State Involvement in Higher Education - Essay Example

involvement in higher education Contents Contents 2 Introduction 3 Main Body 4 First Section 4 Second Section 11 Conclusion 15 References 17 Introduction The study encompasses the degree of state involvement in context of higher education. Different age groups have distinguished educational demand. In current scenario educational system is complex and there is wide range of schools available across a country. Public finance managerial system of any country comprises of two important components – educational operation and expenditure. Government plays a vital role in educational system of any country. This essay shall outline level of governmental intervention in different educational levels. Arguments against and in favour of state involvement would be thoroughly analyzed. Appropriate theoretical frameworks like market failure, public expenditure and government failure will be included in the first section of the essay in order to support argumentative discussion. The theories on public finance management would be able to highlight the importance of governmental intervention in higher education. Public expenditure in educational system of various countries shall also be included within this particular study. Empirical data from different countries such as Europe, Asian countries and United States will also be encompassed in the essay. There would also be emphasis given on higher educational framework of United Kingdom. UK government to certain extent is actively involved in enhancing higher educational system of the country. The level of performance and importance of UK government will be analyzed with the support of public finance management theories. These ideas would be associated with government failure and market failure concepts. A higher educational system can only perform appropriately when it is supplied with essential resources. These resources are either provided by private sector or by government. Educational system being totally dependent on market, results into a risky scenario in future years. The future trends along with present scenario of state level educational expenditure management shall be evaluated in this study. Main Body First Section Government should intervene in education Market failure can be stated as an inefficient market due to lack of government intervention. Inequality is a common outcome of such market conditions. Efficiency of a market is analyzed in relation to competition benchmark. Market failure results when free market is not able to efficiently allocate resources. This concept even justifies the importance of government intervention in order to enhance higher educational system of a region. Externalities as a concept can outline the need for government intervention in certain circumstances. An externality is defined as benefit or cost for an individual, not part of any transaction. Negative externalities are all about a cost being imposed on third party. On the other hand, if benefit is acquired by third party then it represents positive externalities. Positive externality can be stated as a side-effect directly linked with any market condition. It is related to benefits of consumption of services or products that spreads across third parties (Geiger, 2004). In positive externality, marginal private benefit is lesser than that of marginal social benefit. Education also encompasses positive externalities. For instance, individuals who are highly educated are expected to become productive workers in later period. Educated individuals are expected to caste right vote in comparison to less educated citizens. Families can easily access financial support on basis of educational loans and grants. Redistribution is facilitated through education whereby required education is provided by families to their children. Public schools structured in many countries reflect upon the idea of mandatory education for children. Appropriate education not only benefits children but even is advantageous for overall society. Government intervention is strong across many countries in context of education system. Externalities mainly indicate that demand towards obtaining superior quality higher education is increasing across the globe. Figure 1 represents the difference between marginal private and marginal social benefit. Private schools are gaining high margins and in turn restricting individuals belonging to low income group from accessing educational facilities (Enders and Jongbloed, 2007). In such circumstances, government intervention becomes a vital factor. This in turn helps to increase funds available for educational institutions. Positive externalities in context of education have been further elaborated in figure 1. Figure 1: Positive externality (education) (Source: Geiger and Sá, 2008) Education encompasses positive externality because marginal private benefit is much lesser than marginal social benefit. Quantity and price mechanisms are two ways through which government is able to handle externalities. Price mechanism is associated with giving discounts to students in order to reduce overall educational costs. On the other hand, quantity mechanism is about making certain educational level mandatory for students. According to figure1, government intervention incorporates efficiency level in private educational market. The rate of supply is increased through this intervention in terms of providing minimum education to children. On the contrary, without government intervention, market supply will be restricted and children would not be able to access educational facilities. Government intervention facilitates the approach of marginal social benefit (Heller, 2001). It can be stated that adequate resources are provided to educational institutions with the support of governmental authorities. For instance, government of United States contribute significant amount towards educational sector. It has been highlighted in figure 2. Figure 2: Public Expenditure (Source: Geiger and Heller, 2011) U.S. government contribute approximately 15% of total revenue towards educational facilities. The total annual spending of government towards this sector is $809.6 billion (Hoxby, 2009). This clearly reveals that active measures are undertaken by government in order to develop superior quality educational services. On the other hand, similar trend is also observed in United Kingdom, where sufficient funds are allocated by government to educational institutions. Figure 3 highlights expenditure of UK government towards developing better educational facilities for children. Figure 3: Expenditure by UK Government Over the years as per statistics, UK government has intervened significantly in educational sector. The major objective is to regulate the rate of supply and demand. Privatization leads to exploitation which is also applicable for educational institutions. UK government through its intervention approach is able to control free market conditions. Sufficient funds are allocated by the UK government which could effectively address demand conditions prevalent in the market. The general government expenditure in UK as per 2014 statistics was 49.1% of overall GDP rate. 5.3% of GDP was contributed towards education system (Forest and Kinser, 2002). Secondary education however had secured higher percentage in comparison to higher education. This indicates that there exists scope for government to allocate funds in higher education sector. In China, government intervention in educational field has deteriorated. Market failure condition is prevalent in this region since more focus is on private schools or colleges rather than public schools (Ruch, 2001). Families desire to send their children to reputed schools where quality education is provided to children. The concept of mandatory education is confined to certain Asian regions and is losing significance in China. Rate of government expenditure towards educational system in China has been defined in figure 4. Figure 4: Educational Expenditure in China (Source: Vernooy, 2008) This aspect can be associated with negative externalities of market failures. Growing demand towards private schools and high educational quality is degrading the importance of public schools (Ryan, 2011). It even denotes that in China and United Kingdom, government should implement projects based on improving educational system. Against of government involvement in education Government failure at times is also stated as non-market failure. This term is used to reflect imperfection existing in government performance. Government failure term is utilized since 1960s with the emergence of political and intellectual criticism. This kind of failure occurs when government intervention is not able to allocate resources efficiently. It even takes place when government is not being able to intervene appropriately or it is not intervening at all. Decline in economic welfare is closely knitted with the concept of government failure. Lack of incentives can be denoted as one of the reasons behind government failure. There is non-profit motive or limited resources available in private sector. Government might not hold sufficient funds to improve educational system and make it at par with private sector. Poor information is also a reason behind government failure. Politicians usually have less information regarding which aspects should be present within educational framework. Government failure results when innovation is not incorporated in higher education framework. Political ideology is given more importance in relation to gaining more expertise in specific departments. Political interference is usually inclined towards short term effects rather than evaluating long term impacts. This in turn results into market inefficiencies. Public services like education comprise of high administration costs. Government failure occurs when these costs are not being addressed by higher authorities. There are other reasons also constituting towards government failures. These causes are resources, policy, leadership, culture and structure. All these causes usually compound together in order to form a government failure. Privatization is an alarming issue across the globe. This term can be defined as transfer of responsibilities, assets, functions or management to private actors which was carried out by state previously. There are different private actors such as religious institutions, governmental organizations and companies. Public private partnership is also a mechanism resulting into privatization. The unregulated and unmonitored expansion of private sector education is also a privatizing effect. This is observed in the form of low fee private schools and profit oriented schools. These facilities are accessed by students when they do not have options in hand. Privatization is incorporated within educational sector in order to fill gaps existing in educational provision. The increasing privatization trends negatively affect an individual’s right towards education. It is noticeable in terms of accessibility or availability of free education, educational quality and equality. Right to education must always be respected by private actors (Right To Education, 2013). It is responsibility of State to ensure that roles undertaken by private actors are accountable. Privatization encompasses negative impacts along with certain positive impacts which have helped to transform the entire educational environment. In current scenario, higher education is closely knitted with private sector. There is less number of public institutions providing proper higher education to students. It is always assumed that superior educational quality can only be provided by private sector due to availability of significant resources. Quality is closely knitted with resource allocation and this aspect is not entertained by government intervention. Government failure mainly occurs when inefficiency exists in terms resource allocation. There are evidences of growth in private educational sector in many countries (Zhang, 2005). It is evident that many countries have focused on private institutions so as to enhance educational quality for children. For instance, in United States, private education sector have achieved higher growth percentage in comparison to public sector. This has been illustrated in figure 5. Figure 5: Private sector expenditure (Source; Geiger and Heller, 2011) As per figure 5, expenditures in private sector have increased in past few years. There is increased percentage of student services in relation to public sector. The growth in expenditure clearly reveals that there is significant growth in private education sector. Educational development is greatly supported by private sector firms since they eventually include innovation within the system (Forest and Kinser, 2002). On the other hand, entrepreneurship also becomes an important factor when it comes to outlining the growth of private sector educational institutions. In England, education service industry has gained a lot of significance whereby private providers could move swiftly across public sector firms. Education has become one of the most essential industries in England. There is great deal of privatization occurring in this segment where individuals are motivated to join private schools and access future career opportunities. It is evolving as a global industry under current governmental conditions (Wilkinson, 2005). High quality resources are allocated in this segment and this has supported England schools or universities to achieve 6th rank amongst top 10 universities around the globe. There are evidences in context of Asian countries where importance is given to private sector in comparison to public sector. Japan encompasses the approach of private tuition in order to improve the overall structure of higher education. Private tuitions in Japan have reduced the percentage of student drop-out rates. There are students who were not in favour of academic pathways but private tuitions enabled them to achieve desirable targets. Second Section Current higher education system in U.K In UK, higher education system is basically self-governing and independent bodies. This system is aligned with scholarship, teaching and research. Awarding degrees is either regulated by national authorities or by law. There are approximately 700 colleges which do not possess any such power related to degree awarding. £59 billion is contributed by higher education sector towards UK economy. GDP rate of the country is also increased by 2.3 percent due to effective contribution from higher education sector. It can be stated that colleges and universities also play an active role in changing business, cultural and social perspectives. There are private organizations located in UK which is providing distant educational courses to many students. 2,496,645 students have been enrolled in higher educational programs of Britain (Kyvik, 2008). Some of the significant internationalized universities are located in United Kingdom. European higher education comprises of short cycle qualifications. This kind of qualification cycle is associated with job opportunities. Employment opportunities are provided to those who are able to complete the first cycle of higher education. The academic staffs encompass part time teachers as well as those who are full-time researchers. Professional qualifications and doctorate degree is possessed by academic staff of educational institutions (Baskerville, 2013). Maximum percentage of higher educational system is not government owned they are privatized. This clearly indicates that educational institutions are autonomous or are free to undertake their own decisions. The percentage of public funding has drastically decreased in education sector in current scenario. Figure 6 represents the fall in public expenditure in context of higher education system. Figure 6: Public expenditure in UK (Source: Baskerville, 2013) According to figure 6, in 1955, there was desirable contribution made by government towards higher education system. On the contrary, in recent years, this trend has shifted and focus is on developing privatized institutions. Higher education systems in UK follow a standard quality assurance framework. The common mode of entry into higher education is either through NQF level three qualifications or achieving a general certificate of education (Blessinger and Anchan, 2015). These qualifications form the basis of experiential learning for students. It provides them with the capability to accomplish set program objectives successfully. There are certain issues associated with educational system of United Kingdom. In recent years, the government have decreased expenditure percentage towards developing efficient higher education system. Education systems in UK are bound to witness changes in terms of public expenditure. UK government is planning to restrict flow of funds in order to allocate resources in other fields. Expenditure towards educational over the years have been demonstrated in figure 7. Figure 7: Comparison of education expenditure (Source: Baskerville, 2013) As per figure 7, government expenditure is deteriorating since 2011. There is negative percentage increase in overall expenditure annually. Capital cut in this particular sector demonstrates more inclination towards privatized educational institutions. 2015-16 will witness further expenditure cuts in context of higher education system (Ganobcsik-Williams, 2006). Higher education in United Kingdom will be altered in future years in relation to public expenditure. Direct funding provided by the government towards this sector shall be altered magnificently. The funding council shall cut total spending by £0.9 billion which is approximately 18% in 2015. This figure is expected to decrease by 2% in 2016. Cash value is expected to upgrade by £1.4 billion in 2015. This increased value shall contribute towards tuition fee loans. The loan amount would increase by £1.2 billion as per 2016 forecast results (Pickard, 2014). However the overall increase in expenditure is observed to decline. Private expenditure share in UK higher education sector have surpassed that of public expenditure. The decrease in public expenditure can be associated with the concept of government failure. Government intervention often does not result into efficient resource allocation. This aspect was witnessed in functionality of UK government. They were more inclined towards providing quality education to students rather than offering education to all deserving students. Expenditure cuts in public sector shall be contributed towards private sector. This can be treated as a positive externality for private sector (Garben, 2011). It has facilitated growth in this particular sector and encouraged students to pay high fees in order to access exceptional quality of higher education. To be more precise it was a form of market failure where government intervened to bring forth stability within the system. Public expenditure to a great extent in this sector tends to deteriorate level of educational quality. Free educational scheme is being reduced due to rising economic scenario of the region. Students who are residents or immigrants are able to pay tuition fees required for completion of higher education (Economics Online, 2015). UK government is now aiming to transform educational system of the country to a proper service industry which can be explored by students of other countries. Conclusion According to this study, market failure and government failure are two important components of public expenditure management. There are sufficient funds being allocated by government towards educational system across the globe. This flexibility has provided opportunity to students belonging to backward community in terms of accessing quality education. United States, China, United Kingdom have come forward with government intervention strategies so as to improve upon educational facilities. Market failure has been highlighted as a major reason behind government intervention in education policies. This kind of failure often results into inefficiencies in the system because of inappropriate resource allocation. Government then adapts the vital role of providing required resources to desirable segments. On the contrary, there are circumstances where inappropriate government intervention tends to disrupt the entire system. In the first section of this essay government intervention is regarded as a suitable phenomenon since it increases viability of educational facilities. There are evidences included within the study from countries like China, UK and US. Each of these countries have incorporated specific educational framework as per country requirements. These requirements basically differ as per living standard and hence affect the role of government. The concept of government intervention has been argued with the absence of such intervention. Its absence is beneficial for many countries because it provides scope for private sector growth. Private tuitions and privatized institutions enable students to explore wider set of opportunities which was not prevalent within public sector framework. The study ends with a short discussion on higher educational system of United Kingdom. In this country, educational policies are framed with the objective of securing high revenue margins. References Baskerville, S., 2013. A guide to UK higher education and partnerships for overseas universities. [Online] Available at: [Accessed on 2 March 2015]. 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