In many ways, the individualist attitudes bred in the post-Dawkins environment had been projected back onto Whitlam – it was all about the individual student and how much she does or does not pay. Whitlam, though, saw his reforms as a fulfilment of the program of state-funded expansion under Menzies. ‘Under the responsibilities accepted by his government, more young Australians were given access to universities, and more money was spent to equip the universities for their augmented populations,’ Whitlam said of his predecessor in 1973 [Paywall]. To ensure that his point was not missed, he added ‘the justification of Sir Robert’s policies towards universities – the need for national responsibility – has been the central and exemplary principle behind my own government’s approach to education in its broadest sense’.

Both he and Menzies acted on a clear understanding of the responsibilities and benefits of public universities then prevalent across the world. We might call this the Menzies-Whitlam consensus. According to it, universities are spaces of public scholarship in which claims to expertise can be tested transparently and made available for the good of the entire society. They are home to multiple traditions of inquiry dynamised by radical self-criticism. They serve the needs of their local and regional communities. They are spaces of opportunity, not only for individual social mobility, but for collectively overcoming inherited privilege. They are places where good practice in certain occupations and professions can both be instilled and critically assessed. They are places of open debate and dissent that nurture a wider democratic culture. For a number of structural and ideological reasons  the Menzies-Whitlam consensus started to fall away in the 1980s. Instead of following through on this positive vision of building a national system of public universities that would serve all Australians, the discussion turned to how such an expansion could pay for itself. The two economic drivers of the Dawkins plan were the reintroduction of fees and internationalisation.

When Dawkins’ Green and White papers were discussed and debated between 1987 and 1989, the Menzies-Whitlam consensus still held sway in the Labor party caucus as well as many areas of the general community. The reformers needed to reintroduce student fees with reference to the still dominant notion that it is the character of universities that make them crucial public institutions and worthy of public support. To compel change, they seized upon the fact that one of their core functions, the education of undergraduate students, enabled the beneficiaries to attain measurable private financial benefits.

Whitlam’s ghost hovered as the young Bruce Chapman devised an economic mechanism for a social problem. His HECS idea was a beautifully simple and intuitive answer: no upfront costs, repayments due only when the graduate is earning above the national average, with the debt collected through the tax system and capped at 8% of annual income. It took a while, though, to find the right language with which to sell this idea. At first terms like graduate tax and tuition fee were used. These sounded either like increases in taxation or a new cost for a service that the public had become accustomed accessing freely. According to Chapman and Jane Nicholls the political message was ‘streamlined’ to ensure that the payment was understood to be deferred and income contingent. More significant was the characterisation of the new fees as a contribution. Students were not making a payment in exchange for their education – they were not purchasing anything. They were making a contribution towards its cost, which took into account the entire institutional environment that informed their teaching. Three fee bands were initially proposed, but after the final negotiations a flat rate of $1800 per year was adopted. From the government’s perspective, the primary purpose of HECS was to fund the overall expansion of provision to absorb increased demand from school leavers. This went hand in hand with the unification of the old binary system of universities and Colleges of Advanced Education. The ‘contribution’ in no way determined the overall parameter for government spending on higher education. The system was carefully designed to avoid introducing any notion that degrees had become priced commodities.

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What was not so clear at the time – and it would take Chapman over a decade to settle on the right language precisely to explain what had happened – was that the introduction of HECS fundamentally changed the relationship between the state, the university and the student. Previously the state funded the university who educated the student, and society received the benefits of their education, which included their economic productivity. Now the state loaned the student the money to invest in a university education which they wouldn’t have to repay should their ‘investment’ fail. When reading David Moss’s 2004 volume When All Else Fails: Government as the Ultimate Risk Manager, Chapman recognised that his HECS instrument had placed the state in the position of being a risk manager for ‘human capital investment’. Just as the state insures its population from natural catastrophe by funding emergency services, it protects students from the ‘unavoidable uncertainties’ of investing in their human capital.

When deciding on a course of study, a prospective student cannot know in advance: 1) her capacity to succeed in any given course of study; 2) the exact nature of the benefits provided by a course of study and how this relates to income potential; 3) whether or not the successful completion of the course will translate into a return in the labour market. If she is unable to find employment after studying, she does not have a physical asset to recoup the loss. For this reason, mortgage-style loans are inappropriate, something which Milton Friedman observed in the 1950s.

ICLs are obviously different from full state subsidy, but also from a graduate tax, in which deductions are made from the graduate’s income indefinitely. The state does not fund a student’s higher education solely on the basis of a commitment to the public benefits of university-educated citizens such as in the Czech Republic or Denmark, or as we do at primary and secondary levels; but nor does it work by putting a price on the private opportunities it provides. HECS redefined education in the terms of economic outcomes, but it was no more ‘neoliberal’ than the dole. The result was the transformation of our university system into a pretend market of human capital investment, in which universities competed to enrol investors whose decisions were based on their relatively risk-free projections forward into the labour market.

Chapman’s innovation took one contradiction – fully funded public universities that yielded private windfalls for the relatively small section society that typically had access to them – and transmuted it into another – public universities charged with fulfilling the private ambitions of students. The ‘public’ character of universities became a kind of systemic wastage, or, as Chapman put it, a ‘spill over’. The human rights lawyer (LLB), social critic (BA), or environmentalist (BSci) who chooses to turn their critical skills to low or unpaid public service has ‘failed’ to realise their human capital investment.

Perhaps because it took economists themselves a while fully to appreciate the implications of this categorical transformation, public awareness has never developed about the role of the state as an insurer for human capital investment at the tertiary level. This has produced one of the great canards of public policy discussions: the notion that there is a ‘mountain’ of ‘unpaid’ HECS/HELP debt that the state should do all that it can to recoup. Calling for a student who has not gained any meaningful financial advantage from their university education to repay their student debt is the economic equivalent of handing a credit card terminal to someone fleeing a bushfire in an ambulance.

In his Cunningham lecture, Chapman humorously related the annual phone calls he receives from journalists when the annual student debt figure is announced and, inevitably, sensationalised. This is not a minor concern, though, as the notion of ‘unpaid’ student debt is routinely used to harass universities into undertaking even more thoroughgoing market liberalisation. Even if it were conceded that HECS debt constitutes a ‘loss’, rather than an investment in public education, it has to be seen in the context of Australia’s rock-bottom investment in tertiary education as a whole. Of the nearly $34 billion currently ‘owed’ by HELP debtors, it is estimated that around a quarter will not be repaid. However, Australia ranks second last among OECD nations in terms of public spending on higher education as a proportion of GDP. Even if unpaid HECS/HELP debt were factored in as direct public spending, Australia would still be well under the OECD average.

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Of course, the notion of human capital investment was hardly new in 1988. The Martin report that led to the formation of the binary system in the 1960s stated that ‘education should be regarded as an investment which yields direct and significant economic benefits through increasing the skill of the population’. In the policy atmosphere of the Menzies-Whitlam consensus, though, this was to be achieved by super-charging direct investment in institutions. (Under Whitlam, this rose to 1.5% of GDP; it is now 0.7% .) More significantly, it was never intended that HECS systemically govern the logic of undergraduate choice. The most striking fact about the recommendations of the 1988 Wran review, looking back, is that it was judged that HECS should apply to only 20% of the total cost of educating a student. As Chapman commented at the time, the Wran committee assumed that ‘80 per cent of the direct costs of education by-pass the individual who receives it and flow to the community at large’. The ‘spill over’ of public benefit equated to pouring a pint of beer into a shot-glass. HECS restored the level of student fees that had been in place before Whitlam abolished them. Such was the sway that the Menzies-Whitlam consensus still held.

Chapman lists the ‘spill over’ benefits as: a ‘more educated community, ‘more cultured society with effective self-government’; ‘more considerate use of shared spaces’; benefits from new knowledge and technology that individuals cannot ‘fully appropriate themselves’; ‘more educated consumers’ capable of using that knowledge; and the gains in work place in which there are ‘more educated or skilled’ colleagues. None of this is unexpected, nor particularly inspiring (are notions of critical scholarship and imagination so entirely ethereal?), but it is a measure of the distance travelled since that such language no longer gets in edgeways. The closest Birmingham’s Driving Innovation comes is to state that higher education ‘enriches our cultural landscape’ and ‘provides an evidence base to inform public debate’. This is the positivist’s fantasy in which universities comprise a storehouse of helpful facts and there are a couple of paintings on the wall.

Price, the Magician

The settings for HECS/HELP have been altered several times since it first appeared as an $1800 flat fee. The level of student contribution jumped up twice during the Howard years, taking the level of private contribution from 20% to an average of 42%; from a shot-glass to a middy, as it were. At the same time, Howard squeezed direct funding to the sector, ensuring that universities were forced to commit ever more resources to attracting students. Australia was the only country in the OECD in which real public spending on higher education did not increase from 1995-2005.

In terms of system design, the most significant changes under Howard came in 1997, when three fee bands were established. The rationale supplied was twofold: 1) that the student contribution ought to reflect the cost of teaching a course of study; and 2) that it ought to reflect ‘more closely the private benefit to graduates in terms of their expected income in their private careers when they finish study’. These two imperatives hardly align. Law and accounting, which are relatively inexpensive to teach, were included in the highest band on the grounds of the future earnings of potential graduates along with subjects like veterinary science and medicine. Nursing, which is relatively expensive to teach, was placed in the lowest band. This was an ad hoc attempt to hybridise cost, price and social benefit; the law student sees a price (I pay more because I’ll earn more), the nursing student sees social benefit (I pay less because my skills will serve society), and the humanities student sees cost (I pay less because overheads are low).

The bands may have introduced a certain ambiguity about what exactly a student was ‘contributing’ to, but, viewed systemically, the fee levels simply amounted to differing chunks of funding that universities factored into their budgeting. Unlike in the UK or US, Australian universities are not required to report on their spending according to purpose. The most tangible effect was further to increase private contribution, and unevenly distribute resources across disciplines in the universities, the contradictions of which have caused great intra-institutional enmity. The deregulation of student places under Gillard in 2012 created an ‘open’ market for student places, with year to year fluidity in student numbers in any given course. It did not, however, change the fee settings.

Into this situation walked Christopher Pyne: the Peter Pan of federal parliament who talks like he’s still at mooting society boot-camp. With astonishing flippancy, he sought to eliminate once and for all the vestiges of the Menzies-Whitlam consensus by pricing degrees and opening the system up to private providers.

The nature of his plans were captured by the conceptual alterations that were proposed to the Higher Education Support Act (2003). A particularly telling amendment was the eradication of the notion of a ‘contribution’ altogether. In the deregulated system, an income contingent loan for tertiary study would be made available to meet the price of a discrete unit of pedagogy: ‘HESA will no longer need the concept of a student contribution amount, and higher education providers will be permitted to charge students tuition fees regardless of whether they are in a Commonwealth supported or fee-paying place’. This would collapse the distinction made between the educational provision subsidised by the state and that privately purchased, and, with it, any notion of a qualitative difference between provisions made by public and for-profit providers. To ensure that no ambiguity remains, it defines ‘fees’ as the amount exchanged for a unit of service: ‘Under the substituted meaning, a fee that a higher education provider charges a student is a tuition fee for a unit of study to the extent that the fee is directly in respect of the provision of that unit’.

At the same time as the policy was reengineered, a rationale was supplied that redescribed the Dawkins system in terms that assumed that this reengineering had already taken place. In one especially tendentious phrase, the impact statement spoke of a public subsidy that ‘has distorted the consumer’s capacity to distinguish between value propositions and eliminated the capacity for price to function as a moderator of demand in a dynamic labour market’. With a flick of the present perfect, the existing funding settings for public universities were represented in the terms of consumer sovereignty: the student has always been a default consumer looking for guidance in price levels, and regulation has obscured this. The same anachronism was apparent when the UNSW economist Richard Holden claimed that, under the Dawkins system, ‘prices [for degrees] are all essentially the same’.

The funding mechanism for universities was to be turned over irrevocably to consumer sovereignty, but the act, and its profound implications, were concealed in the magician’s sleeve. To see this is to be reminded of the performativity of economic language in marketising reform. It reorganises the environment using terms that feign objectively to describe it. Economic discourse of this type, writes Timothy Mitchell, ‘should be analysed not in terms of the reality it represents (or fails to represent), but in terms of the arrangements and exclusions it helps to produce’.

Other than a half-baked scholarship scheme, the case for the social credentials of Pyne’s proposals rested entirely on retaining the ICL mechanism. The design assumed that price is entirely compatible with the ICL, which would continue to serve its role as guarantor of access. As the debate over the proposals intensified in the months after its announcement, the possibility that pricing degrees might sit in contradiction with maintaining the role of the state as insurer started to get attention. If restraints on price are only guaranteed by the rational risk assessment of the buyer, and that risk is taken on by the state, how can price meaningfully reflect demand? If students are taking out much higher loans and paying them off over a much longer time, will the government recoup enough in the longer run to keep the system sustainable? Especially if repayments remain capped at 8% of annual income? Would students be able to afford basic life costs with a much longer stretch of debt following study? Would this incentivise them to move overseas to avoid repayment?

Leaving aside questions about the decision-making prowess of eighteen-year-olds, HECS/HELP might easily ‘blunt’ the price signals, further driving up fee costs [paywall], claimed some commentators. And this in a market subject to the so-called ‘Veblen effect’ for positional goods for which there are low price elasticities of demand. Previous evidence for university fee rises suggests that no university will want to be perceived to be offering inferior degrees, and so will seek to place their degree products at the top of the market, or at least signal that they are upwardly mobile.

Pyne, of course, simply dismissed the notion that there could be a contradiction. Norton, who co-authored the review that recommended the pricing of degrees, sought to deflate the claims that fees would rise exorbitantly in the immediate aftermath. ‘Universities that charge more than their market value could quickly find empty seats in their lecture theatres’, he wrote. ‘Rather than risk losing enrolment share, they will slowly increase their fees to test what students are willing to pay’. He then turned around to defend the retention of HECS/HELP, stating that it would remain crucial to the social equity of the Australian system. Noting the high rate of defaults by American graduates who funded their studies with mortgage-style loans, Norton claims ‘HELP removes these risks and complexities’. Holden later entered the fray in order to quell notions that HELP would blunt price signals. He argued that, far from blunting price, HELP would bring the maximum number of possible consumers to market, providing more information for the market to aggregate and, thus, to ‘weave its magic’.

The magic would need to work, and quickly, as the government effectively would be handing blank cheques to students with the faith that the markets would work as that the hard-line liberal economists promised. One suggestion to reassure those of weak stomach was to use international fee levels as a cap on domestic fees. However, as Louise Watson pointed out in her submission to the Senate committee, this might just backfire as universities ‘trade-off international student enrolments for domestic student enrolments, by raising their international fees to uncompetitive levels in order to justify a higher domestic student fee’.

Marrying ICLs with price would have introduced structural pressures that would have made real interest rates inevitable. (Under the initial proposals, loans would have indexed student debt to the bond rate, in any case.) It would also have pushed future governments to lower the repayment threshold and sell off the loan book. In 2008, the Labour Party in the United Kingdom passed the Sale of Student Loans Act, and successive governments since have sold off the mortgage-style loans issued before 1998 at a loss to the state of £240 million. Just after stepping down as education minister in 2014, David Willetts suggested that universities buy their own graduates’ debt. The rise in fees in the UK that prompted these speculations is less than that which was projected with fee deregulation in Australia. When commissioning the audit that led to the deregulation proposals, Pyne publically entertained the idea of privatising HECS/HELP debt.

Soft Caps and Flytraps

The Australian public hated deregulation. When the policy was announced in the notorious 2014 budget, Pyne, Abbott, Hockey and a platoon of ideologues stood ready to deploy Howard-era arguments about state support for universities as ‘middle-class welfare’. What they had not reckoned on was the change in public perceptions of universities that had come with their massification. It transpired that this one was going to hurt them in aspirational marginal seats. The visceral rejection of Pyne’s proposals was prompted by fears about ‘hundredthousanddollardegrees’, but it should not be reduced to it. The Coalition was breaking with the social contract that informed the introduction of HECS, and the public knew it. The notion that the value of a degree is tied up entirely with the capacity fully to realise it in the labour markets did not wash with the public at large, especially as it had come to perceive university education as a norm rather than an exception.

In essence, they were reacting against the consequences of reifying income contingent loans. When laying out his theory of reification, the critical theorist György Lukács described the process as the situation in which ‘a relation between people takes on the character of a thing and thus acquires a “phantom objectivity”, an autonomy that seems so strictly rational and all-embracing as to conceal every trace of its fundamental nature: the relation between people.’ Lukács was talking about the way in which the exchange value of commodities comes to be perceived as an intrinsic feature of objects, rather than of the social relationships that determine who can afford what. In a world in which we must purchase commodities to meet our basic needs, he goes on to argue, exchange value fundamentally shapes our perception of the world. When I say the ICL mechanism has progressively been reified, I’m not saying that the mechanism itself has been commodified. Rather, it has become autonomous from the social relationships that it was supposed to mediate, achieving a ‘phantom objectivity’ by which it conceals those relationships in order to facilitate the commodification of Australian higher education.

In a deregulated system the student is led to believe that her ICL allows her to pursue her professional dream, but does not realise that she is in fact helping the aggregation of market information so as perfectly to match her skills investment to the labour market. Just as Google and Facebook give their users ‘free’ services in exchange for data which advertisers buy to sell them stuff, so the government, in a deregulated environment, gives students a ‘free’ loan in order to increase the overall the quantum of skills-training choices being made, calibrating them all the more precisely with demand in the labour market. If the value of a student’s degree directly correlates to the value she can realise in the market, then she must maximise her income so as to be able to discharge the debt. In turn universities are remoulded in the image of the aggregate choices made by her and her cohort, and the market becomes ever more the single decisive factor in deciding what knowledge is worth pursuing. Capital subjugates knowledge to its needs, and knowledge gives up the ghost of its criticality. The ICL becomes capital’s facilitator rather than a welfare-state bulwark against its creative destructions.

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In a fascinating twist, Chapman, in collaboration with David Phillips, made a submission to the second Senate inquiry into the higher education proposals. Chapman had serious reservations as to whether Pyne’s proposals would be a ‘“proper” use of the HECS instrument’. Universities would inevitably exploit the contradictions involved in reducing the risk for Veblen goods in order to raise as much revenue as possible. Indeed, once the horse of fees had bolted it would constitute a significant risk for a university not to raise price in line with competitors. He outlined a ‘University Subsidy Contingent Scheme’ (USCS) that would restrain any ‘socially costly’ price escalations in a deregulated environment by reducing the grants universities received from government to teach a student as they increased prices . ‘If universities choose to increase their prices by high levels there needs to be reduced government subsidies to these institutions as a consequence’. (Subsidy here refers to the funds supplied directly to universities to educate a student, which currently sits at 58% of their fees.)

Holding fast to his baby as it was being twisted around to serve the opposite ends to those for which it was conceived, the father of the HECS produced a curious piece of economics. If HECS was the tragedy of a state that was unwilling properly to support the expansion of universities, USCS was the farce of trying to keep reins on a system as it plunged into anarchy of exchange value. He wanted to ensure that the HECS instrument would not be used with socially regressive effects, while still allowing for the ‘benefits that deregulation seeks to achieve’, which he outlined as: ‘the ability of higher education institutions to offer quality services for students in a differentiated higher education system, and one in which institutions can pursue their own strategies to attract and retain students’.

It is interesting to recall that Chapman spoke against the banding of course fees in the 90s. Speaking to a Senate committee in October 1996, he criticised the contradiction between the two rationales provided for the bands, and in particular the vagueness of the assumptions made about private benefits. He pointed out that average earnings in a given profession were a poor gauge for any given individual’s future benefit. He also pointed out that there was no objective way of deciding on the level of private contribution to be funnelled into the higher education system as a whole.  The relative levels really have to do, he argued then, with the social consensus about the importance of universities rather than outcomes that cannot ultimately be measured.

Given how carefully he phrased his 2015 submission, it is unlikely that Chapman made it on the basis of a personal commitment to deregulation. Nevertheless, it would seem that he could see through to a way in which fee levels could be differentiated using price and yet avoid the kind of bad economics that informed the banding. Presumably this is because the universities themselves would be making decisions about prices rather than prices being imposed on them. If they wanted to push prices for their degrees higher to manipulate perceptions about their value then they would forfeit subsidy. Of course, with that subsidy in constant decline, the effectiveness of this lever could well diminish over time.

Ahead of the announcement of the revised higher education platform with this year’s budget, there were rumours that Birmingham might adopt Chapman and Phillip’s soft caps [paywall] model. Instead we received the ‘options paper’, Driving Innovation, effectively a wish-list of measures that a Coalition Government could act on if it is returned in July’s election. The headline changes and reforms on the table are:
•    the deregulation of fees in up to 20% of undergraduate programs under the moniker of ‘Flagship Courses’ (that is, for courses that answer to the campaign-devised slogans around ‘innovation’);
•    the possibility of extending government subsidies to all registered providers (including private for-profit);
•    the reduction of direct subsidy to universities for undergraduate education by 20% (the same as the cut proposed in the 2014 budget);
•    an increase of student fees of 8%, bringing the level of private contribution up to 50% of the total cost;
•    the introduction of loan fees of up to 20% to recoup that so-called unpaid debt (Pyne described loan fees as ‘punitive’ in a speech in 2014);
•    reducing the threshold for repayments from current levels of $54,000 to $42,000 (taking it in the direction of annual minimum wage of around $30,000/year);
•    disallowing retirees from accessing HELP loans;
•    introducing a household income test for HELP repayments;
•    the recovery of ‘debt’ from deceased estates.

Collectively, these proposals are drastic and unprecedented. If enacted, they would, in effect, wipe out all the insurance mechanisms and guarantors of public interest that were put into place in 1989 to make the introduction of HECS palatable. Every single principle is breached: no loan fees; restrictions on loans for courses at public institutions; contingency threshold at annual average earnings; and the state as the major investor in a student’s education. Where loans are not recouped from individuals, the state will smoke it out of their families, sooner or later.

And, all the while, a full fifth of the system could be deregulated immediately. The ‘flagship’ idea is so flimsy that one hesitates to engage seriously with it. (If universities raise fees for different courses, how can ‘price’ work? Law at one university might arbitrarily be priced $10,000 higher than at a university that chooses to raise fees in other courses.) The significant fact is that the Coalition clearly remains committed to deregulation even as it uses every other means to intensify debt pressures. Together these options could well turn out worse for public universities than the Pyne proposals. Pyne, at least, more or less kept the HECS public interest safety mechanisms intact.

Just as he did following the 2014 Budget, Andrew Norton, with the Grattan brand behind him, is cheering these new reforms along [paywall]. According to his research, ‘more than half’ of those who are not earning above the national average, nevertheless live in households with after-tax incomes of at least $60,000 a year. Concretely, this means that two parents working full-time who each earn a smidgen above the minimum wage would need to evict their children or be forced to pay their fees. At the same time, those graduates (presumably just under half) who have not gained meaningful financial advantage through their studies, and who are not living in a shared income environment, will have to start repayments while pursuing careers other than those for which their education has prepared them. Precisely none of the median salaries of graduates in any field start below $42,000/year. This policy is about compelling students to make strictly economic choices when enrolling in university and punishing those who lose out financially, all the while tricking the Australian public into thinking that our tight-fisted, miserly levels of public support for universities constitutes ‘living beyond our means’.

After the Market Citizen

I have been using the private/public distinction as though it were clear-cut, which, of course, it’s not. I’ve done this in order to highlight the direction that we have been travelling; from the thirty years of the Menzies-Whitlam consensus, through the Chapman-driven Dawkins consensus, which lasted about the same length of time, to the consensus Pyne and Birmingham are trying to instantiate. The somewhat utopian ‘public’ that I have been using as though it were a neutral category of analysis has, like all ideal concepts, a prescriptive aspect. It’s not just that universities need to serve ‘the public interest’, but that they have a duty to enhance the public sphere – to produce the public that they serve.

A recent addition to the ever-growing, sometimes brilliant, but always forlorn library of critiques of the neoliberal university is an essay by Murdoch University’s Kanishaka Jayasuriya, which was part of an excellent volume edited by Margaret Thornton (Through a Glass Darkly: The Social Sciences Look at the Neoliberal University). Jayasuriya argues that managerialism, corporatisation, marketisation and financialisation have had the effect not so much of orienting universities to private interests as redefining the public sphere and the premises of citizenship. In order to ‘meet the dual objectives in expanding “human capital” and the inclusive participation of citizens in a globally competitive economy’ our universities now produce “market citizens”’. If the role of government is to enhance the capacity of students to participate in the market, then the nature of its contribution and that of the student are essentially the same. The ‘spill over’ is not the old ideals of critical scholarship and institutional autonomy, but the altruism of a state that wants to help individuals to capture as much wealth as they can before taking its cut. Pints all around, but everyone goes to the bar separately. The regulatory frameworks that aim to increase access to universities do so only in order to produce more market citizens. The use of the ICL by Pyne and Birmingham as a means of bringing the maximum number of skilled entrants to the market, driven by the need to discharge historically unprecedented levels of debt, confirms his analysis.

The challenge for those who hope to resuscitate the collectivist character of universities, and the public such universities cultivate, is to set a new course within the environment of the emergent Pyne-Birmingham consensus. For sure, this is not a challenge that can be met only at the level of the nation-state when there is a structural reliance on international student markets. Things are unlikely to change substantially until there is a mass mobilisation of students and staff like that which forced major reform in Chile between 2011-13. Things may have to get worse before sufficient outrage prompts such a movement in this country. Even the Pyne proposals did not spark the kind of student activity seen in the United Kingdom in 2010-11, where there were rolling occupations and street demonstrations in the tens of thousands.

I want to suggest two simple policy modifications that might help to pull Australia’s universities back from the precipice, and set them in a different direction. Neither requires any extra public spending in the first instance, and neither is impracticable in the present political environment.

First, let’s scrap the banding of courses and return to a single flat fee. It might be painful to see the fees for nursing and humanities set at the same level as those for law and medicine, but it would help to expel from the system any sense that a student’s contribution amount is determined by the calculation of future private benefit. It also helps to rid the system of the sense that the student is contributing to the cost of her individual education rather than the institution and environment in which she receives that education. Institutions that could not, as a consequence, meet costs for equipment or small class sizes for certain subjects, would need public funds on a needs basis just as per the logic of Gonski model.

Second, let’s change the terms of private contributions. Rather than taking out a ‘loan’, future students would undertake to make an ‘income contingent contribution’; that is, the ICL would shift from being a loan scheme to a contractual obligation. The government pays for their education upfront on the basis of its public benefit; if the student then goes on to reap financial rewards above the national average income, they will pay back the agreed upon portion of their degree program through income tax as per the current HELP settings. If this seems merely technical, and not worth the bureaucratic effort, we must keep in mind the way in which debt dominates public discourse around university education. With an income contingent contribution, there could be no talk of a ‘HECS/HELP debt’. The revenue coming in through the taxes of graduates earning above the threshold would be conceived as a resource generated by future income rather than as the recovery of past expenditure. It also means that the supposed contradiction of the government borrowing at the bond rate to fund loans that appreciate at CPI would be seen as the red herring that it is. Like any program of investment, the state supplies the upfront capital, and the later return comes from a resultant increase in prosperity rather than that of the individual merely. Above all, it helps to avoid the situation of viewing the non-contribution as a ‘loss’ or ‘default’ absorbed by the state that results when debt is counted as an asset.

This should be combined with a progressive calibration of the contribution level. A student earning just above the threshold would contribute only a small portion of the cost of their degree; a student earning significantly more would pay a greater portion. It is interesting that precisely this proposal was canvassed by a national committee of inquiry in the United Kingdom in 1997. The Dearing Report phrased it as follows:

a deferred contribution scheme would involve a student making a commitment, on enrolment, subsequently to contribute a certain percentage of his or her income with the total potential contribution being limited to the cost of the higher education programme taken or some defined percentage of that. The terms of the payments would be set, however, so that the average graduate would, in practice, pay only around 25 per cent of the cost. Only those who secured the highest incomes would pay back the full cost of their higher education programmes.

Neither of these modest measures for shoring up the public orientation of the ICL mechanism are suggested in order to fix a system that has gone badly awry. They could only start to have the desired effect if combined with redresses in other parts of the system that would help to turn the tide of corporatisation. Measures like: strict limits on the marketing budgets of public universities with content-regulation to ensure that they speak to the social mission of a public institution; indexing management salaries to rank-and-file staff at fixed proportions (and certainly no greater than 2:1); ensuring that executive committees have majority academic representation; caps on casualisation; a diminishing level of student fees as higher education becomes more universal, and so on.

I have no affection for either the Hills Hoist or the Income Contingent Loan. They are the result, in planning and university education respectively, of domesticating capitalism in postcolonial Australia. If we want to retrofit the capitalist infrastructure of our society with a new ethos and politics of the collective, we may be forced to appropriate some of these tools in the short term and discover again the great Australian way: city living, country benefits.

Works cited

Bruce Chapman, Timothy Higgins, and Joseph Stiglitz (eds), Income Contingent Loans: Theory, Practice and Prospects, Palgrave Macmillan, 2014.
Bruce Chapman and Jane Nicholls, 'HECS', in The Dawkins Revolution: 25 Years On, eds Croucher et al, Melbourne University press, 2013.
Bruce Chapman and David Pope, ‘Human Capital Formation and Higher Educaion’, The Australian Quarterly 64:3 (1992), 275-292.
Cate Blanchett, ‘Cate Blanchett pays tribute to Gough Whitlam: full text’, Sydney Morning Herald, November 5, 2014.
Phillip Coorey, ‘Government to Try to Soften University Fees Blow’, Australian Financial Review, April 26, 2016.
Alexis Cortés, ‘The Beginning of Free University Education in Chile’, Open Democracy, April 18, 2016.
Tim Dodd, ‘Gough Whitlam Broke Universities’ Glass Ceiling’, Australian Financial Review, October 22, 2014.
Milton Friedman, ‘The Role of Government in Education’, in Economics and the Public Interest, ed. R.A. Solo, Rutgers University Press, 1955.
Richard Holden, ‘Time for a Blunt Lesson on HECS and Price Signals’, The Conversation, February 3, 2015.
Kanishka Jayasuriya, ‘Transforming the Public University: Market Citizenship and Higher Education Regulatory Projects’, in Through a Glass Darkly: The Social Sciences Look at the Neoliberal University, ed. Margaret Thornton, ANU Press, 2015.
‎György Lukács, History and Class Consciousness, trans. Rodney Livingstone, MIT Press, 1971.
Stuart MacIntyre et al, 'Making the Unified National System’, in The Dawkins Revolution: 25 Years On, eds Croucher et al, Melbourne University Press, 2013.
Andrew McGettigan, ‘Cash Today’, London Review of Books, March 5, 2015.
Martin McKenzie-Murray, ‘Pyne Needling’, The Saturday Paper, October 25, 2015.
Timothy Mitchell, ‘The Properties of Markets’, in Donald A. MacKenzie et al., Do Economists Make Markets? On the Performativity of Economics, Princeton University Press, 2007.
Andrew Norton, ‘Budget offers more questions than answers’ Campus Review, May 4, 2016.
John Ross, ‘HELP Repayment Threshold Cut ‘No Hardship’: Grattan’, The Australian, May 18, 2016.
Rodney Tiffen, ‘The University Rankings No Government Wants to Talk About’, Inside Story, March 24, 2015.
Andrew Trounsen, ‘Get Over Gough Whitlam on Higher Education Fees, ALP Told’, The Australian, January 26, 2015.
Amanda Vanstone, ‘Memo to Uni Fees Protesters: Stop Being Selfish Thugs and Bullies’, Sydney Morning Herald, May 26, 2014.