The formation of the Council for the Defence of British Universities is a welcome response to their present and future plight, and both Howard Hotson and Keith Thomas have made powerful defences in the LRB of the indispensable moral and intellectual values which the universities represent. A problem, however, is that the people who now determine the universities’ funding seem largely impervious to these defences. They hold the view that such values somehow come at the expense of the universities’ place in the real world: in other words they conflict with the universities’ ability to make money for themselves and for the economy. They take their stand on the ‘common-sense’ argument that the universities must justify their existence to the tax-payer and they must do so now. The criterion, they argue, by which we measure such justification is the contribution the universities do or do not make to the economy and to business; and, above all, to the market. This argument, if expressed properly, is not unfair. It is entirely reasonable to expect the universities to play their part in the country’s economic well-being and to wonder how that part might best be played. We should, therefore, be prepared to meet those who today make funding policy on their own ground. What we find, alas, is that the ‘evidence’ they employ is rarely evidence at all. On the contrary, it is often ideological assertion and wishful thinking.

The proponents of the marketised universities, ministers, ex-chairmen of BP, House of Commons select committees and those who acquiesce in the distribution of that funding – the Higher Education Funding Council for England (HEFCE), for instance – seem to have an operative notion of a market relationship between the universities and the economy. In practice, however, it is very difficult to find out what it is since it has never been formally articulated. It appears to be this: businessmen know what they want, and what they want the universities could and should provide. The ‘market’ somehow signals to a responsive university system what these wants are and it satisfies them. At the same time, the customers of this system, students, as consumers, also signal to the universities what they want and the universities compete with each other to satisfy them. Furthermore, the market drives innovation and if the universities are tied to the market they will innovate – to the benefit of businessmen, students and the economy. All of this is to be underpinned by a funding formula which will fuse the market, business and innovation in such a way as to produce instant felicity. That no university system in the world actually works likes this is no bar to those who think they do or, in the British case, should. I suspect that lurking behind such a belief is a Tesco model of the market: that it is like a giant supermarket in which shoppers prowl around looking for what they want and their needs can be immediately met by restacking the shelves.

Though they might deny it, this is a reasonable statement of the position held by the ‘reformers’ of university funding. It only seems a parody because it is immediately obvious that it is almost completely unreal. It rests on a fundamental misconception of the market and its functions: a misconception that could only be held by people who have not thought seriously about the market or its history. The market itself, for example, rarely drives innovation; on the contrary it usually reacts. Entrepreneurs certainly have a sense of what might be profitable, but the market does not tell them what will and what won’t. They rely, largely, on guesswork; they put something on the market and keep their fingers crossed. There is no certainty in the market. Nor does it necessarily signal what needs to be done. The market did not synthesise penicillin or put communications satellites into the heavens or discover how cholera is spread. In many cases the market can resist innovation. Businessmen get set in their ways or simply make the wrong guess. Nor are consumers natural innovators. On the contrary they are often very conservative and have to be induced to change their habits by the enormous engine of advertising. Where an industry is utterly dependent on competitive innovation – pharmaceuticals, for example – it draws on the universities now as it as it always has done: and that is on basic research much of which goes nowhere. Success in such research is often dependent on curiosity, hunch and pure accident, none of which fits with the now dominant model of how a university should behave. The brilliant achievements of British molecular biochemistry after the Second World War were in part due to the funding bodies who kept the money flowing even in the face of frequent disappointment.

Nor can students perform the roles given them in this fanciful version of an educational market. They are not perfectly informed customers scouring the shelves of a tertiary supermarket. They are frequently very ill-informed, as anyone who teaches in a university knows. And what if, as customers, their wishes conflict with the needs of the economy? They have been leaving modern languages departments in droves and if ever there was a case of market failure that is it. Those who are most critical of economically ‘useless’ subjects usually alight eventually on cultural and media studies – but their growth was a result of the choices of very many customers. The fact is that tertiary education, like any other kind of education, cannot rest on a competitive market. Education is necessarily prescriptive. The customers don’t know what is best and a system based solely on their choices would not be worth having. In any case, how can England’s universities compete successfully with each other? They differ enormously in wealth, prestige and academic achievement and there is no sign that the political classes wish in any way to change that. The enormously wasteful and counter-productive research assessment exercises were introduced to force the universities to ‘compete’ but they have never altered the relative standing of individual universities.

A stronger case is made by those who argue that the universities have become detached from the economic and industrial demands of their localities. Before the Second World War, and to some extent after it, many of the ‘red brick’ universities or institutions which became red bricks offered degrees or diplomas in subjects appropriate to their location. After the war that increasingly ceased to be true and in many ways this is to be regretted. One reason is that the universities tended to be nationalised; unlike on the continent, most students in Britain do not come from the towns where they go to university, and that helps to detach them from their localities. (With the destruction of the LEAs the government is doing the same to secondary education.) Another is that local industries lost interest in them – partly a result of the first reason, partly a simple failure of industry as such. The third, and most important, was the actions of government. British governments have never rated technical education very highly, despite what they say. It was government that allowed the junior technical colleges (secondary schools which provided an excellent technical education) to die, largely on account of their expense. And it was government that turned the polytechnics into general universities. The universities themselves bear no responsibility for this.

Furthermore, the debate over the universities has been dogged by a confusion between ‘skills’ and tertiary education. All British governments have lamented the decline in industrial skills, a decline in which they have connived, and now expect the universities to do something for which they were never really designed. It is possible that the huge increase in student fees will encourage more people to go to a ‘local’ university and there is some evidence that the old polys are attempting to re-establish relations with what survives of local industry. But that is an entirely fortuitous, and very uncertain, outcome of an attempt to shift the costs of universities onto students and their families.

One of the more surprising things about a government that boasts of Britain’s ‘soft power’ is its refusal to admit that Britain’s universities are, along with Rolls Royce and the pharmaceutical companies (both of which have been very well served by the universities), probably its most internationally competitive ‘industry’. It is, or was, perhaps the best university system in the world, in teaching if not necessarily in research, where the competition from the American universities is formidable. This is internationally recognised. As a result the universities earn the country a lot of money. They could, of course, earn much more. But the government frustrates them at almost every turn: fees for overseas students are very high and it is increasingly difficult for non-EU students to get visas. An economically rational government would exploit the international competitiveness of the universities by allowing them to charge variable fees for non-British students and by making it much easier for non-EU students to get visas. They won’t do that, however, because Cameron made a foolish promise at the last election about immigration, and because an obstinate home secretary thinks her status in the Tory Party is dependent on excluding as many potential students as she can. Thus while the government insists that the universities must behave like competitive entrepreneurs it does its best to ensure that they cannot.

The universities are examples of the success of public institutions in a country whose political elites are now ideologically opposed even to the concept of the ‘public’. Their opposition has in no way been modified by the financial crisis of 2008-9 and its consequences, which should have made them very wary of the ‘private’. Nor has the private been discredited by the failure of virtually every privatisation of the last 30 years. However desirable the sale of public assets might have seemed in principle, in practice it has tended to go badly wrong – something the electorate has long understood. It is, however, almost inconceivable that any privatisations will be undone. The success of public institutions is a reproach to the private-corporate model which makes it even more disliked by those who adhere to that model. They prefer private failure to public success. As long as this is so there will be immense pressure on the universities to go the way of the other privatisations.

While it is impossible for the universities somehow to rescue the economy from all its failings, and to do it immediately, as the government seems to wish, I suspect the British universities are actually closer to business than any other system in the world except the American. The kind of business to which they are so close is high-skill and research dependent, and the profusion of science parks in university towns is designed to promote a fertile relationship between what the universities can do and what British business should do, but often doesn’t. Historically that relationship has been very successful, but I would be surprised if there is much more potential for growth, unless the government produces bags more money, which, of course, it won’t. Both sides, universities and industry, are now probably doing as much as their resources or (in industry’s case) their inclinations allow.

As for the derided humanities, which are to receive no more public funding, my limited experience suggests that its products have proved remarkably successful in the financial and service sectors – the fastest growing parts of the economy and those on which both the Conservatives and Labour continue to place their bets. The universities have always been sensitive to social, economic and intellectual change, and have adjusted to it faster than most other areas of British life. We need only look at the plethora of chairs in university science departments in subjects which hardly existed twenty years ago or at the huge expansion of university business schools or at the introduction of ‘management’ into so many undergraduate courses. The recent history of Britain’s universities demonstrates that there is no necessary antithesis between their traditional intellectual functions and structure, on the one hand, and, on the other, their ability and willingness to work with the sections of the economy that want to work with them. A more pertinent and embarrassing question, which few will ask or answer, is why in the past so many inhabitants of the real world were unwilling to do so.

Supporters of the proposed new structure of university funding are entitled to ask what alternative its critics would suggest. I would favour a return to the old University Grants Committee, the arrangement by which the universities themselves distributed the money. That, however, is no longer possible. It would be utterly unacceptable to a government of any party and there is an enormous bureaucratic class in the universities which has a direct financial and political interest in not going back to it. The best we can hope for is that governments will let the universities get on with doing what they have traditionally done very well if unencumbered by misguided political intervention: a first-class intellectual education which also makes the country a lot of money, and could make it much more.

The question that future historians will find most interesting is why a political class should have set about wrecking a university system which by any criterion (including money) has been outstandingly successful. Sheer ignorance is one reason: a belief that historical experience has nothing to teach a no-nonsense governing class. Muddleheadedness is another. If ever there were an example of muddle it is the relationship between business and government proposed by the 2011 White Paper, or the insistence by a government which tells the universities what they can or cannot charge that they must go out into the world and compete, or the present government’s attitude to overseas students. It is also surprising that people who have for so long dismissed the idea that governments can pick ‘winners’ now wish to do exactly that. A third reason is ideological: a hostility to the public sphere so entrenched as to defy argument or evidence. If there is no change to government policy the decline of the British universities will be slow but inexorable; and one thing historical experience tells us is that when a university system falls it can never be rebuilt.