Hey folks! Tonight I will be writing about the recent funding cuts involving Finnish universities because I honestly am pissed off.

A Summary: Under the name of (economic) “austerity”, the current Finnish government headed by the 3 “S”–Juha Sipila (Keskusta), Alexander Stubb (Kokoomus) and Timo Soini (Perussuomalaiset) suggested cuts amounting to €500 million (US$556 million) from Higher Education Institutions by 2019.

So today, I was watching how Finance Minister Alexander Stubb was met with an angry group of protesters when he went to make a speech yesterday at Helsinki University. I also got angry after watching the video, because the Finance Minister did promise before the elections to never cut university funding, and decide after elections to do the exact opposite. That’s just engaging in hypocritical behavior. (Check the trending hashtag #koulutuslupaus on twitter and instagram).

Currently, most discourse online against the university funding cuts are mostly related to the philosophy of the nature of higher education–in pursuit of knowledge, for equality, and as a basis of human rights. In particular, I loved the way Janne Saariviki puts it:

“Opit, joita yliopistoissa saa, eivät tähtää ensisijassa menestykseen vaan totuuteen.”

This translates to:

“Universities must not aim primarily to achieve (measured) success, but to teach the truth.”

Yet for the longest time, I was puzzled as to why there was no economic argument against an announced “economic” decision by the Finnish government. The entire discourse seems to be acknowledging that cutting funds from tertiary education institutions is indeed an economic policy that will result in a successful austerity policy, and eventually lead to continued economic growth in Finland.

Now this is not even true, because no matter how you look at it, ALL schools of economics will tell you that any spending on education will only to the long-run economic growth of a country. In addition, there is no evidence by the current government to show exactly where the inefficiencies of universities are. Neither is there evidence that suggests that universities are in the first place inefficient.

So let me add on to the current discourse to do an economic post today on why  the funding cuts to Finnish universities are more politically motivated, rather than economically.

The Economic Theory:

Look at this graph illustrating the long-term effect of an increase in spending on education, which is the right and ideal thing to do:

ny1The X-axis is “national income” and the Y-axis represents price level in an economy. Increases of education spending will always shift the AS curve outwards, and on this graph it shifts from AS to AS1, resulting in a lower price level (From P to P1) and a higher national income (from Y to Y1) in the country. A higher national income indicates economic growth.

I know what you are thinking about now–you will probably ask,

“But Finland is going through recession now, how on earth will we get money to spend on education?”

Now the above question is a typical austerity argument. But let me ask you this–is the Finnish government really doing policies that promote austerity measures?

Just think about the recent sote issue. For a detailed economic/political analysis, click here. How is it possible that in spite of two independent experts’ report that the best outcome of sote is 4-5regions, and Kokoomus saying that they are willing to go up to a maximum of 12 regions, the coalition ends up with 18 regions, as of Keskusta’s exact demands? The Perussuomalaiset didn’t even say anything. If the government has agreed to 4-5 regions as opposed to 18 regions, as per the independent experts’ recommendations, they would have saved at least €1 billion. The targeted higher education cuts by 2019 were on the other hand, €500 million.

Hello–so what austerity are you talking about? On the one hand, the government is more than willing to spend at least €1 billion more when there is a better, more cost-efficient alternative. On the other hand, they say “Oh we cannot help it but cut higher education funding by €500 million.”

This is why I’m inclined to agree with Freodom that there is no austerity in Finland. This also means that higher education cuts is not “inevitable”, but a political choice.

And a bad one, by the way.  Don’t take my word for it–OECD actually issued a warning to Finland over education and research cuts. And even the very esteemed Nobel prize winning economist Joseph Stiglitz warns that such education cuts is “robbing” from the next generation.

So let’s go back to the original question:

“But Finland is going through recession now, how on earth will we get money to spend on education?”

What Joseph Stiglitz recommends, therefore, is through increased government borrowing justified on the grounds of promoting long term growth. Now, according to economic theory, not all government borrowing is bad–if a government were to borrow to invest in the next generation, such a borrowing is good. Finland’s credit rating is still pretty solid, so what is holding the government back from borrowing to secure great human capital in this and the next generation?

To add injury to insult, there is actually an expectation for the universities to–in the Education Minister Sanni Grahn-Laasonen’s words and I quote– “raise our ambitions”. Her words:

“We Finns shouldn’t be afraid to discuss how science, research and higher education resources could be used wisely, if resources dwindle.”

But let me ask you this–why must “resources dwindle”?

Why is it okay for political reasons to spend at least €1 billion more when there is a better, more cost-efficient alternative, on the sote issue, but insist on cutting €500 million on tertiary funding with such huge long-term economic costs, as I have convincingly shown in the above?

So don’t you, my dear reader, for one moment believe that this tertiary education cuts argument has economic sense. This cut is politically motivated, not economically.

My personal belief is that tertiary education institutions are targeted for cuts because they have zero political power in Finland. Yes, yes, protest all you wish–so? It’s probably just noise because professors and researchers probably don’t have power. The government will go ahead to implement the cuts anyway.

If the argument is indeed about ambition–again and I quote:

“In terms of quality, research overlap and small research communities are not the best options. We need to raise our ambitions in order to maintain the peak level on the world stage.”

Then MORE spending is needed for the institution to specialize, not less. Why?

Because if the government is serious about specialization in universities, then more administrative staffs is needed to support professors’ ambitions, so that professors can concentrate on ambitious research and less on silly administrative issues. This makes sense, right? How do you expect any academic to be ambitious where there is no supportive eco-system?

So universities– according to this logic on “ambition”– should be getting more funding instead of less, financed by increased government debt. Again, increased government debt for investment in human capital is good for the long-run and taking cuts might be disastrous.

Anyway, I’m saying these in spite of having faced quite some problems in Aalto University. For example, I did have an issue with the English test, because I don’t understand why all EU folks are exempted when all Asians have to take it–if testing for language ability is really the case, they might as well make every Aalto applicant sit for the test. I also have a huge problem with the “this is not part of my job scope mentality”–it took me 1.5 years to get my name changed from “Wan Soh” to “Soh Wan Wei”.

But you do not get efficiency by cutting funding. In fact, the opposite is true: To get efficiency, more funding is needed. To confuse administrative inefficiencies with inefficiencies of the work of my professors is honestly a grave insult to them.

This is what higher education in Finland did for me–I learnt life lessons, “truths”, as Janne Saariviki puts it. Even though Aalto University is nowhere near top 100 on the QS World University rankings. Do I cherish my education at Aalto? Of course! I went to Aalto University as a narrow-minded person with a fixation on academic grades, but emerged as a more compassionate, open-minded individual who is more appreciative of different interpretations to life.

I rest my case, dear readers–this whole Finnish tertiary education funding cuts issue seriously has no long-run economic basis. However, since we have zero political power, I’d like to end this post with this:

“You politicians decide what you want for Finland. Touch your conscience.”