Off to Market? Why Liberalisation doesn’t necessarily mean Privatisation

Article published on Sept. 24, 2003
Article published on Sept. 24, 2003

This article has not been vetted by an editor at Paris HQ

All over Europe, a reform process kicked off in an Italian left-wing bastion is taken to mean some very right-wing policies. But critics of the Bologna Process are simply confused: opening up the playing field doesn't mean making the goal privatisation.

From our point of view, the Bologna Process represents a significant opportunity for European students. For starters, the declarations signed at Bologna render the fears of ‘privatisation’ voiced by the ESIB (the union of national unions of students in Europe) groundless, since there is no explicit mention of any such privatisation.

However, their concerns are based on a rational misunderstanding. It is necessary to remember that deregulation and liberalisation are separate concepts. In effect, even if a sector is centralised, the behaviour of its competing operators is not subject to any regulation. To illustrate: up until recently, the regulation of the stock market in certain countries remained extremely rudimentary, because the stock market was a public organism which survived on a monopoly basis. The privatisation of the stock market has brought a draconian reinforcement of market regulation and increased limitations on public authority over investment trusts and the management of financial markets. Thus, rather than lead to deregulation, liberalisation often creates the need for increased regulation.

Liberalisation, then, cannot be synonymous with privatisation. Indeed, there are certain sectors that have been completely privatised but not yet liberalised. In such cases, the State has relied upon the monopoly of a private enterprise to provide a public service. Likewise, some sectors have been liberalised and remain a public operator (for example, some telecommunications markets).

Liberalisation opens up the market, giving increased access to numerous operators. Liberalisation thus signifies competition. Hence the desirable option is not so much privatisation, as the creation of competition between several operators within a regulated market. This competition generally creates an increase in choice and a decrease in price, as operators are obliged to limit their prices to attract more customers. These market restraints (which lower the price of services) are evidently compatible with the restraints on public service linked to the specificity of a sector such as that of education.

A market for all

Those who oppose the liberalisation of higher education persist in considering these restraints, whether regulatory or non regulatory, incompatible. Yet this is not quite true. The notion of universal access can be protected simply by decreeing that guidelines for public service be imposed upon any operator who hopes to gain a role in the market. One example is the case of electricity suppliers, who have the obligation to supply a minimum voltage at a fixed price free of charge to households with the lowest incomes. Similarly, access to the ‘education market’ can be prohibited for an operator who imposes tuition fees greater than the rising maximum. Well understood, such a regulatory constraint can mean that some financial support is supplied by the teaching establishment by public authority. In order to respect a competitive situation favouring the choice of the student, this financial support cannot be monolithic and fixed, although it must also correspond with the choice of its precedents. To reiterate, the financial sources of each university would include a minimal input from the student. This is the ‘education voucher’ system advocated for many years by Guy Sorman. This system places the student at the centre, whilst maintaining strict criteria of quality control when accessing the education market.

In a non-competitive situation, waste and over consumption are not restrained by the laws of the market and therefore tend to bloat public expenditure, preventing this money from properly contributing to public services or being of real benefit to the community.

If, at the European level, true mobility and greater transparency are created, universities will be obliged to compete to attract students. A system which transfers credits would increase flexibility and therefore likewise increase the freedom of the student.

With regards to the possibility of privatising the education sector, we have seen that the nature of the operator is insignificant as long as it is willing to enter into competition. The concept of public service management permits the private operators to take charge of its running, whether it be in a situation of monopoly or that of a liberalised market. The dominance of private operators over public service is equally independent of the issue of actually knowing if the service is public or private. For example, in Belgium, most of the universities are private but are partly financed by the State, and they coexist with state universities. An adequate application of universal service and public service principals invalidates and renders irrelevant the issue of knowing if a service is public or private.

We must grasp every opportunity to create a truly European higher education area which is at the same time to the benefit of all.