CHAPTER 8
Expand private funding of tertiary education As the tasks performed by Europe’s emerging economies grow more sophisticated, and the competition from middle-income countries in Asia intensifies, workforce education becomes ever more important. Europe lags Japan and North America in the share of the workforce with tertiary education, and within Europe, the east and south lag the center and north, both in the quantity and quality of higher education. Most European countries see higher education as a task for the state. Private funding is limited, private universities are the exception, and links between business and university-based research are weaker than in the United States. Europe’s tertiary education policies are designed to ensure equal access to higher education and to keep research free from corporate agendas. Yet, the approach must be questioned. High fees have not discouraged young Americans from seeking a higher education; wages for graduates are much higher than for those who leave school, offering a good rate of return on investment for a university degree. And it is not just Americans who are encouraged: U.S. universities have many more international students than most universities in Europe. Switzerland and the United Kingdom are the notable exceptions (box 8.10).
Rethink immigration policies In Europe, immigration policy is often seen as a humanitarian intervention. Many immigrants are refugees from countries with oppressive political regimes or civil wars, and Europeans—mindful of their own history of war and displacement— accept immigration as a moral duty. Family reunions are also an important part of European immigration. Many Europeans, however, would oppose more immigration for economic reasons: workers moving to Europe in search of higher wages, and employers inviting immigrants to fill positions with few local applicants for the wages offered.
Box 8.9: R&D policy: Switzerland and the United States Switzerland Switzerland is Europe’s leader in innovation. In 2007, it obtained the highest number of patents per capita among industrialized countries, roughly three times the Organisation for Economic Co-operation and Development (OECD) average. According to the Global Benchmark Report 2011, Switzerland is the most competitive country in the world, ahead of Canada, Australia, the United States, and Sweden (Confederation of Danish Industry 2011). The reasons? First, Switzerland started early. Its emphasis on research and innovation has a long history. The first two institutions funding university-based research were established in or soon after 1943. Second, there are strong public-private links in the funding and conduct of research, and Switzerland has more private spending. Swiss
expenditure on R&D was almost 3 percent of GDP in 2008, above the OECD average. Second, this spending is linked well to a broad tertiary education base: the United States accounted for a third of the total OECD population with higher education. Its universities can reap the commercial payoff of R&D, even when it is federally funded. Third, federal funding is not the sole driver of R&D and innovation: private firms spend a lot. The partnerships of venture United States capitalists and entrepreneurs in places like Half of the 50 most innovative companies in Silicon Valley have driven new innovations, the world, as ranked by Business Week in 2010, changing business and expanding the are American. The country dominates the technology frontier. Fourth, product market most R&D-intensive sectors. For example, it competition, labor market flexibility, and creates a third of the value added in the global substantial management talent increase the information and communications technology payoff to R&D spending. industry. How does the United States do so Source: Iwulska (2011), available at www. well? First, sizable public spending: gross worldbank.org/goldengrowth companies spend twice as much on R&D as the EU27 average (Switzerland spends 2.2 percent of GDP; EU27, 1.1 percent of GDP). Third, Switzerland has some outstanding universities: with a population of just 8 million, it has four universities in the top 100 of the Times Higher Education World University 2010 ranking. In part due to its R&D policies, Switzerland may be Europe’s most innovative country.
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