Norton versus Norton on the promise of a Knowledge Nation

It’s a shame media commentators and critics of the Knowledge Nation Report (hereafter KN) are still grappling with the diagram and the "c" word. If they had read further they would have found an exquisite oxymoron – the proposal that by 2010 a "post-compulsory" education will be something that all school leavers will require and will have. Yet behind this apparent oxymoron lies an important truth: in 21^st century Australia: knowledge-based qualifications and skills will be a necessary condition for economic participation and social citizenship. In other words, post-school education will (or should) be not only a right in itself, but a key to many other rights. As such its universal availability should be seen as a genuine public good, to be publicly funded – if only to avert the unequivocal "public bad" of the persistence of a significant "knowledge-poor" underclass.

The education funding prescriptions – explicit and implicit – in Andrew Norton’s comment on KN would not deliver this. My namesake calls for greater reliance on private provision to provide the increased investment in knowledge for which, as he concedes, the report makes a strong case. Yet, as KN and its companion report from the Chifley Research Centre (The Comparative Performance of Australia as a Knowledge Nation, hereafter "Considine et al") make clear, increased private provision and "more market" approaches over the past 15 years have failed to compensate for depressed public funding and failed to prevent Australia’s knowledge investment from declining, both as a proportion of GDP and relative to most other OECD nations. Further, in some important respects they have distorted education priorities and performance, and worsened social and educational inequities.

In responding to Andrew Norton, I will confine myself to the question he raises in his final paragraph – namely, the potential contributions of private financing, tax reform and changed spending priorities to increased education funding as a component of a greater knowledge investment. However, we should remember that:

• while it contains many interesting policy ideas, KN is not a policy document but a strategic agenda for the coming decade or so, within which policies can be developed and implemented, and its status as an "agenda" rather than a policy is a source of both strengths and weaknesses;
• KN is not just an education strategy document; it’s also an economic and environmental strategy document – the first ever produced by a major party which seriously conjures with ecologically sustainable development.

Both of these issues deserve more attention than I can give them here.

The starting point for KN is that Australia is an economic underperformer relative to the advanced capitalist democracies of western Europe, North America and Japan, and that a key factor in this is a "Knowledge Investment Crisis" as measured by the three OECD benchmarks of knowledge investment – education expenditure, research & development (R&D) expenditure, and spending on software.

Considine et al report that in 1985 Australia’s knowledge investment (not including private education spending) was 6.47% of GDP, compared with an average of 7.46% for 11 OECD countries, 7.60 for the USA (the most important "knowledge nation"), and 8.72% for Sweden (the biggest "knowledge investor" in proportionate terms). By 1998 our knowledge investment had declined to 6.15% of GDP, compared with an 11-country average of 8.22%, 8.73% for the US and 10.83% for Sweden.

Considine et al also show that Australia’s private education expenditure is already higher, as a percentage of GDP and as a fraction of total knowledge expenditure, than for most other OECD countries. Yet even after this is factored in, Australia’s knowledge investment was still only 8.0% of GDP compared with a mean of 9.2%, 10.5% for the US and 11.5% for Sweden. And if private education spending in Australia were the same percentage of GDP as in the USA, our total knowledge investment would still be below the average and the median for the OECD, and below the knowledge investment from public sources alone of Sweden, France, Denmark and Finland. In other words, Australia’s under-achievement is largely a function of suppressing public investment in both absolute and relative terms.

If we focus specifically on national investment in education as a proportion of GDP across the OECD, a similar picture emerges. Australia’s education investment in 1998 was 5.48% of GDP, ranking 14^th out of 28 OECD nations, and below the OECD average of 5.66%. Australia’s private sector contribution was 1.13% of GDP, almost twice the OECD average of 0.66% and exceeded only by 5 of 28 nations, but our public education expenditure was 4.34% compared with an OECD average of 5.00%, and ranking 21^st out of 28 countries – and below the public education investment of poorer OECD nations such as Portugal Spain, Hungary, New Zealand and Poland, as well as developing countries Brazil and Malaysia.

The problem is not only insufficient public funding. Considine et al report that the actual experience with increased private education funding has been that, not only has it not added to public funding in aggregate and quantitative terms, it has actually failed to substitute for public funding in terms of practical support for teaching, research and the quality of education. For example, in the universities during the 1990s total income per student from all sources rose by 9.6%, yet the staff-student ratio deteriorated by 28.9%, with obvious consequences for quality of education. The reasons for this, according to Considine et al, are (a) that income from student fees and charges goes disproportionately to those courses from which such income is generated, mainly Business Studies and Computing; and (b) that much private income is ploughed back into corporate functions such as "off-shore operations, marketing, public relations IT and communications, asset management, quality assurance, alumni fundraising and so on." All this, says KN, has been at the expense of "disciplines that have a greater capacity to contribute to the growth of a Knowledge Nation such as science, mathematics, engineering, education, humanities and the social sciences."

There are other consequences of the suppression of public education funding which can only be enumerated here: increasing casualisation and workplace stress for staff; reduced academic freedom; loss of democracy and collegiality in University governance; student poverty; distorted educational choice by students; reduced access for mature-age and working-class students and students from disadvantaged racial and ethnic groups. Most of this is documented and discussed by Considine et al.

To expand on one of these issues: the Sydney Morning Herald of 11 July 2001 carries two reports on the poverty of tertiary students in Sydney, and the stresses they incur in supporting themselves. Such reports, and my own experience as a university teacher, suggest that the purely fiscal savings from underfunded university places and inadequate student income support are far outweighed by the resulting economic and social loss and waste from students dropping out, failing, underachieving and/or incurring long-term physical and mental health problems.

Another issue, which KN and Considine don’t discuss but which is socially significant, is the effect of large personal higher education debts (from HECS and loans) on decisions about childbearing and family formation. Combined with the shift to insurance-funded retirement income, this constitutes a major pressure on many women and many couples to defer, downsize or abandon plans to start families.

Despite all of this, Andrew Norton’s faith in private and market-based financing of education remains unshaken – perhaps because he never leaves the realm of economic rationalist theory to consider the empirical evidence presented by Considine and KN.

What are the alternatives to increased private financing? The two suggested are taxation reform and redistribution of existing public expenditure. In practice, some combination of both will be necessary. Strangely enough for an economic rationalist, the only reason Norton offers for discounting these options is that they will be electorally unpopular and/or politically difficult.

At least as far as new or increased taxes are concerned, this is probably not the case, given recent opinion surveys that voters would pay higher taxes if this were to yield improve social or environmental outcomes including in education services (see, for instance, The Australian Higher Education Supplement of 4 July 2001). Many options for tax reform have been mooted, including taxes on financial speculation (e.g. the Tobin tax), a progressive expenditure tax (the Kaldor tax, championed by Mark Latham) and taxes on environmental "bads" such as a carbon tax. Some combination of these would yield some of the billions require to meet KN objectives.

There undoubtedly are political difficulties with Latham’s proposals to reduce "passive welfare" and industry assistance. On the former matter these are less important than the negative social consequences of half-baked attempts at "welfare reform" which won’t yield the savings that some imagine. What is needed are innovative, non-coercive and non-punitive ways to link welfare entitlements with knowledge opportunities, with increased costs being more than recouped by long-term economic and social benefits. Industry assistance, too, needs not so much to be abolished as redirected away from subsidies for underperforming, and often ecologically unsustainable, industries and sectors (the Australian Conservation Foundation and Australian Greens respectively claim figures of $7 billion and $14 billion for such subsidies throughout the economy) to intelligent support for new and emerging knowledge-based and sustainable industries, including those prioritised in KN. As such industries grow, the private economic activity they generate would almost certainly produce more private knowledge investment, with better outcomes, than would hitting poor students with more fees and bigger debts.

The other point which Norton misses is that if, as KN proposes, a "whole-of-government" approach to achieving a Knowledge Nation is adopted, many areas of public sector activity which don’t presently contribute to the nation’s knowledge effort could begin to do so without requiring more spending or redistributing resources from other areas.

All told, the debate about education funding, like others canvassed in KN, will hinge on whether we continue, as a nation, to focus on purely fiscal considerations or whether we take a genuinely economic approach to the costs and benefits of the kinds of changes called for in the Report. Indeed, the "triple bottom line" of economic, social and environmental benchmarks, frequently referred to in KN, is a good basis for deciding our collective commitment to those changes.

Finally, readers may have gained the impression that I’m enthusiastic about Knowledge Nation. On balance I am, subject to the two qualifications noted above and a third one: that Knowledge Nation is, like the ACTU/ALP Accord, as much about politics as about policy, and hence embodies compromises between different forces within Labor and with different constituencies which Labor is courting in an election years. Not only are the policy colours still to be painted into the strategic sketch KN provides, a close reading reveals a number of apparent contradictions and "bob-each-way" statements. The delineation of "new" and "old" economies and the degree of commitment to the former are two such areas. Also the strong commitment to sustainability sits uneasily with KN’s enthusiasm for biotechnology. And there are good social and democratic reasons for deepening and broadening the Australian people’s knowledge store, thinking skills and communicative competence, yet these are very much subordinate to the instrumental economic case (as well as the environmental case) for a Knowledge Nation.

But with these qualifications, I feel that KN does represent a leftward shift on balance, and a pronounced green shift, for Federal Labor, and that there are strategic and ideological footholds within it which left, feminist and green forces should recognise and utilise as a base for contesting and defining the future direction of a Federal Labor government. And the release of KN means that Federal Labor finally has a Big Idea – like "It’s Time" in 1972 and the Accord in 1983 – with which to win the coming election, rather than relying on the conservatives to lose it. I hope we can see more discussion of Knowledge Nation, its problems and its possibilities, besides what I’ve been able to offer here.