Ataturk’s Ministers visit Sarajevo

The events of the last few days in Turkey brought back to mind this powerful snippet from Anglo-Irish writer Rebecca West’s account of her travels in Yugoslavia in the 1930s. Nothing to do with economics, and little related to present realities, but a passage that some might appreciate….

“There are thirty thousand Moslems in Sarajevo, and I think most of them were there. And they were rapt, hallucinated, intoxicated with an old loyalty, and doubtless ready to know the intoxication of an old hatred.

We came to the halt at the right moment, as the train slid in and stopped. There was a little cheering, and the flags were waved, but it is not much fun cheering somebody inside the tin box of a railway carriage. The crowd waited to make sure. The Moslem Mayor of Sarajevo and his party went forward and greeted the tall and jolly Mr. Spaho, the Minister of Transport, and the Yugoslavian Minister of War, General Marits, a giant who wore his strength packed round him in solid masses like a bull. He looked as Göring would like to look. There were faint polite cheers for them; but the great cheers the crowd had had in its hearts for days were never given. For Mr. Spaho and the General were followed, so far as the expectations of the crowd were concerned, by nobody. The two little men in bowlers and trim suits, very dapper and well-shaven, might have been Frenchmen darkened in the colonial service. It took some time for the crowd to realise that they were in fact Ismet Ineunue, the Turkish Prime Minister, and Kazim Ozalip, his War Minister.

Even after the recognition had been established the cheers were not given. No great degree of disguise concealed the disfavour with which these two men in bowler hats looked on the thousands they saw before them, all wearing the fez and veil which their leader the Ataturk made it a crime to wear in Turkey. Their faces were blank yet not unexpressive. So might Englishmen look if, in some corner of the Empire, they had to meet as brothers the inhabitants of a colony that had been miraculously preserved from the action of time and had therefore kept to their road.

The Moslem Mayor read them an address of welcome, of which, naturally, they did not understand one word. This was bound in any case to be a difficult love affair to conduct, for they knew no Serbian and the Sarajevans knew no Turkish. They had to wait until General Marits had translated it into French; while they were waiting I saw one of them fix his eye on a distant building, wince, and look in the opposite direction. Some past-loving soul had delved in the attics and found the green flag with the crescent, the flag of the old Ottoman Empire, which these men and their leader regarded as the badge of a plague that had been like to destroy their people. The General’s translation over, they responded in French better than his, only a little sweeter and more birdlike than the French of France, and stood still, their eyes on the nearest roof, high enough to save them the sight of this monstrous retrograde profusion of fezes and veils, of red pates and black muzzles, while the General put back into Serbian their all too reasonable remarks. They had told the Moslems of Sarajevo, it seemed, that they felt the utmost enthusiasm for the Yugoslavian idea, and had pointed out that if the South Slavs did not form a unified state the will of the great powers could sweep over the Balkan Peninsula as it chose. They said not one word of the ancient tie that linked the Bosnian Moslems to the Turks, nor had they made any reference to Islam.

There were civil obeisances, and the two men got into an automobile and drove towards the town. The people did not cheer them. Only those within sight of the railway platform were aware that they were the Turkish Ministers, and even among those were many who could not believe their eyes, who thought that there must have been some breakdown of the arrangements…

We had seen the end of a story that had taken five hundred years to tell. We had seen the final collapse of the old Ottoman Empire. Under our eyes it had heeled over and fallen to the ground like a lay figure slipping off a chair. But that tragedy was already accomplished. The Ottoman Empire had ceased to suffer long ago. There was a more poignant grief before us. Suppose that such an unconquerable woman as may be compared to the Slav in Bosnia was at last conquered this time, and sent for help to her old lover, and that there answered the call a man bearing her lover’s name, who was, however, not her lover but his son, and looked on her with cold eyes, seeing her only as the occasion of a shameful passage in his family history: none of us would be able to withhold our pity”.

Higher Education Funding Links

There have been lots of contributions since the Cassells Report issued. It’s probably worth putting them all in one place. If I’ve missed some, please pop them in the comments.

The Cassells Report itself.

The reaction to the report

Carl O’Brien has a great series of articles on the subject. Here’s one: College funding explainer: The three options to pay for third level

Michael O’Regan: Senators criticise proposal for student loan scheme

The reaction to the reaction

Brian Lucey: Third level financing fails to paint the whole picture

Niamh Hourigan: Student loans will make graduates flee. Face it, tax is the best way to fund third level

Lorraine Courtney: State continues its war on youth, denying them a brighter future

Kim Bielenberg: Facing a higher degree of debt – students could graduate owing €20,000

Darragh Flannery and John Cullinan Study now, pay later? Please read the terms and conditions

Brian Hayes Why this Dáil may actually grasp the nettle of higher education funding

Paying the price for free education

Below is my Sunday Business Post column from this week, reposted with permission.

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Today, I’m writing as an academic and as the Acting Chair of the Higher Education Authority, because I think it’s really important to respond to the recent publication of the Cassells Report on the funding of higher education.

You might not know much about the HEA. It has three main jobs. It disburses about €1 billion in funding to the higher education institutions of this State, it regulates the higher education sector, and it provides policy advice to the Minister for Education and Skills.

The government, the HEA, and all the higher education institutions work within a national strategy around higher education, which takes us out to 2030.

The strategy we as a society have adopted for higher education until 2030 is to push for further and higher education for everyone who wants to go, regardless of their ability to pay at the moment they are admitted. Education should be freely available to those that want to avail of it.

But education is not free. Education has never been free to provide. As I said, the HEA spends over €1 billion of your money on it, and this is nowhere near enough to provide the kind of system envisaged in the strategy to 2030.

Continue reading “Paying the price for free education”

The leprechauns are in Luxembourg, not in Ireland

Colm makes an important point on those Irish GDP statistics here.

Study Now, Pay Later? Please Read the Terms and Conditions.

Posted on behalf of Darragh Flannery (UL) and John Cullinan (NUIG).

The Cassells report was finally published last week with various options for funding higher education outlined. With the dust settled, now may be an appropriate time to take stock of a few important issues. The debate around this topic has largely taken a full state funding approach versus a student loan approach. The student loan scheme suggested as one option within the report is an Income Contingent Loan (ICL) system, whereby graduates borrow for the costs of their education from the State but do not make any repayments towards this debt until they reach a certain income threshold. However, the discussion around this option has been muddied a lot within the debate. There are a variety of student loan systems in operation around the world; some good and some bad. The point of this post is to simply summarise some of the key design parameters within an ICL scheme and highlight the implications of varying these parameters. These have rarely featured in the public debate but can have significant implications for graduates and will thus require deep consideration if an ICL scheme is to be seriously considered.

Firstly, it must be noted that an ICL scheme entails that some students may never pay back any of the debt they owe. For example, if somebody leaves third level education and chooses not to work for the rest of their life, they repay nothing.  In this instance, the taxpayer would ultimately foot the cost of this individual’s education. From an efficiency viewpoint this makes sense as it provides a system where there is burden sharing at its core.  Students that benefit from third level education through higher earnings pay back some of the cost of that education. Society pays through taking on the default risk of those that do not repay fully or anything at all; this particular point seems to have been completely lost in the debate recently. From an equity viewpoint, an ICL scheme provides free access to higher education at the point of entry to every young person in the country.  It has been argued that this is the same with a household mortgage style loan system – the house is free at the point of entry but you pay for it over the next thirty years or so. However, the key difference is that under an ICL system, if an individual makes no repayments due to some spell of unemployment, nothing is repossessed and there is no impact on your future credit worthiness. From both an efficiency and equity viewpoint it can therefore be argued that there is some sense in an ICL system. However, like any change in policy, the devil will be in the detail.

Two separate studies have previously looked at this issue for Ireland, my own ESR paper with Cathal O’Donoghue here and more recent work by Aedín Doris of Maynooth University and Bruce Chapman of Australia National University here. Also, the appendix of the Cassells report presents some sensitivity analysis around certain parameters. While these go into much finer detail around the issue of ICLs, we will simply summarise some of the key parameters and highlight why there are important. These include the debt liability imposed on students, the specific income threshold to be set, the interest rate attached to the loans and the possible capping of repayment burdens.

The first issue that would have to be addressed is the level of debt a student is burdened with for every year they are in higher education. This has to strike a balance between having the ability to provide adequate funding for the third level institutions and not proving extremely burdensome for graduates. This can take the form of a blanket fee for all those attending higher education as outlined in the Cassells report; however, a more efficient way would be to have some variation in this debt across students. This could be linked to the cost of educating the student and/or the potential lifetime earnings from pursing different subject fields. Australia has adopted a system of this type whereby those wishing to study subjects that generally provide a higher return in the labour market such as medicine and dentistry face a slightly higher debt burden compared to those studying in fields such as humanities or nursing.

To be seen as progressive an ICL must have an income repayment threshold that reflects the fact that only those that benefit from third level education should be responsible for some of the cost. The danger of setting the threshold too low is that it places an extra expenditure burden on those graduates that are not earning very much, despite having gone through four years of higher education. Australia has set the threshold at which graduates begin to repay their debt at the average industrial earnings. The Cassells report mentions a lower threshold of the average wage of new graduates; presumably to ensure more graduates pay something towards the cost of their education.

With regard to the interest rate, the level at which this is fixed will help determine both how long it takes for graduates to pay off their debt and the overall state subsidy. An interest rate that is lower than the rate of inflation may significantly increase the subsidy the state provides on the loans by allowing graduates to ‘inflate’ away their debt. If the interest rate is set too high, the debt burden may increase rapidly and lead to longer repayment periods for graduates. A sensible approach would be to either index the interest rate on the loans to the consumer price index or the state cost of borrowing.

Capping the repayment burdens of graduates on an annual basis has seldom arisen in discussion but would form an important part of illustrating the difference between an ICL scheme and personal loans from the banking sector. Such a mechanism would limit the repayment amounts any one graduate may face in a particular year, no matter what their income level is. For example, if a graduate earns well in excess of the repayment threshold of the system, the repayments they make in that year are capped at a certain proportion of their income. Bruce Chapman of Australia National University, the architect of the much referenced Australian ICL system, suggests that this helps to avoid unduly harsh repayment burdens in any given period and could be fixed at around 8-10% of a graduate’s income.

Arguments have been put forward that increased funding for higher education should be provided through increased general taxes, as is seen in some European countries. The Cassells report acknowledges this by outlying two alternative funding options whereby state funding to higher education would be increased significantly and either the student contribution fee would be removed or maintained it at current levels.  However, given the suggestion that an additional €600 million euro per annum is needed in the higher education sector to meet the current demographic and quality challenges, it is highly unlikely either of these options is feasible or desired politically.

There are other important issues within an ICL system that deserve more attention than I have scope for here. These include the potential impact of emigration on repayments and whether the higher education grant system is restructured concurrently. However, for the majority of graduates that may be impacted by such a reform the specifics of debt amounts, income thresholds, interest rates and the capping of repayment burdens are of huge importance and require careful consideration by policymakers. They also deserve more consideration in the public debate around higher education financing.