Higher Education, From Public Service To Consumer Product

In countries that once invested in free public university systems, higher education is increasingly becoming an investment option turned over to the private sector. This is not necessarily a bad thing.

Learning time in Buenos Aires
Learning time in Buenos Aires
Ana María Mass

BUENOS AIRES — In many if not most countries, it can no longer be assumed that the state will provide its population with higher education. Private university and university-level coursework has been expanding worldwide for decades, and its growth can be measured with the number of students enrolled in private higher education institutions — a third of all such students globally.

Private universities constitute a clear majority of higher-education institutions in some countries. In the United States and Latin America, private education is already well established. In Dubai and Bulgaria, it's a recent phenomenon. In Japan, South Korea, Indonesia and the Philippines, 70% of university students are in private institutions, while it is now more than half in Brazil, Colombia and Chile.

In the United States, Mexico, Brazil and Chile, there has also been an increase in the number of universities conceived as profit-making enterprises. In 2010, these universities represented 10% of the student population, and the biggest company among these was the Apollo Education Group, owner of the University of Phoenix. Their objectives are sometimes questioned, as they admit students of lesser academic merit who are more likely to abandon their courses and rely on financing through loans or federal grants.
Argentina doesn't allow profit-making universities. There are universities that are managed in the same manner that companies are, but their legal standing is "non-profit." The terminology and reality can be so fuzzy that it has given rise to terms like pseudo-profitable and quasi-profit organizations.
The fastest growing sector in the world is "demand responsive," which usually refers to institutions that accept people with low-level qualifications. Such institutions abound in China, India, Russia and Mexico, and provide vocational training opportunities and access to work for people less likely or able to access a bona fide university education.
Another form of privatizing higher education is to charge fees for courses in public universities, as we see in Argentina with long-distance education, post-graduate courses and continuing education.
A growth engine
Where countries have loan or grant systems, like the United States and Chile, institutions are prompted into competing for a piece of the students' purchasing power. There is also the long-established practice of private institutions receiving public subsidies.
Higher education is now seen as one of the engines of economic growth. Demographics and demand are pressuring countries to increase the offer of education "products," while figuring out how to pay for them. The traditional social functions of higher education as a public good, education for citizenship and economic development must today face the concept of education as a private good. People and academic institutions are now expected to shoulder part of the financial burden, hence institutions' need to diversify revenue sources.
The privatization of higher education is a reality, and perhaps an irreversible one. Depending on the country, the best students are divided between public and private universities, as are lecturers and full professors. Independent rankings are in turn becoming the means of gauging performance and results, placing new pressures on both private and public institutions. In terms of increasing both quality and accessibility, the best-case scenario would see the private sector becoming a sort of partner to the state in providing young people with higher education.
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Debt Trap: Why South Korean Economics Explains Squid Game

Crunching the numbers of South Korea's personal and household debt offers a glimpse into what drives the win-or-die plot of the Netflix hit produced in the Asian country.

In the Netflix series, losers of the game face death

Yip Wing Sum


SEOUL — The South Korean series Squid Game has become the most viewed series on Netflix, watched by over 111 million viewers and counting. It has also generated a wave of debate online and off about its provocative message about contemporary life.

The plot follows the story of a desperate man in debt, who receives a mysterious invitation to play a game in which the contestants gamble their lives on six childhood games, with the winner awarded a prize of 45.6 billion won ($38 million)... while the losers face death.

It's a plot that many have noted is not quite as surreal as it sounds, a reflection of the reality of Korean society today mired in personal debt.

Seoul housing prices top London and New York

In the polished streets of downtown Seoul, one sees endless cards and coupons advertising loans scattered on the ground. Since the outbreak of the pandemic, as the demand for loans in South Korea has exploded, lax lending policies have led to a rapid increase in personal debt.

According to the South Korean Central Bank's "Monetary Credit Policy Report," household debt reached 105% of GDP in the first quarter of this year, equivalent to approximately $1.5 trillion at the end of March, with a major share tied up in home mortgages.

Average home loans are equivalent to 270% of annual income.

One reason behind the debts is the soaring housing prices. In Seoul, home to nearly half of the country's population, housing prices are now among the highest in the world. The price to income ratio (PIR), which weighs the average price of a home to the average annual household income, is 12.04 in Seoul, compared to 8.4 in San Francisco, 8.2 in London and 5.4 in New York.

According to the Korea Real Estate Commission, 42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s. For those in their 30s, the average amount borrowed is equivalent to 270% of their annual income.

Playing the stock market

At the same time, the South Korean stock market is booming. The increased demand to buy stocks has led to an increase in other loans such as credit. The ratio for Korean shareholders conducting credit financing, i.e. borrowing from securities companies to secure stock holdings, had reached 21.4 trillion won ($17.7 billion), further increasing the indebtedness of households.

A 30-year-old Seoul office worker who bought stocks through various forms of borrowing was interviewed by Reuters this year, and said he was "very foolish not to take advantage of the rebound."

In addition to his 100 million won ($84,000) overdraft account, he also took out a 100 million won loan against his house in Seoul, and a 50 million won stock pledge. All of these demands on the stock market have further exacerbated the problem of household debt.

42.1% of all home purchases in January 2021 were by young Koreans in their 20s and 30s

Simon Shin/SOPA Images/ZUMA

Game of survival

In response to the accumulating financial risks, the Bank of Korea has restricted the release of loans and has announced its first interest rate hike in three years at the end of August.

But experts believe that even if banks cut loans or raise interest rates, those who need money will look for other ways to borrow, often turning to more costly institutions and mechanisms.

This all risks leading to what one can call a "debt trap," one loan piling on top of another. That brings us back to the plot of Squid Game, "Either you live or I do." South Korean society has turned into a game of survival.

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