The Affordability of Education

Gia Jandieri

"Government is not the solution to our problem; government is the problem."

Ronald Reagan

According to popular opinion, the more a country spends on education, the better. For example, many believe that if public spending on education exceeds three percent (or five percent, seven percent, et cetera, depending on one's imagination) a country will do well. At best, this opinion implies that without education it will be difficult for a country to be globally competitive.

It seems that people with such opinions believe that increased spending will automatically improve the quality of education too. I assume readers understand that this logic comes from the realms of fantasy, but no other vision is as attractive as that – if not for the improvement of quality, for me it is unclear what the aim of spending more money is. Various studies are available on this topic and several flatly deny such a direct correlation, for example, a 2002 study by Hanna Skandera and Richard Sousa of the Hoover Institution "Can Money Buy Better Schools?"
All this brings one episode to my mind: the amazement of my students when I told them that Georgian economists, lawyers and accountants are not their competitors, nor are the Turks and Russians alone – their direct rivals are the Americans and Europeans. The idea is very simple. An investor who fails to find a lawyer, an economist or an accountant (or, for that matter, a worker or a programmer, et cetera) with the desired qualifications, will merely refuse to invest in Georgia because an investor's interest lies in achieving success, not just in spending money (especially large sums of money). The system is identical when buying apples: buying rotten apples, no matter how cheap the cost, makes no sense – I say this to attract the attention of those people who believe that low salary rates will automatically attract investors. To the same people I will also say that the amendments to the Labor Code will deliver a hard blow to the education system. In particular, if they complicate the process of hiring young people, their level of education will not matter much – the longer they stay unemployed, the sooner they become disqualified.

Something which I will never understand is those who pay money to study at university and then skip classes. Perhaps the quality of teaching is so low that students do not believe in the benefits of attending those classes. However, this is perhaps only part of the picture. Another part is that students might, for example, not believe that they will achieve future success with the knowledge obtained from these classes or, more likely, they might believe that everything depends on luck and benevolent relatives. To their undoubted disappointment I must say that this is not totally true and that today each and every smoothly operating business is run according to other principles in which quality is key. This is because of competition.

I doubt there are many who would disagree that education (knowledge) is of the utmost importance. However, people talk about that rather superficially – much like they often repeat the expression "time is money" without really trying to understand what that means. In my understanding, this phrase means that time is the most valuable resource; it cannot be reversed, it can only be spent and not recovered. One may ask, what does this have to do with education?

To go back to education, but in a non-superficial manner: education is needed, not for making parents happy about their educated children, but for making those children competitive and successful. It is an oft-repeated fact that the top 20 richest people in the world include several people who have not graduated from university, not to say anything about having gained a scientific degree. Bill Gates, co-founder of Microsoft, precisely fits into the two formulas that education is important and that time is money. He dropped out of university as soon as he realized that he was just wasting time. He knew that he had already acquired sufficient knowledge to be successful and that if he stayed at university he would never be able to recover the time lost there and someone else would occupy his place in business. (Let anyone try to prove that Bill Gates remained uneducated). Is it worth paying 200,000 dollars to go to a U.S. college? Just Google that question and you will find out how often it is raised (for example, "Are Colleges Worth the Price of Admission?", by Andrew Hacker and Claudia Dreifus, 2010,

The competitiveness of decisions and actions is an issue which I often speak about. I will never tire of arguing that, for example, if Georgia has its own monetary policy and currency, then these must necessarily be competitive or else they risk causing immense damage to the economy and the people. This seems easy to understand, but when it comes to practical decisions many people voice their protest, viewing the existence of a national currency as a matter of esteem. Politicians, for their part, will try to politicize the issue by engaging in propaganda to whip up irrational emotions and nullify rational discussion.

We are in exactly such a situation with education. Over the past few years, the population has gradually got used to the idea that it must not expect much from the government. The government has neither the possibility nor the capacity to create a competitive education system in the near future. Had it not been for purely political propaganda, people would have rejected the role of the state in education long ago.

Let's look at this topic from another angle: how many Georgian university graduates will be able to compete with their counterparts from, for example, Turkey? Perhaps not many, Turkey may not be Georgia's toughest rival, but it is the closest one and its competitiveness is improving day by day. Competitiveness is not merely a panacea. It shows many things: how correctly we are acting, whether we will achieve results, whether investors will show interest, whether businesses will be successful, and whether jobs will be created. One of the reasons for investors not investing much money in Georgia, amongst other serious risks, is that they do not see adequate human resources here and, consequently, they prefer to pay more in order to get higher quality services elsewhere.

How soon can a competitive education system be created in Georgia? This will start to happen when we dispel the illusion and understand that for 1,000 USD one simply cannot buy the same quality of education which others receive for 5,000 USD. When talking about this, many say that education is an area of political responsibility and that the government cannot refuse that.

The amendments to the Labor Code will deliver a hard blow to the education system. In particular, if they complicate the process of hiring young people, their level of education will not matter much – the longer they stay unemployed, the sooner they become disqualified.

eople would not approve of government inactivity in this sector and the government, therefore, uses various methods to try and persuade people that it understands the importance of the issue and that it spares no effort to tackle the problem of education. In future, other governments will also act in the same way, whereas those who no longer believe the propaganda will try to send their children to be educated abroad, provided they can afford or can secure sufficient financial support to do so.

There are two ways out of this situation:

First: to quickly close the borders of Georgia and allow neither foreigners nor foreign products in. In this case, there will be no competition and the education sector will achieve better results – everyone will be educated and, moreover, they could receive education for a pittance (or even for free). This is exactly how it was in the Soviet Union where education was so uncompetitive that the state existed solely on account of its natural resources and everything came to a standstill once it disintegrated.

True, we cannot shut Georgia away, if anything, because we do not have the natural resources to fall back on. Therefore:

Second: a competitive standard of education will gradually emerge, but that cannot be cheap or, even more so, free (or affordable). Inexpensive education is of poor quality which is of no help for graduates either starting up a business (it is better to work at a marketplace than attend university) or finding a job. "Free" and "cheap" education doesn't exist anywhere; that is merely the government's illusion – in reality the money is paid by taxpayers. To make the difference more explicit, taxpayers abroad receive average incomes 10 to 15 times higher and, consequently, pay taxes two to three times higher than in Georgia – this, however, dramatically exceeds our capacities.

In order to make this path a success, two things are needed:

- The total rationalization of education – if you want it, you pay for it (as happens with something like electricity).

It is possible to pay for education if one so desires. Let me recall that a host of people manage to improve their living conditions by seeking financing on their own initiative. If, for example, a bank does not give you a student loan for a certain university, then that means that either the university is bad or it questions your abilities.

- The price of education must move towards the medium level world price.

Otherwise it will be impossible to hire qualified foreign or Georgian teachers.

And still, one may ask how the competitiveness of our higher education should be improved under the current conditions? We must not, of course, entertain illusions that this is easy to do or that it can happen in a short time-span. The key thing is that the money we pay for education must work with maximum efficiency. The achievement of this requires:

- The development of such a mechanism that will effectively filter those who want to study and achieve success from those who merely want to obtain a diploma and then cheat the system.

- The establishment of a most efficient mechanism of monitoring, which will control the quality of education, the effective use of resources and the results attained.

- The development of a long-term strategy and the attraction of investors and sponsors.

- The persuasion of lending institutions.

- The promotion of forms of private entrepreneurship that do not require university degrees.

Looking at these and other important factors, one thing is clearly conspicuous – the government cannot fulfill any of these functions. But do not be scared, things are not as bad as one may think. In fact, they are not bad at all. There are various reliable sources available for organizing and financing this. If this scheme operates successfully, the financing will constantly increase:

  1. The resources returned by the government. The money which the government intends to spend on education must be left to the people in the form of reduced tax rates. This sum amounts to tens of millions of lari.
  2. The unused assets owned by universities. For example, it would be possible to rent or lease a university building for use as office space and gradually accumulate the revenue received from so doing in an endowment fund that could be paid annually to the university.
  3. The loans issued to universities capable of providing banks with a plan for achieving success. (By the way, this is a good test – if banks do not issue such loans, this means that a university has no chance of success and that the quality of its output is doubtful.)
  4. The loans available for students to take out. (The same holds true here – who would issue a loan to a student to receive a poor quality of education? If a student has to mortgage his/her property for a loan, then the student him/herself will have greater incentives to achieve good results in their education.)
  5. The personal resources of the population. These will be optimized if people know that the money they are paying for a university education promises greater benefits than if this money were used elsewhere.
  6. The financing of high-performing students by private companies with the aim of employing them in future.
  7. The contribution of individuals and private companies.
  8. The redistribution of the resources of universities to fund successful but economically disadvantaged students.

Of course, there are also other sources available that readers will be able to identify, but everyone must bear in mind that:

- It is impossible to improve the quality of education without personal involvement and responsibility. You must personally buy education and carefully observe what you are buying.

- Politicians are often forced to make unfulfillable promises. Their abilities are limited to election cycles; every new minister, no matter which political party he/she represents, thinks differently and this creates a serious instability and inefficiency in the process.

- Bureaucrats do not make the best experts; their knowledge is never comparable to the information existing in the market; meanwhile, their motivation to perform well is low because they are not concerned about competition.

- Only the private sector has adequate mechanisms for seeking and mobilizing resources and for controlling their use and expenditure.

Making higher education artificially affordable at the expense of the state will bring about the opposite result – it will place the education sphere into a stalemate once and for all. We will lose any chance for its improvement, waste a significant amount of time and resources, and will create numerous nests of corruption. On the other hand, we will become the most "qualified" nation in the world.


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