July 25, 2012, by David Greenaway

The global financial crisis and the internationalisation of higher education

This post was first published in the ‘From the Vice-Chancellor’s desk’ blog on January 20, 2012

I am often asked about the impact of the global financial crisis on the internationalisation of higher education. Given Nottingham’s unique global footprint, that is not a surprise.

As the sub-title of Carmen Reinhart and Kenneth Rogoff’s outstanding book This Time is Different : Eight Centuries of Financial Folly suggests, financial crises are far from uncommon. Nevertheless, the current crisis is a once in a century event. And we are not through it yet. A crisis triggered by personal and corporate debt has mutated into the more dangerous waters of sovereign debt, especially in Western Europe where the potential for catastrophe in the Eurozone remains very real.

What does this mean for the internationalisation of higher education? This is an important question for two reasons. First, higher education underpins the vitality of the knowledge based economy, and its health is a key driver of wealth creation and promoter of social cohesion. Second, higher education has been globalising strongly over the last decade.

We have compelling evidence that HE has become more globalised. In 2009 3.3 million students studied outside their country of domicile, six times greater than a generation ago. That mobility is markedly ‘North – South’: OECD countries host around 80 per cent of students, but supply just 20 per cent. For developing countries, this pattern is reversed.

Moreover, there is remarkable concentration. The US, UK, Australia, Canada and New Zealand are host to almost half of all international students. Among the sending countries, China and India account for 20 per cent.

The English language is the common factor among hosts, a historical accident which has turned out to be quite an asset. China and India dominate the sending countries, partly because of scale; partly because of their remarkable growth.

But these patterns are changing, the US et al no longer enjoy a monopoly of teaching in English, and China and India are no longer the only large dynamic emerging economies.

Researchers are also benefiting from plummeting costs of communication. In the decade between 1996 and 2006, the number of collaborations between researchers in China and India and other countries more than doubled. Even in ‘old’ countries like the US, UK and Germany, international collaborations increased by a factor of 1.5.

What risks does the global financial crisis pose to this internationalisation?

Aside from the obvious point that it has made the world more uncertain, key risks are around the impact of reduced public funding on supply and demand. In most parts of the world, HE benefits from public subsidy. Across OECD countries, public funds account for between 23 per cent (South Korea) and 96 per cent (Denmark) of funding. The combination of bank bailouts and recession has created unsustainable public finances in many countries.

These pressures will impact on higher education. In the UK, the Government has unveiled deep reductions in spending. For HE, this means deep cuts to teaching budgets. (Although in the often sensational coverage of ‘meltdown’ it is forgotten that Universities in England will replace this with higher contributions from their graduates).

In the US, direct funding to State Universities has fallen sharply. In Ireland, Greece, Italy, Spain and Portugal where there are austerity programmes in place, higher education is subject to budget cuts. Even in countries which have had ‘a good crisis’, like Australia and New Zealand, there are unsustainable pressures on direct public funding.

It is hard to imagine this more pressured financial environment will not impact on international mobility.

It is also the case that ailing public finances have reduced funding for scholarships in many developing countries, for example in Pakistan and Egypt. In addition, some like Malaysia, are redirecting government scholarships internally rather than externally.

These will be drag factors. However, there are some powerful pull factors.   First, as public subsidies decline, students will become more footloose, because they no longer feel tied to ‘home country’ Universities. This year graduate contributions will increase in England from a little over £3,000 per annum to a maximum of £9,000. At that point fees at the University of Nottingham in China or Malaysia will be lower than in the UK. There are many places where it will be cheaper still, including other parts of Western Europe. Mass exodus of UK students is highly unlikely, since even with a deferred fee of £9,000 per annum the return to a good degree from a good University remains attractive. But some substitution will occur and that will increase international mobility.

Second, the demand for tertiary education will continue to grow, in part because higher level skills are a fundamental input to the knowledge based economy; in part because demand for HE is income elastic: as we get richer, demand grows faster than growth in incomes.

Third, the major emerging economies though still relatively poor, are large, are fast becoming richer, and are still not highly integrated into the world economy. Together China, India, Indonesia, Brazil, Pakistan and Russia have half the world’s population, but in the AT Kearney index of globalisation, none features in the world’s top 40 most globalised economies. In some the population is also very young: India has 1.3 billion people, half under the age of 25.

Fourth, increasing numbers of Universities see value in globalising to enrich the student experience and enhance employability. As a result, more programmes and partnerships are being put in place to make this easier. These include twinning, joint degrees, exchange programmes and promoting exchange and learning through international networks and international campus developments.

Fifth, although the number of students studying outside their country of domicile increased sixfold in a generation, participation rates remain tiny, 2% of all eligible students study outside their country of domicile. New technology and our rapidly globalising world will change this.

Sixth, increased resources are being invested in promoting international research collaborations to bring together the most able researchers worldwide and help build the research capacity required to confront the major challenges facing global society, like global food security, energy sustainability and changing demography.

Finally, the internet and the astonishing innovations in information and communications technologies it has spawned mean it has never been easier to ship ideas around the globe, at more or less zero cost.

Thus, although there are short-term pressures from the global financial crisis, underlying dynamics will continue to drive higher education to become even more internationlised. Since that can only enhance the quality of our graduates, extend opportunities for productive research collaborations and help build social capital, it is to be welcomed rather than feared.

David Greenaway is Professor of Economics and Vice-Chancellor of The University of Nottingham

Posted in GlobalisationHigher EducationInternationalisation