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Campus reflection

May 22nd, 2014

That’s the mild pun the Chronicle of Higher Education picked for my article (paywalled, but I’ve put my draft version over the fold) making the point that a higher education system is, in important respects, a mirror of the society that created it, and that it helps to recreate. I make the point that, like the US health system and labor market, the US higher education does a great job for the 1 per cent who go to the Ivy League Schools (and whose parents are mostly in or close to the top 1 per cent of the income distribution), does an adequate but expensive job for the next 20 per cent or so, and leaves everyone else in the lurch.

This is important in the context of the Abbott governments proposed removal of caps on fees for higher education, explicitly aimed by Education Minister Pyne at creating a system in which we might have institutions like Harvard and Yale. I plan to write more on this, but the central point will be that, far from creating more places at existing universities, fee deregulation will give them incentives to shrink, pushing students out to the alternatives now being funded under HECS: for-profit institutions and the TAFE system (which has its own funding crisis), corresponding to the bottom tiers of the US education system, where all the recent growth has taken place.


Discussion of the various crises in US higher education seems like mass of irreconcilable contradictions. 
On the one hand, commentators inveigh against the soaring cost of tuition at elite universities, driven by wasteful luxury, with climbing walls as the invariable example of unjustified success. On the other hand, prospective students and their parents despair over the incredibly competitive admission process to those same colleges, beginning with securing entry to the right pre-school, and proceeding through an adolescence filled with resume-burnishing activities, culminating in the all-important personal essay.
Similar contradictions emerge for the system as a whole.  Official and unofficial reports bemoan inadequate college graduation rates, and shortages in vital skills like science and engineering. At the same time, employment options for graduates are so bad that intending students are told ‘going to college is the worst decision you can possibly make’.
But the whole picture becomes much clearer when you keep one simple fact in mind. Universities are a mirror of the society they serve. The growth of inequality and entrenched privilege in US society as a whole (also evident, but less extreme, in other English-speaking countries) is mirrored by the higher education sector. 
At the top, things have never been better, either for the institutions or the students who attend them. For the middle class, what was once a safe route to ensure that children did at least as well as their parents is now a high-stakes gamble, staking massive student debt against the prospect of entry to the professional classes who make up the top 20 per cent of income earners.  Compared to the past, the odds are bad enough that the wisdom of going to college has been widely questioned. 
But, even if going to college is now a much less attractive option than it was, the alternative is far worse. Real wages for men with only a high school diploma are lower now than they were in 1970, and the chance of holding a job is much lower. Combining these two factors, earnings for the median man with a high school diploma and no further schooling fell by 41 percent from 1970 to 2010. 

Women did a bit better in the early part of this period, but are now experiencing similar trends. A truly alarming finding is that, for white women with only high school education, life expectancy has actually declined, by as much as five years between 1990 and 2008.



All of these trends are reflected in the mirror of the higher education sector.
Starting at the top, we have the 1 per cent, in this case the Ivy League, along with Stanford, Chicago and the elite liberal arts colleges. These institutions educate 1 per cent of the college-age population, but account for more than 17 per cent of all endowment income,


and produce a similarly disproportionate share of the corporate and political elite. 



Unsurprisingly, these top 1 per cent institutions are largely devoted to reproducing the top 1 per cent of the broader society. The system of legacy admissions, along with favorable treatment for the offspring of donors ensures that the children of the 1 per cent are massively over-represented among Ivy League enrolments.  Legacy status gives fortunate applicants the equivalent of an additional 160 points on the former 1,600 point SAT scale.


That’s a big advantage, but not an insuperable one. A bright kid whose parents are in the top 20 per cent of the income distribution has a shot at getting into the Ivy League, even without legacy status. And just about everyone in the upper income bracket who has a chance goes for it. Unsurprisingly, applications massively outnumber admissions. Harvard now accepts less than 6 per cent of applicants, and rates are only marginally higher for the other elite schools.


Given the intensity of the competition, and the advantages of having educated and wealthy parents, it’s unsurprising that the 80/20 rule applies. 70 to 80 per cent of the students at Harvard and other elite universities come from the top 20 per cent of the income distribution. With a base like this, it’s easy to allocate the remaining places, at minimal or low tuition, to diversity and the spurious promise of a ‘needs-blind’ admissions policy.


And, given the clientele, there’s nothing surprising about the proliferation of luxury dorms and athletic facilities. The incomes of the top quintile have risen steadily over recent decades, and those of the top 1 per cent have risen spectactularly. Unsurprisingly, they see no reason for their children to endure the relatively spartan living conditions that once characterized student life even in elite schools. And they have no real objection to universities paying big money to elite academics and senior managers. The resulting tuition costs help to tilt the balance against middle-class families, not rich enough to pay, but too well-off to qualify for full financial aid.

One step down the scale are the state flagships, epitomized by the UC system. Under the famous 1960 Master plan, the top 12.5 per cent of Californian high school graduates were guaranteed a place in one of the flagships UC system schools, the top third would be able to enter the California State University and the community colleges would accept all applications. All were tuition free, and it was possible, at least in principle, to make the transition from lower to higher tiers.


At the time, the plan was revolutionary. The flagships offered enough places that students from almost any background, given ability and determination, could get in, and produced enough graduates to meet the demand for workers in professional and managerial occupations. Even more striking was the idea that everyone, no matter what their family background or how well they had done at high school, should have a shot at higher education and the social mobility it generated.

Fifty years late, the Master Plan is being reassessed in the light of new social realities. The flagships have responded to decades of cuts in state funding by transforming themselves into quasi-private institutions, relying heavily on private philanthropy and tuition fees from international and out-of-state students. Californian students, who make up a declining proportion of a shrinking student population, have faced huge increases in tuition, despite declining expenditures per student.

Similar processes have worked themselves out in the second-tier state university system. Although barely mentioned in many discussions of higher education (since most of the participants in these discussions were educated at private institutions or state flagships), non-research intensive state universities represent the core of US higher education. Where they perform well, they represent a high-quality, lower cost alternative to the research-intensive flagships.  Where they perform badly, they are disaster areas, with as few as 1 per cent of students graduating in the standard four years.


Even allowing six years, a large number of state universities graduate less than 25 per cent of their students.


Most students who attend these institutions take on high debt and get little or nothing in return.  Steadily shrinking funding has produced more disasters, and compromised quality even at the best of these institutions.

At the bottom of the status hierarchy, there are the community colleges. These two-year institutions have accounted for most of the growth in post-secondary education in recent years. They cater mainly to the lower middle-class, for whom education was once the route to upward social mobility. These institutions are failing badly. In, Divided We Fail, Colleen Moore and Nancy Shulock found that six years after initial enrolment only about a third of California community college students have completed a degree, about half have dropped out, and around 15 per cent are still enrolled (national studies paint a similar picture). 


Finally, of course, there is the option of not going to college at all. In the mid-20th century, this wasn’t a bad choice. Unionized blue-collar workers could make a middle-class income, and look forward to the same or better for their children. In the 21st century, entering the workforce with only a high school diploma (or worse, without one) is a virtual guarantee of poverty and unemployment, with the prospect that your children, and theirs, will be trapped at the bottom of an increasingly rigid social hierarchy.

To some extent, this gloomy picture is the result of policy choices specific to higher education. A reversal of the decades of expenditure cuts would do a lot to restore access to high-quality education for the children of the middle class and working class. And elite institutions could pay more attention to economic diversity among their students, particularly by scrapping legacy admissions.

But changes like these will have only marginal effects if the trend towards entrenched inequality continues. Whatever political efforts might be made within higher education, the 1 per cent will find ways to push their children to the front of the queue, while the poor will, for the most part, never even get to apply. 

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  1. Chris
    May 22nd, 2014 at 07:04 | #1

    Yes, the article’s pay walled

  2. conrad
    May 22nd, 2014 at 07:57 | #2

    I doubt even Pyne thinks we’ll have universities like Harvard and Yale — Harvard has 30 billion and Yale 20 billion of endowment funds and they both have access to far more public funds via the NSF, NIMH etc. than any place in Aus ever will. Yale has so much money it quite happily refused $20 million of funding in 1995 on philosophical grounds. I can’t imagine any university in Australia not accepting $2 million these days, no matter where it came from. So there is a huge leap between what Australian universities are now and what they could possibly become. So I guess Pyne uses those names as a selling point, not a reality point.

  3. bjb
    May 22nd, 2014 at 11:26 | #3

    conrad :
    I doubt even Pyne thinks we’ll have universities like Harvard and Yale

    No, the real point is so that when the kids from Churchie go to UQ they’ll be less likely to have to mix with the plebs. What’s the point of spending tens of thousands on a private school education when someone from the cheap seats has (nominally, anyway) access to the same institution.

    It’s really completely wasted effort IMO striving to be like Harvard or whatever. I’m currently viewing Edward Frenkel’s UC Berkley Multivariable Calculus lectures just for my own interest to refresh stuff I did 40 years ago in my undergraduate maths degree. If access to world class teachers is just a click away, what is the point ?

  4. yuri
    May 22nd, 2014 at 12:34 | #4

    Good point about MOOCS as I only recently learned to call it after listening to an Indian-American from The Valley explain how many business models were being disrupted by the IT geniuses south of San Francisco.

  5. yuri
    May 22nd, 2014 at 12:48 | #5

    Quibble to JQ. There are a lot more good universities in the US outside the Ivies. E.g. MIT, Tufts, Boston U, Amherst, City Uni of NY, U of Pennsylvania, Caltech (perhaps No.1), Berkeley, Stanford, UCLA just off the top of my head.

    I recall a study too, perhaps 8 – 10 years ago which showed that the material success of those who won places at the Ivies but instead went to state universities was equal to greater than that if those who took up their places.

    None of which means that I have any enthusiasm for a policy of trying to catch up with yesterday’s America.

  6. J-D
    May 22nd, 2014 at 14:41 | #6

    Quibble to your quibble: U of Penn is one of the Ivy League (along with Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, and Yale).

  7. John Quiggin
    May 22nd, 2014 at 15:11 | #7


    Reread the article and you’ll see that I mention Stanford, the UC system (of which Berkeley and UCLA) and the liberal arts colleges such as Amherst. My calculation of 1 per cent for Ivies and similar also includes MIT.

    The evidence seems to be mixed on the advantages of Ivies vs flagships, but it’s pretty clear on the poor outcomes of the lower tiers of the system.

  8. Will
    May 22nd, 2014 at 15:34 | #8

    Let me start off with a bit of levity: how do you know whether someone went to Harvard? Don’t worry, they’ll let you know.

    On the other hand, prospective students and their parents despair over the incredibly competitive admission process to those same colleges, beginning with securing entry to the right pre-school, and proceeding through an adolescence filled with resume-burnishing activities, culminating in the all-important personal essay.

    Of course those many extra-curriculars require massive investments in time and money that extend beyond the means all but the decently affluent families. It is ironic that a nation that prides itself so much on the idea of meritocracy is blind to the nature of its self-propagating class system.

  9. sunshine
    May 22nd, 2014 at 18:53 | #9

    Abbott got free education (I think- Hockey did) and now his kids are lucky enough to score scholarships from mates while he removes the fair go from education -terrible optics. Meanwhile the Murdoch press juxtaposes diggers on the Kokoda track with disability pensioners supposedly budging off the country the diggers fought to save! Where is Lewis Carroll when you need him ! I think the Coalition is in danger of frightening the general public into thinking seriously about real policy issues ,a huge political blunder if they do.

  10. May 22nd, 2014 at 22:35 | #10


    Abbott’s daughter got a “scholarship” to a private college, the Whitehouse Institute of Design. Is this the type of institution that will get government funding for its students under Hockey’s budget changes?

    If so, that “scholarship” may have been a very canny investment.

  11. Adam K
    May 22nd, 2014 at 22:56 | #11

    I agree with the main thesis that “a higher education system is, in important respects, a mirror of the society that created it, and that it helps to recreate”. I would not agree however that we are drifting towards the American social model. The Aussie model is going to be rather even more post-colonial.

    I remember predicting that Abbott would try to introduce ultraconservative Catholic values into our society. I was wrong. I am accusing him now of being a bigot but of a different kind – a closet racist, the last standing supporter of White Australia. We need to ditch political correctness (going both ways) and talk about the real issues dividing the Australian society here.

    I could not find the data on the Internet (what itself is interesting) but ethnic Chinese and Indian students (often Australian citizens) dominate our universities. In 2005 “Across the city, students from a migrant background – mainly from Asia – account for two-thirds of enrolments in selective schools, or 9451 out of 14,300 students.” (source: SMH, Sweeping Chinese revolution, Linda Doherty Education Editor, November 26, 2005). Where did these high-school students go? Obviously they competed to get to the best universities with the graduates from the private schools where children of the rich “Anglo” people studied. (Disclosure: both of my kids attend good public selective schools).

    In my opinion the real goal of the educational “reform” is to burden the graduates with so much debt that ethnic Chinese and Indian doctors, engineers and lawyers will miss on entering the real estate property ladder until they are in their mid-30s and as a consequence they will never be able to economically out-compete less intelligent but richer in inherited assets and better-networked Anglos. (or they may be lucky to survive the property bubble burst without going under water – who knows?…)

    We need to acknowledge that the conditions on getting a visa in the General Skilled Migration program is a kind-of IQ test in disguise. We also know that heritability of IQ is about 50% (source: Wikipedia). Not to mention Asian work ethos and the well-known among any first-and-second-generation migrants attitude towards “breaking through”. Nobody (obviously! this is very politically incorrect topic) examined the average IQ of Skilled Migrants vs the average IQ of the descendants of convicts.

    Correlating the IQ with the income and with the wealth has been done – search for
    “Correlations Of IQ With Income And Wealth by Lisa Wade, PhD, Feb 6, 2008″ on “thesocietypages”. It can be seen that ” there is some meritocracy in the distribution of income, not so much in who owns yachts and has deep investment portfolios.” This was obviously stated in the American context but applies to our “moderated free-market economy”, too.

    In Australia without the desperate attempt made by Tony Abbott to slow down the process, ethnic Asians and children of other fresh migrants could easily dominate the society in one generation time. Australia could be like Malaysia with ethnic Chinese, Fiji with ethnic Indians or Poland before WW2 with the Jews. (I hope this happens anyway – after swimming against the tide for almost 11 years here I have very few reasons to feel any racial solidarity with the Anglos).

    I would argue that not high incomes of some people but the appreciation of real estate assets was the main vehicle of “wealth creation” in Australia. Artificial scarcity of new residential land, fiddling with the demand-side (first home owner grant) and the infamous negative gearing combined with preferential taxation of capital gains all contributed to selective enrichment of certain age-and-social groups such as blue-collar baby boomers who constitute the predominant electoral base of the Labor-Liberal duopoly. Without their consent the “1%” would never have an opportunity to make an open attempt to destroy the last elements of the social democracy in Australia such as universal basic health care or affordable education.

    These are the people who believe in Tony Abbott’s lies about budget emergency. These are the same people who react hysterically when someone mentions ditching negative gearing or increasing capital gains taxes.

    Let’s look at the composition of the private sector assets in Australia.
    “In 2009-10, on average, households in Australia held assets valued at $839,000, partially offset by average household liabilities of $120,000. After adjusting for changes in the CPI, the average household net worth of $720,000 in 2009-10 was 14% higher than in 2005-06, and 30% higher than in 2003-04. Net equity in home ownership in 2009-10 averaged $297,000 across all households in Australia, and accounted for 41% of total household wealth. Superannuation was the next largest component of household wealth, averaging $116,000, followed by property other than the family home ($100,000).” Source: ABS 4102.0 – Australian Social Trends, Dec 2011

    I just want to add that poorer and less intelligent children of the current blue-collar property tycoons will be a collateral damage – squeezed in a pincer movement by both Asians and local “white” bourgeois. Bad luck – your parents should not have supported Paul Keating, John Howard or Tony Abbott, our neoliberal PMs (and there was no or very little alternative anyway).

    Anyway – Tony Abbott will most likely succeed in making Australia a true redneck nation. Those who are smart and who don’t fit will simply leave, exactly like 2 million Poles pushed away by the rounds of austerity after 1989. This is also my advice to my children. It is how they will implement the core Aussie value of “the right to a fair go”. They will go somewhere else…

  12. Alphonse
    May 22nd, 2014 at 23:19 | #12

    Where’s Norton?

  13. Moe
    May 23rd, 2014 at 00:04 | #13

    Adam K – what are you talking about? What Poles were pushed away in 89? do you have any sources for these claims? because I’ve never heard of such mass exodus.

  14. May 23rd, 2014 at 00:56 | #14

    The Government acts as if they had not anticipated the response to their budget measures, including university fees. Obviously, stick to the plan, and don’t consider what has gone before, or has happened elsewhere. There has been a surprising lack of competence, if not confusion, in explaining the detail of the various measures.

    I suspect this reflects that the major parties are in constant campaign mode, reflecting various captain’s calls, message control and absence of policy conversation within the parties, whose memberships are largely relevant to the electoral process, rather than the democratic process. This may explain why Joe Hockey’s first action after the budget was to address a party fund raising dinner, to what one might suppose was a uncritical audience.

  15. Adam K
    May 23rd, 2014 at 06:14 | #15


    The topic is very sensitive and it is hard to determine who is a permanent migrant and who is a temporary guest worker. I can find tons of articles in Polish but this won’t help you much. Here is one in English:

    The Telegraph By Matthew Day, Warsaw 5:35PM BST 22 Jul 2011

    “Hundreds of thousands of Poles left their country after EU accession in May 2004 to work in the unrestricted labour markets of Britain and Ireland, with some estimates putting the number working abroad at over two million.

    The population of Poland has dropped from 38 million to 36 million and experts now believe that many have no intention of returning.

    Professor Krystyna Iglicka, a demographer at the Warsaw Centre for International Relations who has studied Polish, British and Irish migration statistics, believes that up to a million have moved permanently. “

  16. J-D
    May 23rd, 2014 at 08:45 | #16

    @Adam K
    John Quiggin’s original post made the points clearly enough that a higher education system can be a way for people to move up the economic ladder, that it’s also possible for a higher education system to fail to serve that purpose, and that the changes currently proposed will make the Australian system less effective in that respect. You’ve gone to a great and unnecessary expense of words to repeat those points. The only genuine new point I can see in all your verbiage is your assertion that the government is specifically trying to hinder Chinese and Indian immigrants and their children from moving up the economic ladder, and you haven’t made that case. Maybe without the government’s changes the near future would have seen a lot of Chinese and Indian people, in particular, moving up Australia’s economic ladder (and maybe not), but even if that’s true you’ve shown no evidence of a connection between that and current government policy.

    What’s the destination you’re suggesting to your children as somewhere they should do better?

  17. Adam K
    May 23rd, 2014 at 09:18 | #17

    I have made an assertion that the aspirational group (highly intelligent, working hard but having low level of assets) are mainly children of Asian and Indian migrants. They excel at the academic level and they are highly competitive.

    It has been shown by prof Quiggin that the aspirational group will be hit hard by the changes planned by the Abbott government.

    Why are they going to be hit? Because there is a public debt crisis? This is a lie.

    What I have done is showing the wider context of these processes. You are entitled to your view that nothing has been proven. I haven’t overheard Tony Abbott, Tony Shepherd, Christopher Pyne and Joe Hockey plotting to specifically screw up the Asians. I do not work for the NSA. If someone drags me to court for offending the Lord Prime Minister I will have to recant.

    But everyone can connect the dots in his/her own way.

    I don’t know to which country. We will see how the world looks like in 10 years time and whether the Australian government will be able to extract the repayment of HECS (HELP) from the expats. All I know is that Tony Abbott will most likely succeed in alienating a significant group of people (constituting the future intellectual elite) who will not feel Australian because they are not welcome here as equal members of the society. They are supposed to stay in debt servitude. They won’t accept this role.

  18. J-D
    May 23rd, 2014 at 10:56 | #18

    @Adam K
    Connecting the dots, like most human activities, is something that is sometimes done well and sometimes done poorly. In this case you have done it poorly.

  19. Totaram
    May 23rd, 2014 at 12:36 | #19

    If you want to falsify Adam K’s thesis you will need to produce the evidence. His thesis sounds very plausible to me. (disclosure: I am not caucasian). I too feel my children may need to go elsewhere in 10 years or so, even though they have finished Uni and are not too burdened by debt.

  20. J-D
    May 23rd, 2014 at 14:56 | #20

    I’m not sure which thesis you’re referring to. Is it the thesis that the majority of the people trying to use the university system to climb the economic ladder are the children of Chinese and Indian immigrants? If so, I’m not saying that I have shown the thesis to be false, or that I can show it to be false, or even that it is false. I am saying only that no good reason has been given (by Adam K, by you, or by anybody else) to show that it is true. It is the course of wisdom to proportion belief to evidence. The more evidence I have bearing on a thesis, the more confident I am of my judgement of it. Given no evidence, I form no judgement.

  21. Adam K
    May 23rd, 2014 at 17:28 | #21

    The data:

    From the document “MULTICULTURAL POLICIES AND SERVICES PROGRAM 2010″ retrieved from the UNSW website.

    UNSW has a diverse student population.  In 2010, of the total of 52,523 students (Enrolments): 
    56.5% students spoke English at home 
    43.5% students spoke a language other than English (LOTE) at home 
    23.5% of these were local students 
    20% were international students 

    University of Western Sydney
    retrieved from: “office_of_higher_education_policy_and_projects resources”
    UWS Student Profile (Source: UWS 2013 preliminary data as at September 2013)
    low Socio-economic Status students Highest number of any Australian University (over 9,000 or 24%)
    32% speak a language other than English at home with students spanning 170 countries of birth

    Unverified information:
    “It’s no secret that there are a large number of international students from Asia in Australian Universities and selective schools. Anecdotally, it would seem 90% of the students in most universities are Asian faced. However, the statistics suggests that approximately only 30% of total students are classified as overseas students – though top universities take in a larger share. Whilst this suggests a majority are domestic students (which is probably true), Asian migrants make up a large portion of that.
    Evidence of this can be seen in selective schools (top performing government schools) where up to 93% of students in one selective school are reported to be from an Asian background.”
    Source: “The rising number of ethnic minorities (i.e. Asians) in schools, universities and Australian society.”
    retrieved from “Open Economics” blog.

  22. faust
    May 23rd, 2014 at 18:49 | #22

    Conceptually I agree with Professor Quiggin and I think the problem with college debt is that the US Government guarantees it and therefore create a perverse incentive for colleges to over-charge students as the credit risk associated has been covered.

    That being said, if anyone turns down the opportunity of studying in one of the top universities/colleges because of tuition (which they’d borrow from a bank) and instead attends a “bog-standard” college then that is foolish in the extreme since the return on the initial investment is very high.

    The problem with deregulating fees is not that they’ll rise to eye-watering levels but that the fees charged may not be commensurate with the quality of the academic institution. Trying to create a Harvard/Standard/Williams & Mary type university structure takes much more than changing HECS. It requires fundamental cultural shifts within universities with second- and third-tier universities basically giving up their research arms (and the funding that comes with that) to turn into a liberal arts college with the hope that people will still attend. It will also mean that a lot of funds will accrue to probably the top 8-12 universities but even then it will be diluted compared to the funding that can be brought to bear at even a second-tier research university in the United States. In short, those who want to emulate liberal arts colleges won’t and will lose students and those who want to be research powerhouses are still financially (as well as culturally) outgunned by the big global players.

    I like the ambition but I would prefer a quality university and TAFE system and not identifying one or two universities to compete with the Top 20 globally.

  23. J-D
    May 23rd, 2014 at 20:48 | #23

    @Adam K
    ‘Anecdotally, it would seem 90% of the students in most universities are Asian-faced.’

    In other words, somebody said once that 90% of university students look as if they’re Asian.

    Well, as against that you’ve got somebody else (namely, me) saying that I don’t see 90% of university students looking as if they’re Asian.

    So, are you going to believe this other person ahead of me? Why?

  24. jungney
    May 23rd, 2014 at 22:12 | #24

    @Adam K
    Adam, I’m not sure what your problem is with Asian Ozzies as tertiary students. I’ve been among ‘em as a teacher and fellow student for a long time. If you had one scintilla of the spine of the Asian Ozzies with whom I’ve been associating over the last few months, the ones at the forest blockades against CSG and coal mines in NSW, then you’d be able to stand proud as a patriot. As it is you just look to me as the ghost of white Australia feebly rattling its bars in protest against reality.

  25. John Quiggin
    May 24th, 2014 at 05:29 | #25

    I’m calling a halt to this, and will shortly announce a general policy on discussions focused on ethnic groups and their supposed characteristics.

    To be clear for the moment, no more discussion of Asian students or any other ethnicity in this thread.

  26. Charles
    May 24th, 2014 at 07:05 | #26

    Still happy you voted Liberal?

  27. Adam K
    May 24th, 2014 at 09:13 | #27

    @John Quiggin
    Prof Quiggin,

    I am actually happy that you haven’t deleted my subversive and provocative comment from the very beginning and I was briefly able to validate the memes whether they stick or not.

    The trouble is that the “reforms” that is the deregulation cannot be stopped without dramatically increasing the price which is to be paid by the neoliberal oligarchy. This is probably not going to happen because the opponents of the neo-liberals simply do not have balls.

    These few who have them will be successfully prosecuted/persecuted. A few student marches will only lead to the same outcome as London riots or Occupy Wall Street movement – the leaders will end up being broken people (often lingering in jail) and again, all the resistance will be proven to be futile.

    Tony Abbott’s strategy as an “enforcer” is very simple – he is just an old school bully or rather a third-rank amateur boxer, shoving and punching the opponent no matter what and totally resistant to blows to his head – until somebody knocks him down or the school teacher calls him to stop. I grew up in a working class suburb in an Eastern European city so I know what I am talking about. This strategy is working remarkably well with asylum seekers (“illegal migrants”) and is going to work with his educational and health policy reforms. What is going to happen next is that a rotten compromise will be presented and the opponents of the change will be happy that HECS (HELP) debt interests will be capped at 5.5% instead of 6% or something like that. Some of the “reforms” will even be blocked in the Senate and Tony Abbott will look as a loser for a while. But the goal of our “good Shepherds”, the financial oligarchy and Gina’s friends will be achieved. Abbott is to some extent expendable and he is happy to play his current role.

    What Tony Abbott is doing is a vicious, ideologically driven attack on the principles of the welfare state. We are currently witnessing the insertion of the thin end of the wedge. Even if the Medicare co-payment is set at 10 cents per GP’s visit the goal will be achieved – there will no longer be universal free basic health care in Australia. One may say “but it never was like this, there are other fees for example for seeing specialists and everything are shades of grey”. HECS-HELP is also a shade of gray. I disagree. We just need to look at the dynamics of the change – once the thin edge of the wedge is inserted, the rest is easy. When the “free market” principle is adapted to public education the long-term social effects will be exactly as you stated in your main blog post.

    The progressives are like lambs to the slaughter. It is even quite possible that Tony Abbott thanks to the experience of Peta Credlin will win the next elections – Joe Hockey will suddenly find some money in the budget just before the elections to stimulate the sagging economy (think about a middle-class breeding or eugenics program called the paid parental leave). Kalecki called this a political business cycle.

    I fully agree with your analysis presented in the main post but I also think that, sadly, it is the “civilised” intellectual position assumed by the majority of critics of Tony Abbott and the critics of the current incarnation of the Liberals what is the part of the problem. The way the public debate happens in a so-called Western democracy is that participants use statements (which might be more-or-less true to the participant or which might be outright lies) to influence the “public opinion”. Not to mention advertising and other paid means of affecting the electorate.

    I know that you won’t agree with the most efficient and most deadly arguments against the neoliberal version of the reality because you find them naive exaggerations or because of the side-effects of assuming certain positions in the debate. I am specifically referring to Functional Finance, the only working intellectual anti-dote to the budget-balancing mania (is your more balanced approach working? how are the “Zombies”?)

    I predict that one day when Queensland is officially renamed to New South Texas you will personally regret not siding with prof Bill Mitchell and not supporting his “crazy” ideas.

    You want to play chess with all the intellectual honesty and do not lose the ability to see all the shades of grey but at the same time you have already acknowledged in the main article that your opponents are playing poker (with marked cards). Who is going to win? If we are already in New South Texas the rule is simple – shoot the opponent before they shoot you.

  28. may
    May 24th, 2014 at 13:54 | #28

    has any body quantified the amount of money paid when some one has an education that makes them more valuable in the market,over their working life,from the amount of tax they would have paid if they did not have that education?

    i wonder if the amount of tax paid by the ones who obtained their education when it was paid from the tax funded public purse,covered the cost of that education.

  29. may
    May 24th, 2014 at 14:00 | #29

    is there any way of valuing the contribution of the educated who do not sell their skills to the highest bidder and instead (in the eyes of “market uber alles) irrationally follow their own path ?

  30. May 24th, 2014 at 14:57 | #30

    And now we find that despite our supposed nursing shortage, 3000 graduate nurses can’t find work.

    Well, I’ve been in a few hospitals recently, and its very clear that a lot of nursing staff have been imported, presumably on 457 visas.

    I’m not blaming the Libs for this. It would have been the same under Labor.

    Its certainly no wonder that we don’t have much in the way of wage inflation. As soon as there is a shortage in any occupation, a shortage that might be remedied by paying more, then the 457 visas roll out.

  31. jungney
    May 24th, 2014 at 18:49 | #31

    Now for some good news: in Chile, where students have been campaigning for access to education as a right, a wonderful character, an artist, called Fried Potatoes, has stolen and destroyed more than $500 m’s worth of student contracts from a private university.


    I suggest that the ageing ‘new left’, the old ‘new left’, by comparison with citizens like Mr Pots, is flabby, nay, lard arsed, chicken livered and scared of actually doing anything other than whining on blogs.

    That’s you, dear reader. Suck some air into your lungs and take a stand anywhere you like, on any front. Do something, eh?

  32. Totaram
    May 24th, 2014 at 19:15 | #32

    Prof Q:

    I am surprised at your “shutdown” of discussion regarding ethnicities etc. All Adam K was saying was that this extreme right wing attack on Australian society, in particular on the University system, has racist underpinnings. Do you seriously believe that making such an accusation is cause for concern? I think everyone knows that the “stop the boats” campaign would have had no traction if all the arrivals were white-skinned. Let us face it: all the old white men with the big money belong to the people who grew up with the “white australia” policy. While they may be happy to have it dismantled so that they could get more workers at cheap rates, they are not about to accept these people as eq

  33. Totaram
    May 24th, 2014 at 19:18 | #33

    equal in any sense. So limiting their social mobility would be a good thing – no different from limiting the social mobility of coloured people in the USA.
    (sorry, some glitch)

  34. iain
    May 24th, 2014 at 22:24 | #34

    Previously, university “study” was basically either; a professional networking event for elites, or, largely a waste of time to achieve an entry on your resume with some basic skills to support.

    However, in the era of the $1000 MBA (including courses from Harvard, Wharton, Yale etc), their are now different possibilities. Additionally, the questions of how, and why, to certify whether someone is “qualified”, will likely be reviewed – particularly by employers.

  35. May 25th, 2014 at 00:55 | #35

    Its also interesting what universities will do for money. A certain WA university that I don’t work at is apparently remarkable lax about plagiarism. And its hard to conclude other than that they want the ongoing fees from the students, and will put up with a lot to keep the money coming.

    It seems to me that a cap on places might take away this perverse incentive to allow cheating. A student thrown out for cheating could be replaced, so the university loses no money.

    And as for the Government rhetoric about a university education leading to greater income, did the study that produced that result correct for the socioeconomic background of the students? Or did it come from the same place that said we all see the doctor 11 times a year?

  36. Julie Thomas
    May 25th, 2014 at 07:11 | #36

    This is a great article about interventions that have been very effective in improving success rates for low SES/SAT students in the US.

    “If you want to help low-income students succeed, it’s not enough to deal with their academic and financial obstacles. You also need to address their doubts and misconceptions and fears. To solve the problem of college completion, you first need to get inside the mind of a college student.”


    Totaram, what purpose is served by a discussion of ‘racism’?

    If you are interested in this stuff look for Human Bio Diversity sites and you will find much to excite your dodgy and misplaced interest in this question. But be aware that it is becoming clear that this interest is suspect and indicative of some sort of personality problem and, really it is just another way for you to judge other people by your own standards.

  37. Totaram
    May 25th, 2014 at 11:29 | #37

    @Julie Thomas: Totaram, what purpose is served by a discussion of ‘racism’?

    Oh, righty-o then, nothing to see here. Let’s move along. Everyone has a right to be a racist, no?
    Sorry, it’s just my personality problem and my own poor standards that I don’t approve of racism.

  38. Adam K
    May 25th, 2014 at 13:57 | #38

    OK let’s present my arguments in a different way without stirring racial tensions.

    Australia is a frontier Western Anglo-Saxon country in the wider South-Eastern Asian-Oceania region – in the period of history branded “Asian Century”. While there is no good pragmatic argument which can convince the neo-liberal handlers of Tony Abbott to go easy on the poor and unemployed, there is in my opinion a good argument to give up on the students and the “aspirational” class. (Please notice that I personally oppose the very idea of implementing austerity in Australia and find all the thrashing of the poor morally repugnant – but this is not the point. I want to design a good pragmatic argument against the looming “reforms”).

    The only period when Western countries implemented full employment coincided with an existential threat to the Western system initially posed by Hitler, later by Stalin and his immediate successors. It was the fall of Singapore when British colonial economic order was replaced in Australia by an entirely different set of policies. (Why is Abbott trying to revive this order?) By the end of the 1960s the situation on the fronts of the Cold War was stabilised in terms of successfully removing the threat of an imminent Soviet invasion (the US gained undisputed technological superiority with the Moon landing in 1969 and the détente policies of the 1970s ensured that nobody would push the nuke button first). The loss in Vietnam war was irrelevant because the Soviet economic system never got out of ruts of stagnation of the mid-1960s. (The first symptom of the stagnation was the removal of Nikita Khrushchev in 1964 and abortive Kosygin reforms). The Soviet invasion of Afghanistan was the beginning of the end of the Soviet empire. This coincided with the end of the Keynesian era, with the dismantling of Bretton-Woods system, oil shocks, “stagflation” and rising unemployment. We woke up in a neoliberal world of the 1980s shaped by Thatcher and Reagan. The income disparities started rising again.

    Why did the rich go after higher profits? Why did they use higher unemployment to discipline the workers? Because they could. But they couldn’t do it in let’s say 1958 because they were afraid of the workers supporting communists and overthrowing the capitalist regime with a little help from the Soviet Union dropping a few nukes…

    Please notice that there is also an intrinsic inconsistency between the neoliberal moral values (individualistic gain is considered to be the highest virtue, “greed is good”), extreme individualism of anarcho-capitalists and with “patriotism” or loyalty to the community/state up to the point of dying for the Queen. Someone with the knowledge in dialectics should explain this contradiction to Abbott. It can go along these lines: “you cannot have a cake and eat a cake”…

    The key point I am trying to make is that someone needs to explain to the neoconservative handlers of Tony Abbott that until he proposes a well-designed system of private scholarships (enabling for an even greater control over students by feeding them directly) just dismantling the current HECS-HELP-capped fees system in a frontier country like Australia is profoundly stupid.

    Australia is a frontier country on an economic global fault line and telling people like me (who was not born in Australia) that my kids should be both loyal to the country, attached to the ANZAC idea of dying for young Winston Churchill on the distant shores of Turkey and at the same time, “suck it up” because we came late – is ridiculous. It also goes against the tenets of the belief in the supposedly rational behaviour of the economic agents.

    I have noticed that Tony Abbott is quite obsessed with making borders impenetrable (think about “Operation Sovereign Borders”) because he is afraid of Australia being settled / swamped by hordes of “illegal migrants”. He is a conservative and he wants to build a strong state. We are heading back towards another Cold War with the Americans trying to contain China and destabilise the Russian’s neighbourhood. The globalised economic system of labour division (initially ensuring high profits of the corporate oligarchs) was hacked by China who instead of making cheap clothing and other labour-intensive products started making computers, solar panels and space ships on their own. Australia has already lost the manufacturing / high technology sectors and it is increasingly an iron ore / coal mine for Japan, China and India – and and unsinkable aircraft carrier for the US. Oh and we sell live cattle to the Gulf countries…

    Tony Abbott’s handlers should also tell him to look over his shoulder for an enemy within – he should not make them here in Western Suburbs of Sydney or elsewhere in disadvantaged areas. He should not tear the social fabric nor take away hope from young people – this has nothing to do with economic “rationalism”. He should not wage wars on all possible fronts and try to satisfy all his sociopathic desires at once.

    Australia depends on aspirational skilled migrants and their loyalty and attachment to the state – why can’t Abbott realise that alienating migrant families is patently stupid?

    Maybe it’s time for the Liberal Party to replace Abbott with Turnbull?

  39. J-D
    May 25th, 2014 at 14:57 | #39

    @Adam K
    It looks as if you are saying that the tactics likely to be used against the present government by its political opponents are unlikely to be effective. If that’s what you mean, do you have any different tactics to suggest?

    Or have I misunderstood you? Was your meaning different from what I am guessing?

  40. J-D
    May 25th, 2014 at 15:06 | #40

    Obviously there are other kinds of value apart from dollar value, but if you want a quantitative comparison with dollar values you need to make an economic conversion to dollar values first.

    For example, to illustrate my point, I value my friendships, but I don’t value them in dollar terms. The only way to say whether a friendship is worth more or less to me than something worth X dollars would be if I put a dollar figure on the value I place on that friendship, and I don’t do that.

  41. Adam K
    May 25th, 2014 at 16:43 | #41

    Please see my response in the sandpit.

  42. Ratee
    May 26th, 2014 at 12:46 | #42

    “But the whole picture becomes much clearer when you keep one simple fact in mind. Universities are a mirror of the society they serve.”
    This can be broadened to the whole education system, after all Mao at one time forced all uni students to join the peasants in agricultural labour to re-create the revolutionary fervor of his generation.
    In the case of the current restructure of UNI – many reasons are valid and I’ll add my tuppence.
    The current mob’s hatred of the non-full fee paying studenst is firmly rooted in their Young Liberal days where many of their principal opponents in Young Labor came from different backgrounds. They feel it in their gut that the universities are a breeding ground for the worng type of people, with the wrong motivation learning the “wrong type” of thinking.

  43. Ratee
    May 26th, 2014 at 12:47 | #43

    not the least the wrogn spelling !

  44. May 26th, 2014 at 14:06 | #44

    At UWA we are having a meeting on Thursday to discuss what the budget means for our future. I’d like to push the idea of means tested fees, with fees for the poorest students actually falling from their current level.

    If this is a genuine reform by Abbott and co, they should have no problem with it.

  45. David Irving (no relation)
    May 26th, 2014 at 14:24 | #45

    @John Brookes
    It’s not a genuine reform. Abbott and the rest are punishing old enemies from their own time at university.

  46. Harry
    May 26th, 2014 at 18:51 | #46

    Despite some very long posts by one person no-one seems to be drawing the conclusion that the Ivy League schools will lower their educational standards if they cater too much to dumb rich kids.

    Much like how the Yanks are said to be losing in biological science to places like South Korea and China because of creation scientists pushing evolution out of science curriculums.

  47. Ernestine Gross
    May 27th, 2014 at 01:54 | #47

    Prof Q. Good to hear you are involved in this debate.

    I have the following concerns about the university policy direction and I’d appreciate comments from Prof Q and others.:

    1. Research and teaching. The USA model allows or fosters an institutional hierarchy where research and teaching at university level are separable. In the limit, students in some institutions, called ‘universities’, are taught by ‘academics’ who are not engaged in research and who may never have done any research. Some may have research limited to ‘teaching and education’. Even in the research intensive universities, undergraduate students are taught by adjuncts or people enrolled in a PhD program.

    I do not like this model for several reasons. Restricting myself to my area, Economics and Finance, I have observed a growing gap between research results and the content of textbooks during the past 30 years. By separating teaching staff from research staff, I cannot see how this gap can’t do anything but increase at an accelerating rate. Why bother with research if it is not disseminated? Why is the economic content of neo-liberalism (economic rationalism) policies stuck in the 19th century?

    IMHO and again limited to my area, a separation of teaching from research renders the notion of ‘research based teaching’ meaningless unless the teacher is knowledgeable and experienced in the methodology that produced the research. To illustrate my point with a few examples, I set a tutorial question where I introduced a line segment into the ‘standard’ strictly convex indifference curve (to remove a unique solution for all possible relative prices) diagram. A tutor, trained in the USA, came to me and told me “this is wrong”. A much older tutor, educated in the Netherlands and in Australia had no difficulty with the diagram. I’d say the former could not actually read the ‘standard’ diagram but had only memorised the picture. My question is, how is University education supposed to prepare young people to solve any problem in the future if the tiniest bit of understanding and thinking is ruled out (on the excuse that students [and then teachers] lose their ‘competitive position’ – grades – when being presented with something they had not seen before)? I ask this question because politicians talk about education and university education in particular is to prepare young people for the future and prepare them for having several careers.

    I met a French academic who did original work in the area of incomplete markets and finance. She told me her job at a high ranking CU was not renewed because she had failed some students.

    On the other hand, I was taught a first year undergraduate math subject by a Professor of Mathematics who explained why he always teaches first year (and Hon.) students. I learned a lot from his comment. This was a long time ago, a time when a lot of things made sense. [No, I don’t admit onset of senility!]

    2. ‘Free education’. This topic came up tonight on Q&A. As argued by the authors of the budget, a member of the Q&A panel said something to the effect that it is unfair for non-university educated tax payers to pay for the university students who end up earning more – ‘who is paying for it’? Amanda Vanstone’s example in her memo to students (The Age of today) of comparing the incomes of tradies with university graduates was repeated. Nobody objected.

    This line of argument irritates me. Setting aside the positive externalities for society, not least for the potential corporate employers, it is the case that university educated people, on average, have a higher income than those without. I accept that therefore those people who do get a university education should pay a ‘fair share’. For the sake of the argument, I accept Mr Payne’s 60%. None of this necessitates student loans. It is a financing problem under uncertainty, which can be solved via progressive income tax. It is not true that post- Whitlam university graduates with ‘higher’ incomes had ‘free education’. It is not true because the top marginal income tax rates were much higher than in the post-Howard era.

    Is it not fair that some chairmen of corporations (or weasel word merchants or greasy pole climbers) without a university education, who have very high incomes due to the work of highly educated employees, also pay a higher marginal tax rate?

    Ms Vanstone praised Prof Chapman for his work on HECS. The loan system is equivalent to a progressive income tax system if markets are complete (ie a student can sell forward his future services under all conceivable circumstances). Otherwise it is not. Such markets do not exist. In its initial form HECS was acceptable – a kind of risk sharing arrangement with parameter values that appeared to be reasonable, given people’s risk preferences and no GFC. In the limit we have the USA system and the problems documented by Prof Q.

    If we are living in a society where ‘the employer’ (language of enterprise agreements) demand that ‘the employee’ has university education then we need a financing solution for the supply of university graduates that is at least logically consistent with the demand side.

  48. May 27th, 2014 at 11:14 | #48

    @Ernestine Gross

    Well done! A long post that was worth reading. Thank you.

  49. May 27th, 2014 at 12:33 | #49

    @Ernestine Gross

    I agree with the points you’ve made in your comment. I would like to input my opinion on the matter of the gap between research work and textbook materials in economics.

    I’d suggest that the difference between research work and the textbooks in economics is mainly due to many of the textbooks are written by US economists. Many of the top universities in the US are focused on teaching the New Classical paradigm, maybe due to this, many academic economists seems (at least to me) to not know anything besides research that supports their theory and/or simply reject researches that doesn’t have the same conclusion as their model e.g. Eugene Fama, Frederic Mishkin and Glenn Hubbard etc. and they hold senior positions in many top universities in the US. This may be the reason why there is such a large gap between researches and textbooks as many of these economists also writes textbooks (both Hubbard and Mishkin writes textbooks).

    I think this affected Australia due to Australian universities employs many phds from top universities in the US due to the reputation of the universities they graduated from and their publishing records (I think you’d know what gets published in the top economic journals and what doesn’t get publish in the recent years). In my case, during my undergraduate studies in Australia, I have been assigned textbooks written by Ben Bernanke and Olivier Blanchard in some courses. I also know a phd student who graduated from Monash University in undergraduate Finance Economics who has not been taught anything outside the neoclassical paradigm. Although of course students are free to look are recent research papers, the only courses that I have taken which assign journal articles and research papers as reading materials are courses in post graduate honours.

    If these trend persists, I think the gap between research and textbook will only accelerate like you’ve suggested.

  50. may
    May 27th, 2014 at 13:49 | #50

    J-D :@may Obviously there are other kinds of value apart from dollar value, but if you want a quantitative comparison with dollar values you need to make an economic conversion to dollar values first.
    For example, to illustrate my point, I value my friendships, but I don’t value them in dollar terms. The only way to say whether a friendship is worth more or less to me than something worth X dollars would be if I put a dollar figure on the value I place on that friendship, and I don’t do that.

    yes i suppose it could be looked at that way, the topic however, is value as money.

    the value to society ,contributed by people who haven’t personally chased top dollar in the market, for example


    the contribution of people who do work with the homeless,providing lifts to hospital appointments for those who otherwise could not make it,the people who contribute their time and expertise in the area known as citizen science, like astronomy and the aggregation of weather data and on and on.
    these activities have no value in “the market” and the replacement cost of these activities have never been quantified in cold cash terms, although the replacement costs would easily be seen as considerable.

    we all in this society, benefit from these activities,don’t pretend that because a money figure is not produced, they don’t exist.

  51. paul walter
    May 28th, 2014 at 19:49 | #51

    I think the Treasurer is right to come down on student activists protesting five figure fees though. Militant louts, they are.

    For example, just watching a clip of a dastardly invasion of a politicians office to protest a $250 pa fee back in 1987. This followed by an interview with one of these whining ingrates.I thought after wards, ” what becomes of such disruptive folk..

  52. May 29th, 2014 at 16:05 | #52

    Yes, bravo, Ernestine. Especially this:

    None of this necessitates student loans. It is a financing problem under uncertainty, which can be solved via progressive income tax.

    It is driving me crazy that progressive income tax is being ignored in the national conversation. Even people who ought to know better, like Labor ex-premier John Brumby, are talking exclusively in terms of raising or extending the GST.

  53. Val
    May 29th, 2014 at 17:29 | #53

    My reaction to what I saw of Brumby’s comment was that it was actually political – he was trying to make Abbott look bad and also scare people leading up to the Victorian state election. Fair enough I think.

  54. Ernestine Gross
    May 29th, 2014 at 20:34 | #54

    Our current Treasurer, then (in 1987) and now seems to have difficulties considering both sides of the ‘balance sheet’ at any one time and over time.

    Below is a link to the personal tax rates, published by the ATO, for the period 1983/84 to 2012/13.


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