Higher Education Green Paper

It has been an extremely busy past week. Between the release of the Higher Education Green Paper and the Autumn statement the political system is in top gear just before the holiday season. While we are also quietly creeping towards an inevitable vote for airstrikes in Syria. So I am going to look at part 1 of this past week which is the Green Paper. I have no choice but to be interested in this really as I am a student in university, so I feel it is an obligation (some reason I highly doubt most other students will sift through the document, but rather attach themselves to the headlines and staunch opinions).

Firstly, this paper was undeniably needed, student satisfaction and fees has been a volatile issue prompting the need to provide a new look. The OECD just came out with figures suggesting on average the fees at U.K. universities are higher than those of the U.S. With this particular headline just being more fuel to a fire of sensationalism around the issue of fees. It has to be appreciated that while paying £9,000 a year an individual has access to the preeminent British institutions of education such as Oxford, Cambridge, and the rest of the Russell Group. While in the United States at a typical Ivy League university take Yale for example you pay £30,000 a year, as a domestic student. Admittedly both countries take advantage of you when you are an international student (good I got my British citizenship before I went to university).

The first part addresses teaching excellence and quality. The main concept behind this is that students will m0ve towards identifying their university of choice based upon the teaching rather than the reputation. On this basis this is a good idea, pushing forward the teaching excellence framework (TEF). However, it is the following part in the paper which is of concern. Increasing levels of the TEF would enable universities to increase tuition fees. Now the inequality that may create is relatively clear, my biggest concern is what the benchmark for performance is. The top universities in the UK all already charge the full £9,000. If the university performs well with TEF could they then charge across the board higher tuition fees for all their course? In which case could someone justify paying something like £15,000 for an English degree knowing the average salary that such a degree leads to in terms of a career after university?

Supposedly a newly formed Office for Students is meant to overlook that targets are set sufficiently high, and to bring into enforcement the desired goals. There is also the inclusion of needing “widening participation”. Yet I am always cautious of such friendly phrases such as widening participation. On an initial view it looks like a firm trying to maximise profits. Perform well on a set criteria that students might not actually have such a powerful say in, have higher fees, bring in as many students as possible, and then profit. Now obviously this is a considerable simplification with undeniably a skeptic’s view. However, there is an issue to address here and one of those is the longevity of universities in a sense they cannot be subject to the current whims or social leanings of a new set of students every year, as well as the challenge of managing expectations.

Regardless of its perceived shortcomings it is a step in the right direction, realising that students are paying for a service and there must be quality in that.

The following section was with regard to the education sector as a whole. Namely the idea to enable the creation of a universities in that rewarding institutions with degree awarding powers. An example is A.C. Grayling’s New College of The Humanities, which while a full education institute can only award degrees through the University of London external program. The idea here is to bring more competition in the market, and undoubtedly to challenge the institutions which have been comfortable with their awarding powers up until now.

This sector is going to become more dynamic and less antiquated which I believe is the main goal. While not agreeing with every notion in the paper, I feel it was an important step towards improving the industry as a whole. I am unsure of the impact it has on those in research roles and the funding they may get, so I will look into that further.

Education is always a complex issue, with teaching quality being quite a precarious variable to measure. Personally I have felt that the larger issue amongst U.K. universities is that of spirit. Compared to the U.S. counterparts a large part of student satisfaction is derived from the university identity, sports, music, and other inclusive events. It will always be a hard sell when the product is a two hour lecture on statistical theory even with the greatest teaching quality, so this is just another area to consider.

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The Billionaire Class

Going onwards from my previous post, this 2 minute video really summarises the type of substantial change Bernie Sanders promises.

I favour positive change above all else, there is considerable irony in the fact that we are so averse to change yet evolution is all about us using change to adapt and survive. So the same must be done in economics, and it starts with an overhaul of how governments approach the economy.

 

 

The Economy, Money, & Politics

Three of our favourite things, well at least mine. The election is in full swing here in the United Kingdom, and there is currently the build up to the primaries in the United States.

In the case of the United Kingdom we are facing an election of considerable uncertainty, the outcome of a coalition is highly expected considering current polling. But it will undoubtedly come up to post election day to see who can craft this arrangement.

In the liberal air of university one may find incredible support for the Green party, on the premise that a vote for them is a vote for the beginning of change in parliament, even though they themselves have basically stated it will be near impossible for them to have a serious impact on decisions or push through any of their manifesto ideas. So the disillusionment with the two party system has become ever-clear. The general distaste for austerity based policy is also extremely clear.

The question is should we do a u-turn right now? Krugman says yes, undoubtedly. He was ferociously battling Austerity based policy 5 years ago, and in this last week released an article which is his parade lap of saying he was right and still is right.

http://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion

The only issue is, is that he is not necessarily right. We don’t get the opportunity to test out economic policy in isolated environments, he is basing his success by noting the apparent failure of austerity. Yet we lack an example of any economy which didn’t pursue austerity after the financial crisis. Fiscal based stimulus may have equally failed, but we will never be in the position to know for this occasion.

I am not defending austerity in any manner but I would be cautious to jump onto the other boat, Krugman himself noted while yes a deficit can be managed for a long time there is a point where it is undoubtedly damaging to the health of the economy. Austerian economics is by no means popular or in the post financial crisis economy that effective. However it does highlight a period in which we have explored unconventional policies. The main issue with austerity has been the inequality which it has helped perpetuate, this can be seen in regards to the year on year increase of millionaires and billionaires, but an increasing rate of poverty in developed economies. One may ask who the government is serving, the people as they should be? or the special interests of large corporate institutions? As it is clear that the growth that we have achieved has not been felt by the marginalised factions of society.

I mentioned earlier the upcoming primaries in the United States, I have taken this example specifically due to the data available in regards to where the money that supports candidates comes from. Take the sample below between two democratic primary candidates Hillary Clinton (who has just recently launched her campaign with an advertisement showing how she supports the “regular” American) and Bernie Sanders.

GovMoney

Hillary Clinton has received donations from Citigroup, Goldman Sachs, Morgan Stanley, J.P. Morgan, Credit Suisse, etc. The list goes on. Obviously this does not mean that she will enact policy specifically to disadvantage the people while supporting the financial industry. However, there is a distinct conflict of interest. In comparison to Bernie Sanders he has mostly received contributions from workers unions, and manufacturing related companies. If one was to argue who is more likely to serve the peoples interest, from a financial standpoint it would be Bernie Sanders. But even in this case I believe that campaign contributions to some degree cause a conflict of interest. How can we expect politicians whether they are in the United States or the United Kingdom to make economic policy decisions without an appreciation of the influence that arises from campaign contributions, party contributions, and the coaxing of lobbyists.

The reader will have no doubt that I lean towards the right in regards to political and economic policy. However, I believe that governments have betrayed their ultimate purpose – “serving the people”. With a smaller government I would argue there is less room for financial pressure on elected politicians. As well as the issue of career politicians who get to enjoy the warm cushion of contributions for their entire lives. This is not a comment on the lifestyle or pay of politicians, but how their position is compromised due to the nature of money in politics.

This is critical when we come to assess the type of economic policy whether fiscal or monetary that countries push through. Austerity can seem like a valid decision on the basis that the government would not be crowding out investment, while offering expansionary monetary policy on the side. This has not helped the integral strength of the economy, but specific sectors. While we clearly understand the failures of over-specialisation regardless of how developed the economy.

Planning & The Rule of Law

Hayek

A government should ultimately be bound by rules that are fixed and announced before it takes up any activity, this allows an individual to plan how they will go about their affairs, or in a more macro sense how firms should behave as they understand the manner in which government may use coercive power. Of course this system is not perfect in that the creators and administrators of these laws are fallible.

However, it does create the assurance that a pursuit of certain aims will not be stifled by a governing body, in the case where all the conditions are realised, so that law rather than stifling freedom allows it to flourish. Here Hayek makes a distinction between the rule of law which enables a government to fix conditions in which resources are used, but the ends they meet is ultimately decided by the individual, and arbitrary government where it directs the means of production to particular ends.

Central planning cannot allow the first to exist, in that the formal rules we have provide a framework rather than step by step guidance, central planning would require these rules to be exact in what they suggest in that the particular ends are met, and it is not by the individuals whim the product of these means. Here arises another problem with central planning and as such collectivism. When a government has to make every decision framework rules are useless, imagine trying to solve at this very moment how many buses should operate. Whereas in our current society the government provides the legal framework for their operation but it then comes down to competition, market forces, etc. which decides the operation of buses. A controlling government would have to make this decision under the circumstances that the problem arises, and this means that it would have to balance all the different aims and needs at that given moment as to not favour one, but inevitably somebody’s views have to be given greater significance.

Hayek uses the example of the Highway Code, which does not instruct people on where to go and exactly how they go about it (planning attempts to do this), it instead offers a framework in which the individual can operate but also ensure that society is not harmed, and is better off on the whole. It is here that the concept of formal rules is developed, in that we create rules that are useful to a yet unknown people, under circumstances which cannot be foreseen in detail.  They are formed on the basis that society is better off due to their existence. Thus, this avoids the need of dealing with each individual’s means and ends, the recognition that precise results are hard to come by, and that by providing a structure of which everyone is aware of, everyone will be better off.

Micromanagement is unsuccessful as concrete rules for a given situation would have to be applied, but we lack this information, and in the ultimate end only one aim can be pursued as otherwise it may conflict with another. Thus Hayek notes that the state should confine itself to providing rules to general types of situations as only the individual currently in the current circumstance possess the correct information to make a viable decision. Also there is the recognition that we cannot see into the future, the state would struggle to see the effect of certain actions on particular people. Furthermore, the state chooses between the different ends consequently favouring one over the other, as it cannot know what would have happened if the other aimed were to be picked. Thus planning in regards to law in the creation of definite rules means that it perpetuates the problem of asymmetric information, whereas formal rules reduce the asymmetry’s influence.

Hayek emphasises that as planning becomes increasingly extensive the struggle in asserting what is “fair” or “reasonable” increases. Providing the need for more authority in making executive decisions, and that this facilitates more deliberate discrimination between the particular needs of different people. It would ultimately determine how “well-off” a certain person will be compared to another, in that only one’s needs are met through this discrimination in choice. The rule of law in a non-planned system ensures that there is an absence of legal privilege. Hayek establishes the paradox that in aiming for equality it is necessary to facilitate a legal system in which not everyone is equal in front of it.

“To produce the same result for different people it is necessary to treat them differently.”

The rule of law undeniably can lead to economic inequality (but to some extent this is the only thing that is truly inevitable), thus socialism protests against “formal justice” in that judges are too independent for example. Hayek ascertains that the rule of law is only effective if it is universal and as such does not work in socialist system, in which again there is the breakdown of political freedom. “It does not matter whether we all drive on the left or on the right-hand side of the road so long as we all do the same.” Rules are meant to enable us to predict each other’s behaviour to a needed extent, in that I won’t drive onto the motorway and find that people are driving in the opposite direction.

The individual should be able to foresee the actions of the state on the basis of the rules of law, and as a consequence use this knowledge to form his own plans and how he goes about his affairs. Here the individual knows where the state can stifle his efforts, and that it is not set arbitrarily on the specific circumstance of that moment. From this Hayek makes an acute reference to the Enlightenment:

“Man is free if he needs to obey no person but solely the laws” – Immanuel Kant

In a socialist system the rule of law will be applied in a manner which is as if a person were to be commanded by another. Legislation in a democratic government is confined by the continued discourse and disagreement, whereas in a socialist system in will be pushed through ultimately serving one individual’s ends at the cost of another.

When a state embarks on the complete control of economic life the significance of minority rights, and individual rights are diminished, without even breaking the rule of law at times. Hayek states that ruthless discrimination occurred through a change in economic policy first before and statutory change. Due to the nature of Socialism and the need for an overriding decision to be made, power lands in the hands of few and in that there is the inevitable service of their vested interests, or an ability to go against a large minority.

The Great Utopia

Hayek

 

It is here that Hayek delves into the traditionally authoritative roots of socialism, bringing forward the example of early socialism which its founders during the French Revolution felt that it could only be put in practice through a dictatorial government. Then its transfer to being considered an agent of liberty in regards to the development of “democratic socialism”, and this saw greater acceptability in western societies.

It is established that democracy and socialism stood at an “irreconcilable conflict” through reference to Alexis de Tocqueville who stated:

“Democracy extends the sphere of the individual freedom, socialism restricts it. Democracy attaches all possible value to each man,’ socialism makes each man a mere agent, a mere number.”

Further Hayek notes the development of thought in regards to people placing greater importance over economic freedom than political freedom, of which Hayek argues that one cannot have economic freedom without political freedom. Socialism aims to provide economic freedom without political freedom in that equality can be reached. To finish the Tocqueville quote:

“Democracy and socialism have nothing in common but one word: equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude”

In this there is a change in the meaning of freedom from “freedom from coercion, freedom from the arbitrary power of other men, etc.” to “freedom from necessity, and to free from the despotism of material want,”. He notes that rather it being a demand of a new freedom it was simply the old demand for equal distribution of wealth. In this he notes the appeal of socialism and its promise of greater freedom as it lured more liberals, from this he makes his most bold remarks in regards to socialism “The Road to Freedom was in fact The High Road to Servitude” and that to the followers of socialism in a progressive manner from liberalism that “it should appear inconceivable of socialism leading to the opposite of liberty”

This is then developed into the political sphere where at first approach communism and fascism appear to be at opposite poles, but to some extent they are actually the outcome of similar tendencies. Where “socialism achieved by democratic means seems definitely to belong to the world of utopias”

Then with reference to Italy and Germany as being examples where dictators arose from socialist backgrounds into fascist and Nazi forces respectively, which would appear to be at opposite sides of the spectrum but are ultimately as he notes was realised in 1930s Germany it was easy to transfer young communist to a Nazi and vice-versa. History tells the tale of how the two sides have clashed and Hayek argues this was because they sought the support of similar minds, as in actual fact they were both against the old type of liberalism. His use of Hitler and Mussolini as examples of the rise of Socialism is interesting in that when being taught history often the struggle between fascists and communists for power is portrayed and that they appealed to different parts of society. However, Hayek notes their similarities and that their forms of policy were rooted in socialism as the agent for pushing through authoritarianism and nationalism (notably through central control).

Thus, here Hayek concludes that those whom argue socialism can coincide with freedom have simply not yet realised the extent to which they are irreconcilable ideals. Ultimately stating that democratic socialism or individualist socialism, or however many ways socialists who still believe in liberal ideals express it are arguing for the creation of an impossible utopia.