paper for National Scholarly Communications Forum, ANU, 9 August 2001

Knowledge Economy and Knowledge Culture

Simon MarginsonMonash University 1

1. Introduction

This paper is focused on the social sciences and the more 'social' of the humanities (SSH),from a point of view grounded in Australian public policy, and in the context of the globalknowledge economy. It is also informed by a particular take on the relation between thenational and the global. After reviewing constructions of the global knowledge economy, thepaper argues that the SSH create three broad kinds of goods: private goods, national publicgoods (the 'nation-building' functions of the SSH), and global public goods. The paperdiscusses issues and problems in relation to each kind of good. It concludes that relative topotential capacity, the goods produced by the SSH are 'under-produced'.

The frame of reference of the paper is external: in attempting to imagine the SSH in terms ofpublic policy - and thereby contribute to their survival and potential - it analyses the social,economic, cultural and political benefits or values produced by the SSH as these valuesappears from outside the university. This is a little difficult to do from inside the university,but I submit that it is a useful exercise. Further, those values are understood in terms ofpolitical economy. These starting points shape the argument, and both need to be explained.

First, externality. The SSH disciplines are Janus-like, facing both inwards and outwards. Theyare at one and the same time self-referencing, shaped by disciplinary communities andacademic traditions; and also externally referenced, shaped by their various applications andthe parties affected by them, and by the larger cultural world. In every SSH discipline we findthis tension between internal and external identity. It is a tension that varies by discipline, butit is necessary to all of the SSH. If the tension is resolved too far in one direction, something islost. If an SSH discipline becomes solely scholastic, so that the discipline as an end in itselfbecomes the only end, in losing external engagement the discipline also loses its purchase (andultimately, its funding as well). If an SSH discipline becomes solely instrumental, it loses theindependent capacity for critical reflection and for certain kinds of social and individualreconstruction. In looking at the SSH in terms of their meanings in public policy, I am notarguing for the negation of disciplinary identity. Rather, from outside the university, the innerlife of the discipline appears as a means to an end. This end is the social, economic, culturaland political values created in the discipline. Arguably, governments in Australia have 1 Professor Simon Marginson is Director of the Monash Centre for Research in Education. In addition to four single-authoredbooks on aspects of education and public policy he is co-author with Mark Considine of The Enterprise University(Cambridge University Press, 2000), and co-author with Mark Considine and Peter Sheehan of Australia's ComparativePerformance as a Knowledge Nation (Chifley Research Centre, 2001)simon.marginson@education.monash.edu.auwww.education.monash.edu.au/centres/mcrie

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supported the development of the SSH not to nurture knowledge that terminates in itself , butbecause these knowledges sustain public and private goods.

Second, political economy. In this era policy arguments are economic arguments. Defence andnational security are understood in terms of trade; priorities are defined by budgets; nationalidentity and purpose are reduced to economic competitiveness. The chilling implications ofsuch a policy framework for the sensibilities called up by the SSH are all too obvious.Nevertheless, as Adam Smith, Bentham and Mill, Marx and Keynes among others showed,economics, when stretched into the form of political economy to take account of public goodsas well as private goods and markets, can encompass much of what we understand as thesocial and the political, and part of the cultural as well. Further, there are signs that thisbroader notion of the 'economic' is gaining ground in policy circles, as the most recent WorldBank statement on higher education suggests (World Bank 2001a and 2001b). The economicframework is not entirely adequate, but it allow us to fashion a policy-relevant argument. Thiskind of argument might be necessary in Australia at present,where with some exceptions, suchas native title, reconciliation and the republic, economics has dominated policy making sinceWhitlam. It would not be appropriate in some other countries, for example South Africa whereequal place is necessarily given to democratisation and the extension of effective citizenship(Singh 2001; Badat 2001). Nor will it always be strategically necessary here. 'Disembeddingthe economy from its social and political moorings can never be complete and never morethan temporary' (Rao 1999, p. 77).

At his point in the paper it is useful to define public goods and private goods, terms that willbe used extensively. Samuelson (1954) defined public goods strictly as non-rival and non-exclusive. 'Non-exclusive' means that no-one can be excluded from the benefits of the good.'Non-rival' means that consumption by one person does not impair its value for another, thegood is not exhausted. Clean air in the countryside is a pure public good with both qualities.There are few pure public goods, but a larger number of goods have one or both qualities inpartial form, or under particular circumstances: these include higher education and research. Inaddition to public goods as defined by Samuelson there are other economic 'externalities' or'spillovers' which arise when an economic agent takes an action without bearing all the costsor benefits. When one person dumps toxic waste in a stream the health of others is harmed(negative externality). The education of one person may enhance the productivity and earningsof another (positive externality). Pure public goods, impure public goods and externalities allshare a common quality: they tend to be under-provided in markets, because individuals andfirms cannot capture all of the economic benefits for themselves.

In much of the literature – which increasingly has departed from Samuelson’s attempt tonaturalise the definition of public goods - all goods subject to market failure areconventionally labelled public goods (Kaul et al. 1999b). This is the definition adopted in thispaper. Other goods are private goods. Public goods are often provided by governments, andare mostly dependant on state financing. Non-government organisations, households andspontaneous forms of association also produce public goods.

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2. Constructions of the knowledge economy

The concept of the 'knowledge economy' is used eclectically to cover a range of differentconceptions of the economy and society. In the literature three views can be distinguished (fora more detailed discussion see CRRI/CRLRA 2001).

First, a relatively narrow 'virtuous circle' linking scientific discovery, technologicalapplication, and trade, profitability and competitiveness. This conception, centred on a smallnumber of strategically significant industries such as biotechnology and ICT in whichknowledge and knowledge-processing are the key use values, is held in certain scientific andtechnological circles, and informs some of the discussion in the international agencies (forexample OECD 2001a). It has no particular implication for overall employment - the coreindustries in the 'circle' are not large employers - or work organisation and the character ofwork outside the virtuous circle. Thus in the Chief Scientist's report the SSH are arranged asadd-ons whose role is to facilitate the smooth operation of the virtuous circle by providing theappropriate legal framework, business expertise, and community support for science andtechnology, and sharpened consumer awareness (Batterham 2000, pp. 5, 16-17, 34 and 40).Another move consistent with this vision is to add a second and smaller 'virtuous circle' basedon the creative industries, particularly digital applications of the arts and some humanities.

Second, there is the ideal evident in many OECD and World Bank publications of a high skill/high performance/ high value economy in which the continuous transformation oftechnologies is central to economic competition and both are pervasive and continuouslydriven by economic and cultural globalisation; all production is subject to knowledge-intensification, fed by ICT applications; and trade and economic competition are increasinglyfocused on the most knowledge-intensified sectors, led by but not confined to the 'virtuouscircle'. There are echoes of post-Fordism in the assumptions about the broad upgrading andmodernisation of work and the positive valuation of human capital. Thus the World Bankdeclares blandly that 'knowledge has become the most important factor in economicdevelopment' (World Bank 2001b, p. 5). The OECD argues that 'the quality of humanresources is the major factor behind the invention and diffusion of new technologies' (OECD1999, p. 10), and this encompasses the organisational and cultural aspects of globalisation andtechnological diffusion, as well as science. Here knowledge is understood broadly toencompass all forms of education and training, as well as research and research applications,and is readily extended to the SSH. The OECD formula for national investment in knowledgeadds together the proportions of GDP invested in education and training, research anddevelopment, and software, i.e. all three are treated as equivalent, and investment in the SSHas equivalent to investment in science and technology (OECD 1999; Considine et al. 2001).

The third view is a realist reading of the trends touched on by the second normative view. Ininternational trade, between 1976 and 1996 the proportion of goods with a medium-high andhigh level of technology grew from 33 to 54 per cent (World Bank 2001b, p. 5). All industrysectors are affected by globalisation to at least some degree, and ICT applications arepervasive. Touching all industry sectors, whether these are implicated in the causes or effectsof technological change, and whether the change is driven by labour selection or labourutilisation, there has been a general advance in the level of cognitive, technical andbehavioural skill requirements (Pont 2001). No doubt globalisation and the accelerating rate oftechnological change have driven improvements in responsiveness and adaptability. At the

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same time, rather than a universal uplifting of skills and the dignity of work, the generalisationof research-based reflexivities and life-long learning, and a flattening of workplace hierarchy,the picture is mixed. The growth of knowledge-intensive and other forms of high skill workcoincides with the growth of low skill work in some sectors, and an increasing under-utilisation of educated labour: in most OECD countries the growth of graduates is outpacingthe growth of employment in knowledge-intensive occupations (Pont 2001). 20 per cent ofAustralians with Bachelor-level qualifications and 12 per cent with postgraduate qualificationare working in jobs that require no qualifications at all (Loble 2001; Briggs and Kitay 2001).Non-standard employment (casual, temporary, part-time and self-employed) is growing, thehours of 'full-time' work are increasing, and the role of full-time permanent employment isdeclining.

Figure 1 Fields of the social sciences

few explicit vocationalapplications

specificallyvocational

genericallyvocational

GROUP 1multi-disciplinarybounded fields

GROUP 2bounded singledisciplines

GROUP 3bounded singledisciplines

GROUP 4multi-disciplinary,bounded fields

GROUP 5multi-disciplinarymore open fields

Australian Studies Anthropology Psychology Law Public Health

Indigenous Studies History Economics Education Management &Business Studies

Women’s Studies Political Science &Public Policy

Social Work Communications

Sociology Librarianship &Information Science

Demography Accounting

Geography etc.

Linguistics

etc.

fields that are both outerand inner directed

fields that are more inner directedthan outer directed

fields that are more outer directedthan inner directed

Notes: This is just one possible classification of the social sciences. Accounting is normally included in Businessand Management - sometimes Law is also - but they are bounded professions with registration-based practice. (Inthis volume Law is discussed as separate from Business, except in some statistical data, while Accounting isincluded with the Business disciplines).

Source: author

The SSH disciplines are among the university disciplines, the great majority of universitydisciplines, which are subject to the under-employment of graduates. The SSH have a variedrelationship with work [see figure]. In some fields students are directly prepared for particularoccupations (for example Law, Education, Accounting); in some fields the SSH provide a

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broad-based vocational preparation (for example Management) or a vocationally flexiblediscipline-based professional preparation (Psychology); in others the discipline is notspecifically focused on work but its skills and sensibilities are utilised in a wide variety ofoccupations in the public and private sectors, as in the case of most of the humanities and the'humanistic' social sciences. In the knowledge economy, the economic potential of the SSHextends well beyond that of virtuous circle 2 and an adjunct to virtuous circle 1 (though itmust be said that the virtuous circle constitutes a neater argument). Including BusinessStudies, the SSH disciplines constitute the majority of the cognitive, technical and behaviouralattributes required in the knowledge economy. The SSH, particularly the humanities and the'humanistic' social sciences, are steeped in cultural contents that feed into industries such asentertainment, information, media and tourism; they are seminal to the organisational andsocial capacities to initiate and respond to innovations; and are formative of skills in advancedcommunication, and cultural sensibility and cultural difference, that are called up by globalconvergence. The SSH disciplines do not have to argue for a role in the global knowledgeeconomy. They are already there.

This does not mean that all investments in the SSH – or for that matter, in the natural sciencesand the technologies – always generate economic growth. Investments in the educatedcapacities of people and in institutions that generate knowledge and shape its utilisation are thebedrock of long-term local and national capacity in the global knowledge economy. Theseinvestments are no doubt indispensable to economic growth and the associated social advance.Nevertheless, national investments in education and research, including investment in theSSH, are a necessary but not sufficient condition for the creation of economic value.Profitability and competitiveness are also affected by capital capacity, work organisation, thecompetitive conjuncture and other historical and cultural factors. Growth accounting of theRobert Solow type - in which the effects of investment in knowledge are derived from thestatistical elimination of other effects from the rate of economic growth - is not convincing.The World Bank underwrites the Solow analysis, and holds Korea as an example of a countrywhere investment in scientific and technological capacity (including secondary and tertiaryeducation) has generated major economic payoffs. But it also cites Brazil, India and Russia ascases where investment did not generate the expected returns (World Bank 2001b, 15 & 7-8).

An expansion of education all too readily feeds into credentialism, especially whencompetition between educational providers is intense and the unit levels of investment areinadequate. The task of policy is not to use unemployment to grow educational participation,or even merely to augment investment in knowledge per se, but to maximise the conditions inwhich investment in knowledge is linked productively to other economic activities. Thisbrings industry policy onto the national agenda. Finland, in which investment across highereducation and research dovetailed with the rise of Nokia, is a case in point.

3. Individual vocational goods

Education and research create two kinds of private goods. First, knowledge goods: commercialresearch, and artefacts that embody knowledge and creative work in the academic framework.Second, those attributes of graduates - encompassing the credentials they hold and the skills,knowledge and sensibilities that they have acquired - that are translated into privatelyappropriated earnings and status benefits. These private vocational goods are acquired by both

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domestic students, and the international students that invest in the global education market.The education of university students also generates public goods: those skills, knowledge andsensibilities which feed into the social and economic environment in Australia or abroad,without being translated into private benefits appropriated by the educated individual.

The effects of education are formative of human personality, and are life-long regardless ofwhether the graduate enrols in a subsequent course. Fields of knowledge shape long-termbehaviour as was brilliantly illustrated in Pusey's (1991) study of the effects of university-acquired Economics on the values held and the methods employed in the senior ranks of theCommonwealth Public Service. It is therefore ironic that when examining the outcomes ofeducation, in an era in which public policy is dominated by Economics, policy has becomeincreasingly focused on short-term economic utilities. In assessing university performanceDETYA uses data on graduate employment rates and graduate satisfaction with coursescollated by the DETYA-supported Graduate Careers Council of Australia (GCCA). Graduatesatisfaction is measured in a Likert-scaled questionnaire. DETYA has now introduced agraduate skills test, again focusing on short-term utilities. The GCCA data are collected inApril of the year after graduation, too early for any overall assessment of the effects of courseseither on employability or on the larger mix of private and public goods. Despite that theGCCA data have gained a good deal of currency. They are central to the Good UniversitiesGuide's comparative judgements about the relative worth of institutions and fields of study,and cited in newspaper reports, feeding an ultra-utilitarian bias into the popular imagination.In the realpolitik, they have come to stand as proxy for the whole effects of higher education.

The Commonwealth is formally committed to a broad role of higher education in 'contributingto the attainment of individual freedom, the advancement of knowledge and social andeconomic progress'. It states that the 'main purposes' are to develop the potential of individualsfor personal growth, work and social contributions, to 'advance knowledge and understanding',to aid the application of knowledge for economic and social benefit, to contribute to 'anadaptable knowledge-based economy' and to promote the individual contribution to'democracy, civilisation, tolerance and debate' (Kemp 2001, p. 3). It is a broad definition of theexternality of higher education which extends well beyond an economic policy framework,and foregrounds the SSH. Nevertheless, 'civilisation' is not one of the government'sperformance targets. Graduate employment rates and graduate salary levels stand in its place.In practice the broad conception has been collapsed into narrow benchmarks grounded inshort-term instrumental outcomes. There is a parallel reduction in research policy, where theperformance measures collapse research effects into income generated by research, and alsocollapse the quality of research and supervision into the quantity of publications output andresearch graduate throughput (Marginson and Considine, 2000).

On the whole, in this framework the SSH disciplines do not fare well. Indeed, only thestronger professions such as Medicine, Dentistry and Pharmacy, and Law at prestigiousuniversities, enjoy consistently high employment rates in the early months after graduation.The biological sciences, which at the core of the 'virtuous circle', face similar short-termgraduate unemployment rates as apply in the SSH. At times, depending on the business cycle,the position is little better in technical fields such as Engineering. Nevertheless, for many SSHgraduates the first year or two out is a transitional period and it may be 5-10 years before long-term vocational patterns are established. In the longer time frame, comparative employmentrates tend to even out across the disciplines, and generalist graduates tend to become more

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appreciative of the sensibilities that they have acquired. Measures of short-term graduateemployability and graduate satisfaction cannot provide an adequate measure of the effects ofeducation on graduate work, or on lifetime earnings patterns, let alone the larger complex offormative effects on individuals, and the public goods created by higher education. It is awonder that we have continued to tolerate the tyranny of these short-term and narrowlyutilitarian benchmarks for as long as we have.

4. National public goods

In global policy circles that has been a renewed emphasis on the creation of national publicgoods in higher education. This has yet to feed into government policy-making in Australiathough it is compatible with the Labor Party perspective on the 'Knowledge Nation'.

In the first half of the 1990s the World Bank's pronouncements on higher education tended tobe abstract and ideological. Higher Education: The lessons of experience (1994) was aneconomic model of a marketised sector, which constituted an influential blueprint for neo-liberal reform. More recent World Bank policy papers sustain the earlier commitment toglobalisation, but focus on the politics as well as the economics of reform, acknowledgecultural (though not economic) plurality, note that markets in education have downsides aswell as upsides, and re-emphasise the positive functions of government and governmentinvestment. The Bank makes the point that national identity and economic capacity are crucialto global effectiveness, and foregrounds the role of higher education in nation-building:

Notwithstanding the methodological difficulties in measuring public benefits, tertiaryeducation produces a whole array of economic and social benefits (World Bank 2001b, p.41).

The economic benefits include the 'contribution of tertiary education institutions and graduatesto economic growth beyond the income and employment gains accruing to individuals'including the positive effects on productivity, workforce flexibility and 'absorptive capacity',and the diffusion of technological innovations. Tertiary institutions also play a key role intechnology-driven regional economic development.

In terms of public social benefits, tertiary education promotes nation-building throughgreater social cohesion, trust in social institutions, democratic participation and opendebate, and appreciation of diversity (gender, ethnicity, religion or social classdifferences). Pluralistic and democratic societies need research and interpretation whichare fostered through social sciences and humanities programs. Tertiary education maycontribute to reduced crime rates and corruption, and to [an] increased community serviceorientation (philanthropic donations, NGO and charity work). There are also strong socialservice benefits associated with improved health behaviours and outcomes (World Bank2001b, p. 42).

The Bank situates national higher education in the context of the national innovation system(which sustains the virtuous circle); and in the larger context of cultural capacities inflexibility, adaptability and innovation; and place and national democracy in a globalenvironment. It is also concerned about the provision of equity via educational opportunities

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for upward social mobility. There is more here than negative freedom and conditionsconducive to economic markets. The new World Bank framework has a Amartya Sen-likeinterest in the conditions underlying identity and the exercise of positive freedom, includingthe global distribution of power and income. These social, political cultural themes, whichpush the economic policy framework beyond its limits, again bring the SSH into the picture:

A word of caution is warranted to signal the danger of focusing exclusively on thetraining and skills dimensions of the knowledge economy. Adapting to the changingenvironment is not only a matter of reshaping tertiary institutions and applying newtechnologies. It is equally vital to ensure that students are equipped with the core valuesnecessary to live as responsible citizens in complex democratic societies. A meaningfuleducation for the 21st century should stimulate all aspects of human intellectual potential.It should not emphasise only giving access to global knowledge, but also uphold theriches of local cultures and values, in support of which time-honoured disciplines likephilosophy, literature, arts and social sciences will continue to remain essential.

Through the transmission of democratic values and cultural norms, tertiary educationcontributes to the promotion of civic behaviours, nation building, and social cohesion.This, in turn, supports the construction or strengthening of social capital, generallyunderstood as the benefits of membership in a social network that can provide access toresources, guarantee accountability and serve as a safety net in times of crisis … Tertiaryeducation can also play a crucial role in promoting social mobility. It is important toprovide adequate and equitable tertiary education so that the entire citizenry can maximiseits participation at all levels, creating new education opportunities for all groups insociety, especially the poor (World Bank 2001b, 18).

Taking the logic further, it can be argued that cultural norms and practices that themselvesfoster the cooperative provision of public goods have both current and future public goodsbenefits. Investment in higher education, which is a complex of such norms and practices, isboth a public good in its own right and an on-going source and condition of public goods,provided that the capacity of higher education is replenished over time. Further, institutionsand disciplines, such as History, which nurture a sense of future and thereby help to sustainconditions for cross-generational public goods (see below).

The Bank notes that public fiscal capacity is everywhere under increasing pressure, that in thisperiod, public funding is generally associated with declining quality, and that a pluralisation ofsources is desirable. Nevertheless continued government support is justified because of theexternal economic and social benefits associated with higher education; and because marketfailure constrains the private financing of bright students from economically disadvantagedgroups. It is difficult to isolate the public good aspects from other aspects because of cross-subsidisation. Despite this, expensive areas such as basic science will continue to requirealmost full public funding. The Bank notes that 'the cost of not investing sufficiently in tertiaryeducation can be very high', and 'government funding is likely to remain the dominant sourcefor tertiary funding in the majority of countries' (World Bank 2001a, 12; 2001b, 40-43). It is amore sustained and detailed rationale for government funding, grounded in public goods, thanany Australian government has provided since before the Dawkins reforms of 1988-1992.

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Likewise, the World Bank's conception of the external effects of the SSH is more multiple andsuggestive than that outlined by Dawkins, or by the Chief Scientist and in the Government'sInnovations statement (Howard 2001), or in the Knowledge Nation agenda (ALP 2001). TheBank's link between nation-building, identity and the SSH is especially significant. LikewiseZhang Xiaoming and Xu Haitao (2000, pp. 101-113), in their discussion of strategies forChinese higher education, note that the SSH are key to sustaining national identity, in thecontext of uneven global power and tendencies to standardisation and cultural hegemony:

Knowledge can be divided into two categories: natural sciences and humanities and socialsciences. The former is objective and universal, but the latter is not. Social and culturalphenomena in the west are different from those in the east, i.e. the objects of study aredifferent. Therefore there are differences concerning the deepening, development andspreading of this kind of knowledge. These differences will give rise to contradictions.Although internationalisation itself is theoretically neutral and fair, differences inrresources and national power will lead to unfair results in practice. The combination ofdifferences in national power with internationalisation inevitably results in unfairdistribution of interests among countries in international affairs. That is what China has toface while internationalising its education system' (Zhang and Xu 2000, p. 105).

The objective should be 'mutual development' on an 'equal footing'. Each countries' specificcharacteristics should be taken into account. Rather than eliminating culltural difference everyculture should be considered a 'valuable resource'. Internationalisation should not mean'standardisation, even less western standardisation': it should favour 'diversification', mutualunderstanding and appreciation of cultural difference. 'Chinese universities have to consider… how to preserve and develop traditional Chinese culture, and how to absorb and make useof foreign culture in the course of internationalisation, that is, how to move frominternationalisation to localisation'. This requires a multi-cultural approach to all programs.'We should master the "game rules" of the world as well as those of China. Such a broad viewis necessary if we want to participate in internationalisation' (Zhang and Xu 2000, pp. 104,112, 107-9).

Amartya Sen (1999, p. 118) makes a similar point that neither 'grand universalism' nor'national particularism' are appropriate in a globalised world. We share multiple identities, notonly those of national and global citizenship but professional associations and other forms ofaffinity that cross borders. He argues for 'global equity', in which these plural affiliations arerecognised, as distinct from 'international equity', which is national particularism plus state-managed international relations. In a globalising environment, universities have a doubleimperative: to open up to international influences, while sustaining and projecting a distinctiveidentity. Kaul et al (1999, p. 451) note that global effectivness in Sen's sense requires'reversing the logic of globalisation to place greater emphasis on national capacity-buildingand regionalism', a point also made, less directly, in the World Bank's analysis. But this willnot just happen. As Zhang and Xu put it, national cultural identity must be deliberatelysecured:

A nation has to preserve and develop its culture, since this provides both the cohesiveforce and the enterprising spirit of a nation, originating from its people's identificationwith its culture, their sense of belonging to the culture and their sense of pride in it. Ifthere are problems with, or psychological blockage to the heritage of national culture, the

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culture will inevitably fade or disappear. The transmission of culture is one of the basictasks of education (Zhang and Xu 2000, p. 107).

Likewise, if policy makers want Australia to participate in global higher education from aposition of strength, so that we participate in the effective shaping of the global setting, theywill need to nurture the capacity of universities to make a distinctive contribution, a capacitywhich is itself a public good. In turn, a healthly SSH capacity is integral to this public good.Like all public goods it is impossible to quantify in detail. However, it is open to binaryinterrogation. We can judge whether the national capacity in the SSH disciplines is or is not ina healthy state. We can also judge whether national capacity and quality are getting better orworse. This is sufficient a rule of thumb for policy makers, though it cannot specify the limitsof investment.

At the heart of capacity in the SSH disciplines is the capacity for independent basic research.Mala Singh, the Executive Director of the South African Council on Higher Education, arguesthat:

The fostering of ideas in a range of basic and applied fields is a necessary public good,allowing different ideas and their applications to nourish social development in amultiplicity of tangible and intangible ways. It should always be possible in highereducation to pursue knowledge in ways intended to extend the horizon of humanknowledge, irrespective of considerations of immediate relevance (Singh 2001, 3-4).

In the last decade Australian system regulators and policy makers have paid lip-service to thisline of argument but have failed to purse it with sincerity, vigour or rigour. Instead theresearch system has been skewed in favour of applications and commercialism, and the pure/applied balance has been lost. New evidence from Canada, published in the journal ResearchPolicy earlier this year, suggests that in the social sciences at least, this strategy might havebeen misplaced. Landry et al (2001, pp. 333-349) focus on the utilisation of social scienceknowledge in policy and by professional practitioners, in six fields: Political Science,Sociology, Economics, Anthropology, Industrial Relations and Social Work. They find that 16per cent of research usually or always leads to applications, and another 28 per cent leads toapplications from time to time. Significantly, 'research projects focused on users' needs wereno more likely to lead to utilisation than the projects focused on the advancement of scholarlyknowledge. Focus on the users' needs influences positively utilisation only in sociology but inno other social science' (Landry et al 2001, p. 346). At the same time, utilisation waspositively influenced by researchers' own dissemination efforts.

In other words, researcher push matters more than commercial pull, and as in relation tograduate output, a high-utilitarian bias is counterproductive because it weakens basic researchcapacity which is a source of applications. This confirms that to maximise the sum of thepublic and private goods that they enable and create, academics in the SSH need to keep bothof the balls in the air. They need to engage internally in their disciplinary communities, andthey need to sustain external engagement and readiness.

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5. Global public goods

Global public goods are goods which satisfy the criteria for public goods - they constituteeconomic externalities, with at least some qualities of nonexclusability and nonrivalry - whiletheir benefits are also quasi-universal in terms of countries (they are common to regions or tothe world as a whole) and populations within those countries (they are broadly if notuniversally accessible). We can talk about global public goods - or their opposite, globalpublic 'bads' - in terms of the distribution of benefits or costs to nations, or to people withinthose nations. In general, public goods, whether national or global, result from cooperation orcoercion rather than competition (Rao 1999, p. 73). Some public goods result incidentallyfrom the production of private goods, but deliberate production is more effective and efficient.

Sustainable global public goods/ bads constitute a special category of global public goods/bads. These are benefits or costs that are neutral in terms of generations, or at least affectcurrent generations without foreclosing their effect on future generations. This conception hasparticular importance in relation to ecology and non-renewable resources.

Globalisation is a process of economic and cultural convergence, powered by flows of capital,technology, ideas and people. These flows lead to increasing cross-national interdependence.This in turn renders global public goods more central than before. In a major study of globalpublic goods Kaul et al. (1999c, p. 453) argue that such goods fall into three categories:

1. natural global commons, such as the ozone layer or climate stability, where the policychallenge is overuse and natural sustainability;

2. human-made global commons, where the policy challenge is underprovision andunderuse, including knowledge, common and diverse cultures, transnationalinfrastructure such as the transport system, the financial system, international law andglobal communications and information systems such as the Internet. The architectureof the Internet is inherently nonexludable and nonrivalrous, though it is not universallyaccessible, and the services performed on the Internet are readily subjected to fencingoff (Spar 1999);

3. global policy outcomes including peace, global equity, financial stability, theelimination of disease and the establishment of human rights and the rule of law.

In the form of teaching services, education functions as either a public or a private good, or amix of both, depending on how it is organised. In contrast, knowledge in its natural form is asustainable global public good (Stiglitz 1999).

Scientific knowledge is more often universal in character. Some of the public good benefits ofSSH knowledge - particularly in the applied and professional disciplines - are localised;though as noted, cultural diversity is itself becoming increasingly significant as a global publicgood. (This means that a specifically Australian approach to higher education can constituteglobal public goods, provided that the Australian approach really is distinctive and is not anAmerican or British clone distinguished only by a falling dollar and cheaper export price).

Because knowledge is a global public good, the role of national government in sustaining theknowledge base, which derives from the economic character of knowledge itself; has global as

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well as national implications. Research in Australia contributes to the world as well as toAustralia. At the same time, its global benefits are subject to a major limitation.

First, the capacity to absorb and utilise global knowledge - a capacity which largely rests onnational institutions of higher education and research - is unevenly distributed. For example in1996, 85 per cent of all research and development expenditure was confined to the OECDregion, with another 11 per cent in China, East Asia, India and only 4 per cent in the rest ofthe world (World Bank 2001b, p. 4). At the same time, each time national or institutionalcapacity in education and research can be extended to another country the public good benefitsof the global academic network also expand. Academic networks, like the communicationssystems that now sustain them, are an extreme case of nonrivalry in consumption. The greaterthe spread of participation and the size of the network, the greater the potential public (andprivate) benefits.

Second, though knowledge is naturally nonexclusive and nonrivalrous, some knowledge isinitially excluded from scrutiny, rendered artificially scarce and used to constitute a rivalrousfirst mover advantage. (Exclusion is only possible in the case of particular discoveries or newartefacts that can be separated from the public knowledge at their base: this is less often thecase in the SSH as compared to the sciences and technologies). Thus knowledge can functionas a temporary private good and this is the function of intellectual property arrangements.Once the knowledge becomes widely used, excludability and rivalry disappear. Here there is apublic good policy tradeoff between the benefits of rewarding innovation and the benefits offree knowledge, which all else being equal tends to speed the rate of innovation. There is alsoa tradeoff between the global and national public goods of free knowledge and the nationalpublic good and firm-specific private good derived from a temporary monopoly of knowledge.

There has been relatively little discussion of global public goods produced in higher education.The World Bank has tentatively opened global public goods in higher education to scrutiny.Here the Bank focuses particularly on global relationships and systems:

Promoting an enabling framework for international public goods. Some consequences ofglobalisation and the growth of borderless education are turning into important issueswhich affect tertiary education in all countries but are often beyond the control of any onenational government. Among those challenges of particular concern to countries seekingto build up their advanced human capital capacity are the new forms of brain drain, theabsence of a proper international accreditation and qualifications framework, the lack ofclear rules for the protection of intellectual property rights of distance educaitonprograms, and issues of access to information and communications technologies,including the Internet (World Bank 2001b, pp. 66-67).

From the viewpoint of developing countries, the brain drain is a very serious problem. TheBank notes that there are 30,000 African PhDs working abroad, many in the USA, whileAfrican universities continue to suffer a critical shortage of trained staff (World Bank 2001b,p. 11). The brain drain produces both national and global public bads. Nationally it preventshigher education in the developing countries from achieving the critical mass necessary toaccess the fuller benefits of global knowledge, and thereby also affects the capacity to buildlong-term national identity which in many developing countries is strongly affected by highereducation. Globally it contributes to inequalities between nations and helps to sustain world

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poverty and political instability. In Australia, where international education feeds into skilledmigration, the international education program constitutes a net brain drain from thedeveloping countries. In that respect Australia contributes to global public bads (while makingits own national public good gains) - though the majority of international students studying inAustralia are from the relatively affluent nations of Malaysia, Singapore and Hong Kong, andAustralia's negative impact is dwarfed by that of the USA.

Such issues have yet to make their way onto the radar screen in Australia, except in anexclusively national form. In Sen's sense the Australian outlook is 'national particularist' and'international' rather than 'global', as is confirmed by the Australian approach to the Kyotoprotocols, and the judgement of Treasury that Australia should be an international consumerrather than producer of ICT goods and services: that is, Australia should free-ride on the ICTindustry in other countries rather than develop its own production and exports.

Let us consider an example from higher education policy. Australia has established a nationalsystem of quality assurance and accreditation. This is not to contribute to the global orderingof education, where the issues are still to be addressed, as the World Bank notes. Rather, theAustralian decision was triggered by the establishment of national quality assurance in theUK, which allowed British universities to claim an advantage in the international market.Australia's policy approach to international education has always been national particularist(though many individual educators are more high-minded than this) and has focused on theproduction of global private goods and national revenues, rather than national and globalpublic goods. Both of these reductions diminish the goods that might otherwise be generated.Essentially, the international education program was designed as a commercial program thatwould maximise export earnings and fiscal relief. Institutions' need for revenues, especiallyafter the cuts in government funding in 1996, have reinforced the exclusively commercialcharacter of the program (Considine et al 2001). Despite its orientation the internationalprogram also generates public goods, both national and global, which derive from theenhanced cultural mixing and off-shore engagement of Australians especially in South EastAsia. Further, the international program tends to enhance global skills such as cross-culturalcapacity, including cross-cultural business relaitons; cross-national collaboration andexchange; knowledge of a range of international contexts; and managing communications andtravel, which augments national and global capacity in higher education. To an extent thesebenefits also flow to the source countries. At present these benefits are incidental to theprogram.

The final phase-out of the subsidised international education program from 1988 reduced thecapacity of the Australian government to shape the outcomes. A more aggressive program ofsubsidies - for example, a substantially increased scholarship budget - could significantlyenhance the national and global public good benefits. The government could increase thenumber of students from poor countries, thereby broadening Australia's cultural engagementbeyond the present intake which is largely composed of middle class families from theChinese diaspora in five countries. The government could also increase the number of highquality research students. If not carefully handled this might exacerbate the brain drain fromthe developing world: nevertheless it could enhance long-term international relations, andresearch students in the sciences and technologies could augment the public good benefits toAustralian industry.

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The major policy difficulty posed by global public goods is how to pay for them. The nation-state covers market failure in the national economy, but there is no global equivalent. Globalagencies and international foundations can play a role, but in the end the principal point offinancing can only be national governments, operating within the framework of globalagreement. Kaul et al. suggest that the same principle should apply to global public goods asapplies to their opposite, global public bads such as pollution:

Governments must assume full responsibility for the cross-border effects their citizensgenerate. In other words, countries should apply to those spillovers a policy principle thatis well established nationally: the principle of "internalising externalities"... [This will]strengthen the capacity of nation states to cope with global interdependence. Theimplication is to let international cooperation start "at home", with national policiesmeant, at a minium, to reduce or avoid altogether negative cross-border spillovers - andpreferably to go beyond that to generate positive externalities in the interests of all.

A first step in this direction could involve establishing national externality profiles to helpbring each nation's spillovers, both positive and negative, into focus. These profilesshould facilitate bargaining among nations by increasing the transparency of the impactsthat states have on each other and the global commons. Such profiles would also makecountries more likely to take responsibility for the externalities generated within theirborders … it could be useful for ministries to have a two-track budget - one for domesticexpenditures and one to finance international cooperation, while ensuring effectivecoordination of these external activities (Kaul et al 1999a, p. xxvii-xviii).

Kaul et al argue that policy-making for global public goods should be a circular process, aloop, with the roots at the national level where primary responsibility for the internalisation ofexternalities must lie, for reasons of efficiency and effectiveness. Global action 'from above' isa second-best option. One would like to see Australia lead the way in the developing ofmethodologies for operationalising public goods in higher education. While such a scenariomight seem unlikely, we can be sure that global public goods will loom larger in future.

6. Problems of capacity and quality

The OECD index of national investment in knowledge aggregates spending on education andtraining, research and development, and software (as proxy for the ICT industries) as aproportion of GDP. Between 1985 and 1995 Australia's investment in knowledge declined by10.8 per cent compared with 11 leading OECD countries and 12.1 per cent compared to theUSA. Between 1995 and 1998 there was a further deterioration of Australia's comparativeposition by 3.3 per cent compared to the OECD group and 5.8 per cent compared to the USA.Total investment in knowledge fell between 1985 and 1998 while it rose significantly in theUSA and in the OECD as a whole. Between 1985 and 1998 the share of US GDP devoted toinvestment in knowledge rose by 15 per cent, while in Australia the share of GDP devoted toknowledge fell by 5 per cent. Further, most OECD economies invest more in knowledge (the'new economy') than in buildings and other fixed capital (the 'old economy'). Not Australia.Between 1992-93 and 1997-98 the ratio of investment in knowledge, to investment inbuildings and structures, fell from 87 to 68 per cent. Not only does Australia have the

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investment profile of an 'old economy', the 'oldness' has increased, while most of the world hasbeen moving in the opposite direction (Considine et al. 2001).

Both the undergraduate private goods and more particularly the public goods created in theSSH are dependant on public investment. Public funding per student in higher education fellfrom $8888 in 1994 to $6826 in 1999 (constant 1989-90 prices). Between 1995 and 1998 allbut five OECD countries increased the level of public investment in tertiary education. InAustralia public funding declined by 5 per cent which was the second lowest performance inthe OECD (OECD 2001b). During the 1990s average student-staff ratios rose from 13 to 1, to18 to 1, with the most rapid deterioration taking place after 1995.

The effects have varied by discipline. As Gallagher notes (2000, p. 34), 'some fields, such asmathematics, humanities and social sciences, are particularly dependent on general universityfunding'. Fields such as Business Studies and Computing can supplemented public fundingwith fee-based incomes: the classical SSH and natural sciences disciplines mostly cannot.However, for the most part, university leader managers have been unable or unwilling tocross-subsidise those disciplines unable to earn significant private incomes, to the degreenecessary to sustain their resource base. At the same time, in many universities the SSHdisciplines have been encouraged to adopt a more vocational character at undergraduate level,a hybrid of classic SSH and Business Studies practices, so as to improve their short-termmarketability while reducing the extent to which students are formed in core SSH disciplines.

These developments are unsurprising and could have been forecast on the basis of the mix offunding and incentives established in the Dawkins reforms (Marginson 2001). TheCommonwealth has conferred on university leader-managers a good deal of freedom infinancial management and priority settings. In the Enterprise University (Marginson andConsidine 2000) there has been a shift from internally referenced academic cultures, not toexternal community but to internally referenced executive cultures. Where once academiccultures constituted their own self-reference, their horizon of judgement, the position of theuniversity as an end in itself – the prestige, the financial position of the university as aninstitution akin to a firm – constitutes the horizon of value. By the same token the objective isnot to maximize the public interest, it is to maximize the university interest. University leadersare using their augmented economic freedoms to maximise their economic bottom lines. Theyare unwilling to assume the full funding of public goods. They have direct financial incentivesto increase fee incomes; and performance incentives to strengthen vocational contents,graduate employment rates and student demand. There is no corresponding link betweenfinancial or performance incentives, and the provision of public goods.

Enrolment growth has been concentrated in the most marketable SSH fields, Business andLaw, particularly in fee-based courses. International student growth has outstripped domesticstudent growth, and coursework Masters numbers have grown much faster than postgraduateresearch numbers. Fee-based Masters and Graduate Diploma are not subject to the samedegree of regulation as HECS-based courses and universities have tended to compete on thebasis of shortening the length of programs. Coursework Masters courses are often hard todistinguish from undergraduate courses. One suspects that the expansion of these courses isaugmenting credentialism more than it is augmenting the national capacity in knowledge.

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The overall outcome is the under-provision of national and global public goods, a part transferfrom public goods to vocationally-oriented private goods, and decline in the use value (thequality) of public and private goods due to deteriorating learning conditions (see also Karmel2001). The quality and capacity of the SSH are severely constrained by under-investment.

7. Conclusion

Over time the under-production of public goods tends to accumulate and corrodes the long-term infrastructure established in earlier periods of public investment. A future governmentwill need to find the way back to a major commitment to the production of public goods andlong-term (lifetime) rather than short-term private goods. It will be necessary to positivelydiscriminate in favour of those SSH disciplines heavily dependent on public funding. Recentexperience suggests that it would be inadvisable to rely on executive-led institutional self-interest as the primary medium for achieving these policy objectives.

The political pre-conditions for an increased investment in knowledge are conversion of theCommonwealth Treasury to the new OECD/ World Bank orthodoxy on investment inknowledge, and the establishment of broad community consensus. In a low tax environment,the key will be the financing mechanism used to underpin national investment. While pollssuggest that two thirds to three quarters of the electorate would be prepared to support anincrease in taxation of it was allocated to education, an increase in income or indirect taxeswill be met with some scepticism even if it is nominally linked to education. On the other handthere would probably be more support for a dedicated income tax, akin to the Medicare Levy,that was specifically linked to investment in education. Ideally such a tax would absorb themajority of national investment in education and research, underpinning a reworking offederal-state funding and administrative arrangements on the basis of cooperative federalism.

Finally, policy should foreground the contribution of national and global public goods inhigher education, while recognizing that such public goods are inescapably dependent onpublic investment. Correspondingly, policy makers should be more vigorous in holdinguniversities to account for the provision of these public goods. In other words, adoption ofpublic goods objectives creates both augmentation and obligation. As Singh puts it:

The contribution of higher education to the public good within the framework ofaccountability and responsiveness as well as the need to sustain and support with publicfunds certain higher education concerns and activities which are socially necessary haveboth to be articulated more explicitly and inserted more consciously in policy planningand implementation (Singh 2001, p. 6).

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