Free Marketers

BY MARGOLIS
SOME OF THE 20TH CENTURY’ Greatest scholars got their start at India’s venerable state universities. But if Anil Agarwal has his way, those august institutions will soon get a run for their money. The 53-year-old metals and mining magnate plans to create Vedanta University in sleepy Orissa state, with 100,000 students and 40,000 faculty that he claims will raise standards throughout Asia. True, only a fraction of the $3.5 billion needed has been raised. But the fact that the project exists at all is emblematic of a new trend: the privatization of higher education in the developing world.
Independent universities are nothing new in the West. But since colonial times, higher ed in Latin America, Asia and Africa has been a virtual government monopoly. Tuition was heavily subsidized or free. This began to change late last century, however. The international financial crises, massive debt and the collapse of socialism pauperized governments from Albania to Argentina, leaving them unable to support public schools.
At the same time, emerging-market economies began to take off. Soon private players stepped in, drawn by surging demand and government deregulation. Of course, launching a private university is no simple latter, especially in developing states with accident-prone economies, poor populations and thickets of red tape. Yet many barriers are now falling. Brazil is booming. In India, 30 percent of students attend private schools, up from a handful two decades ago. In China, the number has doubled since 2003, Even in Russia, three out of four students attend private schools.
The changer is being driven by a shift in the international economy. As the information age goes global, college degrees become ever more important; in Brazil-which typifies the trend-graduates, now earn 2.7 times more than those with just high-school diplomas. And public institution cant’s keep up with the demand. A third of students taking entrance exams in Beijing last year were unable to find places.
Moreover, quality is plunging. “the truth is that many public schools are riding on past glories,” says Rajpan pai, head of Manipal University, India’s pioneer nongovernmental school. A 2005 report by Mckinsey concluded that fewer than 10 percent of Chinese graduates were qualified to work for a multinational company, and in June, Indian Prime Minister Manmohan Singh called his country’s state system “dysfunctional.” Public schools teach “students to think about joining the commanding heights, not to become a junior partner in a firm,” says University of Illinois economist Salim Rashid. “They [are] misfits when they get out into the real world.” Many new private schools, on the other hand, offer practical courses, top teacher and accountability. “If you pay for education, you keep a much closer eye on it,” says Rashid.
That said, some critics argue that private schools discriminate against the poor. In fact, however, most of these universities offer scholarships and charge modest fees. And rich kids still enjoy a huge advantage in public systems, thanks to prep schools and private tutors. Still, policymakers worry that it’s hard to ensure quality with new schools emerging overnight. With honorable exceptions, private universities generate only a fraction of the developing world’s ph.D.s and cutting-edge research. Yet Rashid remarks that while “there are plenty of mediocre private schools, there are also plenty of mediocre jobs out there.”
No advocated argue that the market is infallible-only that it has become indispensable. “We know today that the government is not enough,” says Manipal’s pai. “A lot of people wouldn’t be studying at all if there was no private sector.” As more and more students in the developing world strive for a college degree, that knowledge alone should help them up the learning curve.