new arenas of education governance - institut für soziologie · this illustration is taken from...

This Illustration is taken from the original etching in Thomas Hobbes' Leviathanof 1651. Palgrave Macmillan and the editors are grateful to Lucila Munoz-Sanchezand Monika Sniegs for their help in redesigning the original to illustrate what'transformations of the state' might mean. The inscription at the top of the originalfrontispiece reads 'non est potestas Super Terram quae Comparetur ei' (Job 41.24): 'thereis no power on earth which can be compared to him'. In the Bible, this refers to theseamonster, Leviathan. (Original Leviathan image reprinted courtesy of the BritishLibrary.)

New Arenas of EducationGovernanceThe Impact of International Organizationsand Markets on Educational Policy Making

Edited by

Kerstin MartensAssistant Professor, Collaborative Research Centre, University of Bremen, Germany

Alessandra RusconiSenior Researcher, Collaborative Research Centre, University of Bremen, Germany

Kathrin LeuzeSenior Researcher, Collaborative Research Centre, University of Bremen, Germany

palgravemacmillan

Transformationsof the State

Internationalization of Marketsfor Education? New Actors WithinNations and Increasing FlowsBetween NationsReinhold Sackmann

Introduction

The education System is strongly linked to the development of the modernnation state and represents one of the core facets of state activity. In the pastfew years, however, there have been debates about whether education isundergoing a foundational change - one toward internationalization andthe creation of international markets. It is disputed whether this changeshould be viewed äs either an unavoidable natural development, or a desir-able development worthy of funding and support, or rather a regrettable ten-dency that should therefore be regulated, or eise rejected and counteracted.

These debates have experienced an upsurge in the run-up of the mostrecent round of GATS (General Agreement of Trade in Services) negotia-tions. GATS deals with the worldwide liberalization of trade in Services ofwhich education forms part (see Larsen and Vincent-Lancerin 2002, 2003;Sauve 2002; Scherrer and Yalcin 2003; Enders et al. 2003, Scherrer in thisvolume). However, there have also been opposing voices concerning theliberalization of education; the associations of administrations of NorthAmerican and European universities, for example, have been critical of theGATS negotiations (Barblan 2002), and the media has portrayed protestgroups calling themselves 'representatives of civil society' (Hachfeld 2003:23), such äs ATTAC, an anti-globalization campaign. Generally speaking,critics fear a loss of the quality in education, the rising inequality of resultsand a destruction of education äs a public good (on these issues seeKohlrausch and Leuze in this volume).

In contrast to these critics, advocates of liberalization expect a gainin efficiency of educational facilities through stronger privatization (forinstance Schlaffke and Weiß 1996; Hurrelmann 2001) and hope for the

155

156 New Arenas ofEducation Govemance

improvement of sluggish and inefficient educational Systems throughinternationally connected education markets. More and more countriesincreasingly include market elements into their education policies:the introduction of market-oriented components into the education Systemconstituted, for example, the core of the British education reform in the1980s (see Pierson 1998) and has played a large role in reform movementsin the US over the last two decades (see Levin 2001).

The initial ideas of this reform thinking can be traced back to early foun-dational neoliberal theorists like Friedman (see Osterwalder 2003), äs welläs to sociological studies in the 1980s (Coleman et al. 1982; Coleman andHoffer 1987). It was, however, not until the 1990s, following the interneteuphoria, that the market for education really became dynamic: at thattime, profit-oriented education enterprises seized the opportunity to con-quer the education market, especially through e-learning which was seenäs a central area of growth and expansion in academics. Private enterprises,equity funds, and Consulting firms specializing in e-learning were expectedto unleash capital within the next years and thereby take over the fieldhitherto dominated by state and public education providers. Institutionswere reacting to these new expectations: for example, the EU and someindividual member states, such äs Great Britain and Germany, createdaction plans for the funding of the education industry.

This chapter presents empirical data that underlies the debates aboutthe development of education markets. Such an account seems essential,äs exaggerated prognosis often prevails and imprecise definitions of publicand private providers of education blur the phenomenon. The fundamen-tal question posed here is äs follows: Are we in a process ofintemationalizingeducation markets?

In the theoretical part of this text, I will clarify the notions of marketand internationalization with reference to education. In the second part,I present data on private education providers in the US and Germany andsummarize the existing statistics for these countries. The extent of Studentflow among countries is used to describe education rnarkets in more detail.The concluding part summarizes the results of this study and I furtherdevelop a scenario in which the internationalization of education marketscan be carried out. At last, some reflections on the rise and fall of an inter-national education market arena are proffered.

Markets for education and internationalization:concepts and models

Internationalization via markets implies, first and foremost, a commercial-ization of national education Systems äs international providers can seil their

Internationalization of Markets for Education 157

products only if there exists a national market for education. In this view,internationalization is the result of a two-step process: first, a nationalmarket for education has to develop in certain pockets of the educationSystem, and only in a second Step can this education market spread at theinternational level. At present, education is financed in nearly all countriesby the state to a large extent. On average, in OECD countries, 88 percent offunding spent on educational facilities comes from public sources (OECD2002: 212). Therefore, a stable niche for markets will only be provided ifthe political elites degrade the state provision privilege and/or if privatesuppliers offer education in new fields of the education System previouslynot occupied by state providers. Only then can new actors appear andnational education markets evolve.

For a better understanding of the nature of these new actors, the conceptsof commodification, marketization and commercialization are useful tools(Polanyi 1944; Esping-Andersen 1990; see North 1990). Commodificationdescribes an economic process by which a Service or item is transformedinto a tradable good, where a provider of this Service or good increasinglyacts in a profit-oriented way. Because Services can also be provided by thestate or Community, competition over supply arises between these threeparts of society (state, market, Community). To better understand thedynamic of marketization processes, it is useful to differentiate amongthree types of education providers:

1. decommodified providers (such äs state universities)2. private non-for-profit providers: foundations (like Harvard University)3. for-profit education enterprises (like AKAD, the leading German sup-

plier of education Services for working adults).

A typology of education providers according to the degree of commercial-ization is more useful than a simple differentiation between public andprivate providers because, until now, most private providers of educationServices have been foundations, charitable trusts, endowments, grants, andthe like. Besides being dependent on public funding to a high degree, thedynamic of expansion is less commercially motivated for this type of Insti-tution. Private universities, for example, such äs the famous American eliteuniversities, seek to secure the institutions' capital (endowment); however,unlike true businesses, their primary aim is not to increase it for share-holders. Thus they are 'genuinely pre-capitalist organizations' (Stichweh2000: 137), expanding into new regions or other countries (for instanceby founding branches of their Institution abroad) for ideological reasonsand to spread certain values (like Waldorf schools) rather than out of aprofit motive.

158 New Arenas of Education Govemance

The degree of commodification of education can change over time:though parts of universities, such äs football teams at American Colleges(Bok 2003), have been for-profit or highly commercialized since the 19thCentury, purely commercial educational institutions are relatively new.The American umbrella organization 'Education Industry Association' wasnot founded until 1990.

The appearance of for-profit enterprises can be considered the firstprerequisite for the emergence of an international education market.A supply model assumes that an international education market estab-lishes itself through the increased appearance of a new type of supplier -namely, for-profit education enterprises (see Hentschke in this volume).During the 1980s and 1990s a new kind of venture capital market devel-oped in order to finance activities of new private education firms. Thesefirms mainly operate within national markets, but may also develop aninterest in overseas activity because of economies of scale. Examples ofsuch suppliers include international sellers of educational products (suchäs marketers of internet learning platforms, for example, First Class),founding affiliate institutions or 'franchises' (for example, new branchesof a university abroad), and mixed suppliers (like providers of offshorecampuses and e-learning). The declared rationale for both commercializa-tion of education and internationalization of education markets is thevision of education transforming itself from a labor-intensive part ofthe economy to a capital-intensive sector with the new powerful techniqueof the internet (Moe and Blodget 2000). For capital-intensive sectors,economies of scale gain importance.

The second prerequisite concerns national or international regulations.Markets do not evolve naturally in this sense, but emerge äs market sys-tems promoted by national or international institutions (Eucken 1990).Markets originate in Society and their existence and boundaries are con-structed institutionally (see Weber 1978). The creation and institutionallegitimization of international markets through market Systems is cur-rently taking place, primarily through GATS and its various instruments(see Scherrer in this volume). GATS provides an arena in which marketrestrictions and structures for the international education market aredecided upon and where international organizations and the develop-ment of international markets are interlinked through the creation of aninternational governance structure.

Further impetus for the internationalization of education markets isgiven by new demands for education from emerging Asian countries,especially China. National education institutions, powered by nationalpolicy, could create a specific supply for this demand in the hope of


financial profit. In relation to higher education, the OECD refers to thisäs the 'commercial model' (Larsen and Vincent-Laurent 2002). In the1990s, for example, Australia discovered that Asian students presented alucrative market and created new institutions and added commercialactivity to already existing public institutions. Some states like Singaporetook advantage of this new opportunity, and the increase of studentsstudying abroad can thus be considered a further step towards the inter-nationalization of education. Specifically, this implies an increase intemporary migration processes. If all exchanges or trade taking place underconditions of scarcity (see Walberg and Bast 2003) were counted äs marketphenomena, then transboundary mobility of students (like studyingabroad) could be interpreted äs an education market. Currently, however,prices only play a subordinate role in such exchanges, and for-profitproviders of education are rare. Thus 'mobility of students' does not fit anarrow definition of 'education market'. However, an increase in transna-tional Student mobility, made possible by providers blending cultural,political and economic motives, could be a promoter of internationaliza-tion and sometimes of educational markets. Excess demand in emergingeconomies, like China or countries with a fast growing population likeArab countries, could trigger off international education markets from theSouth and East of the globe.

In brief, the following hypothesis can be derived: an internationalizationof the education market will follow a two-step mode. First, a new type ofactor, for-profit enterprises, has to find niches on a national level in newfields of education in order to develop a profile. Second, an internationalmarket order and/or an increase in demand for education beyond thenation state create chances for expansion in an international educationmarket.

Empirical data on education markets

The literature surrounding education markets is, on the one hand, charac-terized by vigorous discussion about the pros and cons of educationmarkets and, on the other hand, by a lack of empirical data measuring thephenomenon. In the following section I therefore present the availabledata and important desiderata.

Private suppliersAccording to this chapter's hypothesis, the internationalization of edu-cational markets is viewed äs a two-step process starting first with thecreation of national markets which then move on to an international


level. In this section I focus on two national markets and their privatesuppliers. Theoretically, private education suppliers can develop in anynational market, but their survival is more likely to be assured in largenational markets. Therefore, Germany äs the EU's most populated countryand the US äs the biggest national economy of the world seem two appro-priate cases on which the following study shall be based. Moreover,Germany and the US both represent countries where the state has tradi-tionally dominated the education System. Identifying where educationmarkets emerge and education enterprises appear in such countries can bemost helpful in pointing out where an internationalization of the educa-tion market may take place in the future. As such, I will measure the extentof for-profit education enterprises - independent of their national origin -considering the sector of higher education in particular. This operational-ization is based on the idea that the growth of international educationmarkets is rather constrained by low degrees of commodification of largeparts of the education sector than by trade barriers among states. If theUS and Germany have sectors showing a strong education market, it can beexpected that these areas will also increasingly internationalize. Especiallythe US constitute an 'indicator' in this regard, äs it is assumed that thelargest and fastest growing amount of for-profit education entrepreneur-ship of all the OECD countries is located there (see Hentschke in thisvolume).1 The data available, however, comes from official statistics andother sources and is incomplete and not strictly comparable. Up to nowthere is no international data set on private providers in education mar-kets, äs most national statistics are incoherent in this respect.

The education market in Germany

There are two sources for data on education markets in Germany: educa-tion statistics and statistics on the corporate sector. According to generalstatistics for the year 2000, 2012 million persons were employed in thefield of education and instruction in Germany, either publicly or privately(Statistisches Bundesamt 2002:109). Spending on private preschools, pri-mary and secondary schools, and higher education amounted to€10.8 billion - approximately 0.5 percent of the gross domestic product.This figure has remained constant in relation to 1995. The largest volumeof spending on the part of private providers in the year 2002 occurred inthe preschool sector (€6.4 billion), the smallest in the higher educationsector (€0.3 billion) (Table 9.1).

Concentrating only on higher education, the expenditure of privateeducation institutions appears especially low: in the year 2000, onlyl percent of the expenditure of all institutions of higher education in the


Table 9.1: Expenditure on education by public and private providers inGermany (year 2002)

Expenditure As a percent of grossin bn. euro domestic product

Private preschool, school,higher education, total- preschool- elementary, secondary school- vocational school- university, polytechnicPublic preschool, school,higher education, total- preschool- elementary, secondary school- vocational school- university, polytechnic

10.8

6.43.01.10.3

70.5

4.845.28.6

11.9

0.5

0.30.10.10.03.3

0.22.10.40.6

Source: Statistisches Bundesamt 2005: 155.

country was made by private institutions; 1.1 percent of employmentexpenditure (Statistisches Bundesamt 2000: 20). Moreover, in the mid-1990s, 39 of the 67 private higher education facilities were funded byreligious institutions and private commercial institutions of highereducation were also funded through non-for-profit foundations(Konegen-Grenier 1996).

Yet also in Germany, education enterprises with innovative businessideas can be successful, äs exemplified by AKAD, founded in 1959. In 1980,AKAD became the first polytechnic correspondence school in Germanyand now runs three polytechnic Colleges with over 700 students (Schönherr1996). The demand for this Institution is constituted by employed personswho wish to complete a degree.

Statistics on the size of the private education market are rare apart fromthe education statistics already reviewed. Germany is dependent on esti-mates in regard to subsectors of private education markets. Interestingly,the official statistics on the corporate sector (Statistisches Bundesamt1991:80) categorize education under Services äs the 'rest of the rest': 'Rest 7',together with 'laundry' and 'garbage removal'. And in the Federal Bureauof Statistics' 'first corporate assessment in the Service sector' (Petrauschke2002), education can be found in residual category 74.8: 'provision ofother Services, predominantly for businesses'. Because Services of privateschools that are particularly related to education are not taxed and thus


do not involve tax returns, this sector is difficult to assess through taxstatistics.2 Overall, the official statistics regarding the private educationalmarket are very incomplete. Estimates of larger market volumes are onlybased on selective assessments. The market volume of private tutoringServices, for instance, was estimated at 1.2 billion German marks inthe early 1990s, and the volume of continuing education at 80 billion(Schlaffke and Weiß 1996). Even data from Consulting companies con-cerning the German continuing education market are based on unreliableestimates (Andersen 2001).

Despite serious shortcomings of statistics on education markets inGermany, one can conclude that the degree of commodification of theeducation sector is low. The largest niche of private provision can be foundin the field of preschool childcare by predominantly non-profit providers.International education providers from Germany usually develop theiractivities with a core business outside education, for example, SAP äs an ITprovider which offers, similar to other Software providers, internationalactivities in instruction, or Publishing sector companies which tradition-ally represent an international market with strong German presence.However, by and large, the core education sector does not show any majorsigns of strong for-profit sectors or explosive growth rates. It remains a dor-mant giant.

Education markets in the US

As in Germany, sources for statistics on education markets in the US areeducation statistics and statistics on the corporate sector. In the 1990s,a new source of data sprang up when analysis firms started specializingin education markets and the new 'education industry'. In contrast toHentschke in this volume, I put a focus on official statistics. Since educa-tion statistics in the US are more informative about the scope and kind ofpreschool, school, and higher education markets, it is worthwhile to gointo greater details than with the German data.

Preschool commercial childcare centres represent by far the largest por-tion of the commercial education market. In 2001, with $23.7 billion, theyaccounted for 23 percent of the Overall for-profit education market volume(Eduventures 2002: 8). Similar to Germany, preschools are more often pri-vate than primary education. The percentage of US children in privatepreschools grew from 29 percent in 1965 to 36.2 percent in 2003 (NCES2005: Table 43). The percentage of private schools, on the other hand, hasonly grown slightly in the last decades. Between 1970 and 2002, thepercentage of all teachers teaching at private schools (elementary and sec-ondary) grew from 10.1 percent to 11.5 percent (NCES 2005: Table 4).


Table 9.2: Expenditure on education by public and private providers in the US(2003/2004)

Expenditure As a percent of grossin bn. $ domestic product

Private elementary and secondaryschoolsPrivate Colleges und universitiesPublic elementary and secondaryschoolsPublic Colleges und universities

35.6

128.0478.7

223.2

0.3

1.24.3

2.0

Source: National Centre for Education Statistics (NCES) 2005, Table 29, 30. Owncalculations.

However, whereas in Germany the proportion of private elements in theeducation System decreases with increasing levels of education (Table9.1), Table 9.2 above shows that the opposite is true for the US.

The data confirms that there are more private facilities for highereducation than in primary and secondary education in the US. Privateinstitutions spend 57.3 percent of the public spending in the higher edu-cation sector, whereas private primary schools spend only 7.4 percent ofthe public expenditure. The two sectors are different not only in theiramount of expenditure, but also in their structure: for example, the per-centage of religious organizations involved in private preschool andprimary education facilities is markedly high; 77.2 percent of privateschools fall into this category, of which Catholic institutions represent thegreat majority (NCES 2005: Table 58).

Table 9.3 above shows the structure of post-secondary education in theUS according to the degree of commodification. The majority of privateinstitutions of higher education are run by non-profit organizations. At3.6 percent, the proportion of enrollment of for-profit enterprises amongColleges and universities that bestow recognized degrees is significantlylower. These two distinct forms of private higher education differ substan-tially in the quality of supervision and support: non-profit privateinstitutions of higher education average 3.4 students per employee whereasthis figure lies at 5.0 in the case of for-profit institutions. This differenceallows for the Interpretation that non-profit private institutions provideabove average quality, whereas for-profit institutions concentrate oncheap mass markets. As a result, Student admission to non-profit privateuniversities is highly selective, whereas most for-profits follow an openaccess policy (Ruch 2003).


Table 9.3: Registered students and student-employee ratio in post-secondaryeducation in the US according to the degree of commodification (2002; 2001)

2-year and 4-year degree-granting institutions

N

Enrollment, 16.611.711fall 2002Student/staffratio, fall 2001

Public

% of N

76.8%

5.2

Private

Total(%ofN)

23.2%

3.5

Not-for-profit(% of N)

19.7%

3.4

For-profit(% of N)

3.6%

5.0

Source: National Centre for Education Statistics (NCES) 2005: Table 169. Own calculations.

Serving less than 4 percent of students in the US, for-profit private insti-tutions play a rather insignificant role, however. The dynamics of time areof interest in judging this result: in 1976, only 0.4 percent of students atinstitutions of higher education with a recognized degree were enrolledat for-profit private institutions, whereas 21 percent were enrolled in non-profit private institutions (see NCES 2003: 210). Thus a huge growth infor-profit institutions has taken place in the last decades, whereas the mar-ket share of non-profit private institutions of higher education has beenreceding. One example of these new private actors in the education arenais the Apollo Group, which alone holds 15 percent of the for-profit highereducation market share, running among others the University of Phoenix.As it reads on the homepage of Apollo Group, 'over the years, University ofPhoenix has grown to become the largest private university in the nationfor working adults' (University of Phoenix 2004), and has successfully spe-cialized in distance learning degrees including virtual online courses (seeLevin 2001).

In regard to the number of students of private and public institutionsof higher education, it can be said that private institutions are generallymuch smaller than public ones. The proportion of private institutions ineducational organizations is therefore much higher than its proportionof students: although in 2002 only 3.6 percent of students were enrolledat for-profit institutions of higher education with recognized degreeprograms (Table 9.3), 29.6 percent of two-year Colleges and 11.3 percent offour-year Colleges were run by for-profit institutions in the year 2000/2001(NCES 2003: Table 5, own calculations). Privately endowed institutionsare also smaller than state institutions: 8.2 percent of two-year Collegesand 63.3 percent of four-year Colleges in the US are non-profit private

Intemationalization ofMarkets for Education 165

Table 9.4: Revenues and expenditures of degree-granting post-secondaryinstitutions in the US by source of funds, purpose and type of Institution(2000-2001)

Publicinstitutions

Private,not-for-profitinstitutions

Private,for-profitinstitutions

Revenue per full-time- 21 368 $ 31 737 $ 12 644 $equivalent StudentPercentage distributionby source:- Student tuition and fees 18.1% 38.1% 87.4%- governments (federal, 50.8% 18.3% 5.6%

state, local)- Investment return, 5.9% 14.9% 0.5%

private gifts and grants- Hospitals 9.5% 8.7%- Other source 20.8% 20% 6.5%

Expenditure per full-time- 33 069 $ 10 781 $equivalent StudentPercentage distributionby purpose:- Instruction 30.4% 32.2% 30.9%- Research and public Service 15.5% 12.2% 0.5%- Hospitals 9.5% 8.5%- Other expenditures 44.6% 47.1% 68.6%

Source: NCES 2005: Table 333. NCES 2004: Table 341, 343, 348, 356, 357. Own calculations.

institutions. However, they only cover 19.7 percent of all students. Thecomparatively smaller organizational units of private providers indicatethat economies of scale have not yet led to cheap mass productionmethods in higher education markets.

On the basis of Table 9.4, it is possible to discern differences in functionamong institutions funded by endowments, public institutions, and for-profit institutions by their financial flows.

Table 9.4 shows that for-profit private institutions of higher educationfunction on low financial revenue per Student, whereas non-profit privateinstitutions are the wealthiest. Privately endowed institutions earn nearlythree times äs much per Student than their 'poor commercial relatives'.As the income structure illustrates, this is due to differences in the sourceof funding: 87 percent of the for-profit institutions' revenue comes fromtuition fees, while non-profit institutions earn 15 percent of their revenuefrom their endowments and gifts.3 Such revenue is not at the disposal of

166 New Arenas ofEducation Governance

for-profit schools. The financial Situation also explains why for-profit insti-tutions rarely house clinics or offer degree programs in medicine. Moreover,they hardly spend any money on research in comparison to their counterinstitutions. For-profit institutions must thus Import 'completed' knowl-edge, since they do not participate in the production of new Knowledgethemselves. The structure of expendirure of non-profit private institutions,on the other hand, hardly differs from that of public institutions.

In sum, the US can be considered the leading figure for the developmentof potential education markets, since its domestic market is larger and thesocial and institutional environment is more conducive to private enter-prise in general, and to for-profit organizations in particular. Even in suchan environment, however, the public sector clearly dominates education.Most private providers of primary, secondary, and tertiary educationServices are non-profit. It has been useful to distinguish between privateproviders according to the degree of commodification in the Americaneducation market, äs this has shown that the differences between publicand non-profit private institutions of higher education are smaller than thedifferences between for-profit institutions and privately endowed ones.

The data analysis provides highly differentiated material concerningeducation markets. The largest sector of the commercial education marketis childcare, which is labor intensive. Those participants of the educationmarket most interesting to Investors following the internet hype have beenlocated in the higher and continuing education sector, for example in theform of e-learning. On a large scale this sector did not fulfill its promises.The most surprising success story in the sector of higher education - alsoon the stock market - has been the Apollo Group and its University ofPhoenix. Its product, distance learning for employed people, is one notcovered by traditional universities and therefore constitutes a lucrativemarket niche. The success of AKAD in Germany, though on a much smallerscale, shows that there is potential for the development of education mar-kets also in Germany for a sector beyond the Services covered by publicuniversities.

Flow of students

The second empirical part of the present chapter concerns the interna-tionalization äs a space of movement. Internationalization of educationin that sense has had a long tradition dating back to the middle ages. Theinternationalization of education markets can take its course in two ways,depending on who is considered subject of the process: the providers ofeducation (supply model) or the consumers of education (demand model).The demand model assumes that an increased demand for foreign education


opportunities leads to an internationalization of education. Interna-tionalization is here defined äs an increase in transaction andcommunication across borders relative to domestic or inrranationaltransactions (see Zürn 1998; Gerhards and Rössel 1999). Only wheninternational exchange grows not just in absolute numbers but relative tothe domestic level of exchange, is education truly internationalizm^.There exists, however, continued disagreement äs to how to Interpretthese numeric relations. My quantitative benchmark figures for thisindicator is äs follows: for less than l percent of international transac-tions, the degree of denationalization is insignificant, for percentagesbetween l and 5 it is considered low, levels between 5 and 20 percent aresignificant, those between 20 and 50 percent are strong, and a predominantlydenationalized System is one in which the percentage of internationalexchange is over 50. Transnational movement of students is registeredby the OECD and the UNESCO (Table 9.5).

Table 9.5: Exchange of students in tertiary education (2003)

Country

AustraliaFranceGermanyIrelandItalyJapanKoreaNetherlandsNew ZealandPolandSpainSwedenUnited KingdomUSCountry mean

Foreign studentsfrom throughoutthe world äs apercentage of allstudents (foreignand domesticstudents)(D

18.710.510.75.61.92.20.23.9

13.50.42.97.8

11.23.56.6

Intake ofstudents fromother OECDcountries4

(relative tototal tertiaryenrolment)(2)

8.62,55.34.00.80.70.12.53.50.11.94.66.51.73.1

Nationalstudentsenrolledabroad inother OECDcountries

(3)

0.62.52.88.72.21.62.82.43.51.31.53.61.20.22.5

Source: OECD 2005: Table C3.1. Own calculations.

168 New>lre«fl5 ofEducation Govemance169

The data shows a wide statistical spread in the number of foreign stu-dents among all students in a given country. It varies between 0.2 percentin South Korea and 18.7 percent in Australia. Among the OECD countries,Australia and Great Britain are among the top countries on the receivingend of foreign Student flow. The flow of students in these countries is,however, unbalanced äs only 0.6 percent of Australian students study ina foreign OECD country.

Viewing both transaction processes equally äs indicators of international-ization, Ireland, Sweden, New Zealand, and Germany are above average ininternationalization. The degree of internationalization of tertiary educa-tion can be compared to the degree of internationalization of other socialarenas using roughly these units of measurement (Zürn 1998; Gerhards andRössel 1999). At 2-3 percent, the transboundary movement (exchange ofstudents) in the category 'mobility of students' is significantly lower thanthe degree of the internationalization of financial flows (about 40 percent),but it is higher than the percentage of international phone calls (about1-2 percent) and comparable to the percentage 'direct Investment of citi-zens abroad' in relation to all fixed Investment (about 2-4 percent). Inother words, it shows a low degree of denationalization in this area.

One problem with the data on the flow of students until now has beenthat the category 'foreign' is not well defined. The category is mostly deter-mined by nationality, which depends on the respective immigration policyof the country in question and could mean higher or lower numbers offoreigners independently of migration flow. Lanzendorf (2003) thereforecompared the proportion of foreign students in several European countriesreplacing the criterion 'nationality' with 'permanent residency abroad' and'having had education abroad'. In Germany, the number of foreign stu-dents following the 'nationality' criterion for being a foreigner is 10 per-cent, following the criterion 'permanent residency abroad', it is 5 percent,and according to 'having had education abroad' it is 7.8 percent. Thus thecurrent statistics clearly overestimate the percentage of foreign studentsin some countries.

Table 9.6 reflects the temporal dynamic of Student flow. Among OECDcountries, the number of foreign students between 1980 and 1999 has,on average, risen by 5.7 percent per year. The number of foreign studentsin Australia, New Zealand and Great Britain has increased particularlystrongly. The US, the country with the highest number of foreign students,and France have below average growth rates. The number of foreign stu-dents in Germany has risen above average rates in both decades.

Looking at the flow of students in individual countries while keepingin mind the question of internationalization of education markets, the

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170 New Arenas ofEducation Governance

Australian case attracts particular attention. It represents the main bene-ficiary of the Student flow of China and other Asian countries who sendthe largest groups of students to study abroad. The opening of central andEastern Europe, similarly, resulted in a disproportionately large increasein foreign students in Germany (the largest group of non-Germans inGermany comes from Poland) (Lanzendorf 2003).

Thus, there appears to have been a movement over the last rwo decadestoward increasing internationalization of education in the sense of thedemand model. Whether this increase can be called a 'market', however, isdebatable. Whereas in Australia foreign students pay higher tuition fees andboth the federal and the state governments support for-profit providers ofeducation, similar commercial motives are not dominant in Germany. TheGerman government even rejected an advisory report of an Enquete-Commission which recommended that Australia should be used äs a modelfor German higher education policy (Deutscher Bundestag 2002: 493ff).

In the context of the internationalization of education markets äs awhole, it is important to note that the transboundary mobility of students,which fits the criteria of an education market only to a limited extent, iscurrently estimated to represent the largest volume of the worldwideeducation market (OECD 2002: 104). The GATS negotiations call this typeof market 'provision type 2' (use abroad).

Conclusion

To conclude, the results of various data on internationalization processesof the education market can be summarized äs follows: some supplierswithin the education market are already highly internationalized andshow a high degree of concentration. These include Publishing companiesproducing educational materials, or IT companies and Software enterpriseswhich also serve other markets.

The most significant international demand in the education sectoris currently for short term or temporary courses of study in other coun-tries, such äs study abroad programs. At 2-3 percent, the proportionof all students in OECD countries studying abroad is still rather low;however, the degree of internationalization is rising. Whether this reallyconstitutes a market, however, is nevertheless debatable, becausecommercial motives only rarely determine supply and demand for inter-national education exchange. Only in the last decades have for-profitmodels managing Student mobility been developed, äs, for example, inAustralia.

In the OECD countries, broad portions of the education sector are pub-licly organized. This also applies to the US, a country traditionally more


open to private enterprise. Crowding out or market displacement on thepart of commercial or public education providers is rare. The vast majorityof private education providers in the US and Germany are non-profit -particularly in the primary, secondary, and tertiary sectors of educationServices - and hardly follow a market logic. In the US, non-profit insti-tutions of higher education rather resemble public institutions, for examplein their structure of revenues and expenditures. Thus it appears necessaryto differentiate among private education providers according to the degreeof commodification in further education market research. For-profit edu-cation enterprises establish themselves in areas less likely to be covered bytraditional public education (market niches), such äs childcare Servicesfor preschoolers or distance learning (correspondence courses) for workingadults (like the University of Phoenix and the German AKAD). It is in theseareas that markets provide an attractive alternative to public educationofferings.

Altogether, rapid growth of the international education market cannotbe expected. Private, primarily non-profit, institutions of higher edu-cation have a market share of only l percent in Germany. Even in theUS, the market share of for-profit institutions of higher education is only3.6 percent. Until now, neither of these countries has shown a wave ofinternationalization.

It remains to be seen in what way the conclusion of the GATS treatywill promote the internationalization of education markets. False specu-lations during the internet euphoria of the last decade have given rise tothe need to base prognoses on more well-founded data. Considering thatthe pace of growth of the American for-profit education sector probablyconstitutes the upper ränge of possible growth rate expectations, a signifi-cant international commercial education market can only be expected in30 years time. The previously predicted giant Steps in development withinfive or even fewer years have proven unrealistic.

For the future, it would not be wise to leave monitoring and supervisionof the field of education markets to analysis companies like Consultingfirms and other private interests. Thus, it would seem prudent to improveefforts to provide accurate and more differentiated statistical data on theProvision of private Services in education in official statistics, for instancein the EU or the OECD.

Post script: Why could the arena of an internationaleducation market arise? And why could it fall?

The focus of the article was to analyze the internationalization of educa-tion markets. Up to now, no international education market comparable,


for example, with the international automobile market, has developed.However, in the last decades new actors have emerged and internation-alization has increased. One could argue that this new arena arose duringthe 1990s. As short-term trends are connected with a high degree of uncer-tainty, I wish to add a brief Interpretation with some remarks on theinstability of international education markets.

Why could this arena of an international education market arise? A two-step movement has been depicted in the field of education which firsttriggered the development of such a market. Anglo-Saxon countries, likethe US, Great Britain, Australia and New-Zealand, created a drive forneoliberal reform during the 1980s favoring experiments with marketsin education. Even though none of these reforms turned national educa-tion Systems into markets in these countries, the idea of the advantages ofthe market spread. For example in the US, an education industry establish-ing itself in niches where it did not have to compete with state provisionemerged at the beginning of the 1990s in fields like preschool, adulteducation, and universities for adults among others. Ventura capital on thenew international financial markets provided the necessary means toquickly react to such new developments. This is part of a social innovationcreating new forms of organizations. I take the for-profit education indus-try äs an example for a rather clear-cut, new form of market actor. Oneshould add to this arena of new actors more complicated forms, like stateuniversities in quasi-markets with entrepreneurial activities in interna-tional markets. However, a description of the commercial activities of, forexample, an Australian or a British university since 1990 would take quitea number of pages äs it is itself an Institution in flux. So it is beyond thescope of this chapter.

A second innovation (besides new actors) especially promoting theiraspirations was the emergence of a new technology in the form of theinternet with the supposed potential to create a new kind of economy, aknowledge-based economy. Progressive governments in some Anglo-Saxoncountries tried to combine the market rhetoric of their predecessors withrenewed activism of a novel productive state, the Schumpeterian welfarestate. One could find similar developments in Germany, the EU andFrance. The anti-communist revolutions at the end of 1980s furthered theperception of one single world society through 'globalization'. In this opti-mistic mood, a single report by the analyst firm Merrill Lynch (Moe andBlodget 2000), suggesting the advent of an international education marketwithin a short time, could move billions of dollars and euros spent oninternational education market activities by governments in Great Britain,the US, Germany and the EU to name a few.

Intemationalization of Markets for Education 173

Why could this arena implode? The internet did not prove to be themajor component of a new education industry. 9/11 happened (with grow-ing international distrust and conflict on the agenda). Within the worldsociety, the new wave of demand for education is situated upon tensionlines of the world: China, Arab countries and Eastern Europe. Will Chinaand the Arab countries find a way to democracy? Will Eastern Europe eco-nomically prosper? (International) Education is a substitute for freedomand economic development to the young people in these areas on themove. Intemationalization äs a social process needs trust within worldsociety. International cooperation, including international organizations,had a harder stand during the 2000s, distrusted by some national elites andpopulist movements in highly developed countries. Whether an emerginginternational society can stabilize and embed international education mar-kets, or whether hegemonic strife and war will prevail, remains to be seen.

Notes

1 See for private institutions of higher education in the US, Levin (2001) andRuch (2003); for the development in primary education, Belfield (2002);and for the structure of non-for-profit private sectors, Salamon (1999). Onpersonal accounts, see Deal and Hentschke (2004).

2 Of the 28,336 people employed in taxable education sectors, 13,484 worked indriving schools, which count äs a subsector of adult education.

3 In 2000-2001, the revenues from this source for non-profit-universities werefar lower than usual, äs stock market depression resulted in a negative Invest-ment return of $3.6 billion.

4 OECD-countries in columns (2) and (3) are: Australia, Austria, Belgium, Canada,Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland,Ireland, Italy, Japan, Korea, Luxembourg (export only), Mexico (export only),Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Spain, Sweden,Switzerland, Turkey, UK, US. In the percentage also included are the followingnon-OECD-countries Brazil, Chile, India, Indonesia, Malaysia, Philippines,Thailand. In column (1) all countries ofthe world are included, therefore data incolumns (1) and (2)/(3) are not comparable.

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