Let’s say you live in one of those former socialist countries with a really old-fashioned higher education system.  Your universities are insular because they have almost no contact with the private sector.  Internally, they are managed by an academic oligarchy.  Externally, they report directly to a government– no Board of Governors, just a straight reporting relationship between the rector and a government minister.  And I don’t just mean an accountability relationship here – I mean the rector and every single employee of every single university is a civil servant, and hence subject to rules applying to the civil service.  Except for those universities with medical schools – which make some money out of the provision of health care services – the system is as close to 100% reliant on government funding as makes no odds. 

What do you do to modernize such a system?  What’s the dream reform?

Well, number one, you set the universities free.  You turn them into independent organizations – in this case called “university foundations” – by statute.  Staff cease to be public servants, but instead work for universities.  Just like every public university in North America. 

That means you need a different governing arrangement.  So why not go the North American route and have government appoint a Board of Directors from a group of community leaders?  Indeed – why not go even further, and let those Boards, once selected, continue to select themselves, like a kind of self-perpetuating oligarchy, with no interference from government?  McGill works this way, and to an extent Queen’s does as well (though both also have elections to the Board from internal constituencies as well).  Indeed, the Government of Alberta has just decided to move in a similar direction, giving institutions greater flexibility to name their own members, to general acclaim.

But how do you solve the problem of being too dependent on government financially?  Charging tuition fees is one way, but if politically that’s not an option you’re in a bit of a quandary.  The government can still yank your chain whenever it feels the urge to do so.  So – and stay with me here for a minute – what if you provide universities with absolutely stonking huge endowments that they can draw on?  Then they can be more or less independent of government financially as well as legally?

Perhaps this seems too good to be true.  Most academics (in most anglophone countries at least) would likely think this is a pretty good system – much like the one we are used to but with more insulation from government than is common.  And yet, intriguingly, when Hungary did exactly this last month, it was reported by Deutsche Welle as “Government attempts to take-over universities”, while Reuters claimed it as President Viktor Orban’s government extending “dominance through university reform”.

Now, I am obviously not going to use this post to stan for Viktor Orban or his Fidesz Party. Orban is a thoroughly unpleasant guy, to put it mildly.  But I do want to point out that the case against Orban isn’t quite what it seems.  He is undoubtedly hijacking institutions of higher education, but not in the way that most people seem to think.  He and his allies aren’t gaining vast new powers over universities through these changes – they already have that by virtue of every university professor being a government employee and through control over something like 100% of institutional funding.  At a day-to-day level it’s not clear to me that it matters all that much whether the universities are taking orders from Fidesz apparatchiks in the ministry or whether they are taking it from Fidesz apparatchiks on a university board of directors.

The significance of the move, however, is that by turning boards into self-perpetuating oligarchies (many, many McGill’s, let’s call it), they are insulating universities against future changes of government.  Fidesz apparatchiks will go on appointing other Fidesz apparatchiks even if a new government comes to power, because the law that creates Foundations that can only be altered by a 2/3 vote of Parliament, which would be difficult for the Hungarian opposition to achieve, particularly given the way Orban has used Putin-like tactics to silence opposition media.  In other words, what sounds like a good idea to safeguard university autonomy can look pretty ugly when it’s Orban in charge of appointments.

The financing of this change is not entirely clear. Hungary spends about 1% of GDP on financing its higher education institutions.  By normal endowment spending rules, supporting that kind of expenditure via endowment would require resources equalling 20-25% of GDP to be transferred to these new Foundations, which for Hungary implies something in the $30-40 billion range.  The European Union put the kibosh on a proposal to divert about $4 billion in EU COVID emergency funding to this purpose a couple of weeks ago, which means that despite claims of massive transfers of state-owned assets to the Foundation, it’s hard to see how the amounts of money involved will actually make institutions self-sufficient.  To the limited ability I have been able to get a sense of the sums involved (for instance, this quite useful article from Balkan Insights, and various reports from or about Corvinus University, which adopted the Foundation system a couple of years ago) suggests that there isn’t nearly enough money, which means that a few years down the road we are either looking at cuts or continued reliance on government funding (not the worst thing in the world, but undercuts the ostensible purpose of the reforms).

In any case, my point here is simply that when engaging in policy analysis, it pays to not look at a set of reforms in isolation.  The starting point matters.  The motives of policy-makers matter.  What might be seen as a big step forward in (say) Edmonton might not be seen as such in Budapest.  It all depends.