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Universities and the Economy in Asia and Europe

T he debate about the governance and funding of the Catalan university system needs an international perspective. A recent OECD report on the role of higher education in the development of Catalonia criticises the status quo and proposes to both the Spanish and Catalan governments, as well as the universities, a series of innovations to enhance the strategic importance of higher education. The European University Association has published a report on the impact of the economic crisis on European universities. The Asia Europe Foundation in Singapore organised a series of expert workshops to carry out a comparative analysis of the situation in Asia and in Europe, and recently published the analyses and recommendations of these workshops.

EU states consider higher education to be a right and a public good that must be guaranteed by the public administration. Asia states see it as a benefit for the individual or household, who will profit in the future from their studies and should therefore bear the burden of financing them. European universities receive more public funding while the Asian system relies more on private funding. Both regions are being forced to compete in the ratings game, placing an exaggerated emphasis on the results of elite research rather than on generalist teaching and training, even though the Asian context still includes many developing countries. In comparison to Spain, the emerging Asian economies invest significantly more in higher education and R&D and provide financial incentives and flexibility in governance in order to improve the output and ranking of selected universities. Spain invests only 1,1% of its GDP on higher education and 1,1% on R&D. The USA spends 3,1% and 5,8%, Finland spends 3,5% and 5,6%, Korea 2,6% and 2,6%, Japan 1,4% and 3,2%. China tripled government spending on higher education over the last two decades. Catalonia’s level of expenditure on R&D is higher than the Spanish average, but it is low compared to the best performing OECD countries. Without a serious commitment to potentiating higher education and R&D, this country can hardly expect to compete on the same scale.

In both Europe and Asia the nature and function of higher education systems are being questioned. Brahm Prakash of the Asian Development bank stresses the nexus between education and development in the contemporary economic model and foresees the need to redefine the role of universities in the light of the current financial crisis. George Psacharopoulos of the World Bank has shown that there are both private returns and social benefits from higher education. The former include the generation of wealth and payment of higher taxes by university graduates (many studies have shown that even a small increase in the amount of GDP dedicated to higher education generates a much larger increase in overall GDP). The latter includes the externalities of education, and raises the question of what role governments should play in supporting higher education. The Leuven Communiqué also highlights the social dimension of higher education. The OECD outlines the social outcomes of learning, giving empirical evidence of the higher levels of health and wealth among better-educated men and women and the obvious community benefits: lower public spending on health and more private savings and consumption, as well as more social cohesion, tolerance, better informed voters and more effective democratic governance. According to World Bank research, returns on higher education have risen significantly over the period 1973–2004.

The EUA report defines five basic ways of financing universities: public funding, tuition fees, income from research contracts and continuing education, philanthropy and the entrepreneurial management of university resources. It also stresses the need for effective autonomy in university management in order to guarantee efficient use of funding, as well as accountability by universities to demonstrate their results. In the case of Catalonia, public funding may have reached a ceiling. Students or their families finance almost 20% of the real cost of their studies, but this is not significantly lower than what they pay in other EU countries. Catalan universities have begun to generate income from research and continuing education, but there is little or no tradition of philanthropy or of the entrepreneurial management of university resources.

According to the Asia Europe Foundation report, where the cost of higher education spills beyond the limits of public funding, the government’s role should be to ensure that someone pays, e.g., through the active stimulation of the private sector. The introduction of fiscal incentives for endowments or donations should generate new sources of income, as should a more proactive policy of knowledge transfer and cooperation between the universities and the productive forces, as well as cultural and social transfer and cooperation with the public administrations. It concludes that higher education is a public good and a fundamental element of economic, social and cultural development, and that governments need to provide continued support to ensure continuity, quality, diversity, equity, access and sustainability in higher education.

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