Marketisation of education has failed

Cross-posted from The Conversation:

The Morrison government’s waiving of almost A$500 million in dodgy vocational education and training debts holds many lessons about the nature of education and public services being provided by for-profit enterprises.

The debts were collected by about 38,000 students unwittingly locked into federal VET FEE-HELP loans by dodgy for-profit education providers. Thousands more complaints seeking to have debts waived have yet to be processed.

One of the lessons from the disastrous mix of public funding and private profits in the VET sector is that policymakers infatuated with the dogma of “reform” are incapable of learning from experience.

That’s true of both sides of politics.

Victorian reforms

A brief history of the “most disastrous education rort in Australia’s history” illustrates the point.

The story begins in about 2008.

Historically, vocational education and training was the domain of the government-run Technical and Further Education (TAFE) colleges. To create an expanded demand-driven sector, the Labor government of John Brumby in Victoria made two key “reforms”.

One was to open up the TAFE system to private-sector competition. The other was to shift costs to students, through a fee loans scheme similar to the one federal Labor introduced to fund university education expansion.

These reforms were embraced by Brumby’s Liberal successor, Ted Baillieu, who severely cut TAFE funding, and by both Liberal and Labor federal governments.

How not to reform

But what Victoria provided, in the words of education policy researcher Leesa Wheelahan, was “a great template in how not to reform vocational training”.

As Wheelahan noted in 2012, problems emerged almost immediately. For-profit providers enticed students (and therefore the money flowing from the government) with sweeteners such as “free” iPads. Diplomas requiring 600 hours of work were granted on the basis of 60 hours. And so on.

In an essay published in 2013, I wrote: “Attempts by for-profit firms to enter (what they perceive as) education markets have almost invariably ended either in failure or in fraudulent exploitation of public subsidies.”

But the Victorian template was embraced federally first by the government of John Howard, which extended the Higher Education Loan Program to VET, and then those of Kevin Rudd and Julia Gillard.

It grew even more under Tony Abbott, increasing at triple-digit rates between 2012 and 2015, until evident problems forced government action. The Australian National Audit Office’s scathing assessment of the scheme in 2016 led to it being scrapped.

Examples of failure

Policymakers could have learned not only from the initial failures of VET reform but from examples of for-profit education at all levels.

Australian universities have dabbled unsuccessfully with the for-profit tertiary model exemplified by the University of Phoenix. It and other for-profit universities have been accused of rorting federal education funding provided for military veterans, by spending 15% or less of the fees received on instruction.

It’s perhaps a good thing that Australian universities rooted in the traditions of public education have routinely failed with for-profit ventures such as as Melbourne University Private. It closed in 2005 after losing an estimated A$20 million over the previous seven years.

At the level of school education, the US has plenty of failed experiments. One is Edison Schools, which at its peak in the early 2000s had hundreds of school contracts. It has since lost the great majority due to not delivering on promises.

In the realm of early child education, Australia’s for-profit child-care operators funded by government subsidies have a similarly problematic record. The similarities include using the types of lures pioneered by shonky operators in the VET sector – enticing parents (and their federal subsidies) with offers of “free” iPads and gift cards.

The limits of market liberalism

The failures of for-profit education reflect both the specific characteristics of education that make a market model inappropriate and more fundamental failings of market liberalism.

Students, by definition, don’t know enough to be informed consumers. Whether the course is good or bad, they are unlikely to be repeat customers. In these circumstances, relying on consumer choice and competition between providers is a recipe for superficial, low-quality courses and exploitation.

As centuries of experience has shown, only the dedication and professional ethos of teachers can ensure high-quality education. Reliance on incentives and markets is inconsistent with that ethos.

The broader problem with the reform agenda is that for-profit businesses paid to provide public services are more tempted to make profits by exploiting loopholes in the funding system than by innovating or providing better services.

This point is apparently yet to sink in with agencies such as the Productivity Commission, which remains enthusiastic about applying “increased competition, contestability and informed user choice” to human services “to improve outcomes for users, and the community as a whole”.

Article by John Quiggin, Professor, School of Economics, The University of Queensland


  1. “… the disastrous mix of public funding and private profits …”

    Private provision of education is not the problem. Add public funding into the mix and then you have the makings of a problem.

    The structure / execution of the reformed system was an abomination a monkey would disown.

  2. Too many universities teach pointless degrees that offer nothing to their students or society

    Stop funding Mickey Mouse degrees, says top scientist

    degrees in celebrity journalism, drama combined with waste management, and international football business management

    Nearly half of degrees soon to be worthless

  3. Jumping jack flash

    The owners of these fine educational institutions required debt like every other sucker in this country. So they had a go, and they got a go.

    6 billion goes. Give or take.
    I’m sure they used a lot of their goes to obtain debt and buy houses, which would have helped push prices up, and made a lot of people very, very happy. And so on and so forth.

    They also provided an essential service for Australia – giving our wonderful government an opportunity to privatise something else.

    • But Homo Economicus had better funding and investors wet themselves over the new [tm] market potential to be developed and its synergy’s with other industries …. wheeeeeee … almost 50 years later ….

      • It’s a wheel we’re on and we’re too stupid as a species to learn from past mistakes. I guess we just don’t live long enough.

        • Jumping jack flash

          I don’t think it would matter how long we lived, the cycle would just lengthen to suit.

          It’s simply a matter of someone getting an awesome idea and then thinking that because they had the idea it was awesome, and then they put it in place, ultimately getting burned by it and everyone wringing their hands saying that it was stupid.

          Then as soon as everyone forgets, someone comes up with an awesome idea and then thinks that just because they thought of it, it must be awesome and couldn’t possibly end up the same way as any similar ideas before it (if they even care enough to look), and then they put it in place and get burned by it, everyone jumps up and down, and so on and so on it goes.