Monday, October 12, 2009

Obsession with University Rankings: A Case of Missing the Forest for the Trees?

Dr. Mohd Nazari Ismail.

Prof. Gerhard Casper, when he was president of Stanford University in the US once wrote to a magazine that ranks US universities: “As the president of a university that is among the top-ranked universities, I hope I have the standing to persuade you that much about these rankings - particularly their specious formulas and spurious precision - is utterly misleading”. He added “I am extremely sceptical that the quality of a university - any more than the quality of a magazine - can be measured statistically.”

There is certainly a basis for his remark. This is because of the odd fact that in recent years very little positive correlation exists between the performance level of universities in a country and the ability of that country to avoid social and economic malaise.

This was not always the case for if we look back into history, there used to exist very strong linkage between the existence of superior academic institutions and the level of the countries’ economic and social welfare conditions. This is a truism for the Roman civilisation, the Arab-Muslim civilisation during the Umayyad and Abbasid Caliphates as well as the European civilisation during the Renaissance period. The Romans’ excellent academic institutions which were built upon knowledge sourced from Greek scholars resulted in the flowering of their civilisation. The golden age of Islam was also the time when famous educational institutions such as Al-Azhar in Egypt and other educational institutions in Islamic Spain prospered. In Europe, the Renaissance was also the time when universities such as Oxford, Cambridge, Sorbonne and others came into existence.

However, in recent years this linkage seems to have completely disappeared. The top 11 performers of the 2009 THE-QS ranking are American and British universities. However it is interesting to note that these two countries are not only the source of global financial problems, they are also the ones that are in the most critical state. America, despite having Harvard, MIT and other top ranked universities even possesses the dubious honour of being the most indebted country in the world. Its total debt is estimated at almost 50 trillion dollars and its public sector deficit for 2009 is a whopping USD1.4 trillion. On top of that it is also the world’s largest source of carbon emission per capita.

Britain, despite having Oxford and Cambridge, has an external debt which is 400% of GDP, the highest in the G7. Moreover, in a recent ranking of the stability of financial institutions by the World Economic Forum, the UK and the US were ranked at number 37 and 38, below many developing countries.

In Asia, Japan has the most number of top performers in the THES-QS table with the University of Tokyo being the highest ranked Asian university. Eleven Japanese universities are also among the top 200 in the world. But the performance of the Japanese economy is among the worst in the region. In addition, its public debt is predicted to surge to 200% of GDP in 2010. Japanese corporate bankruptcies soared by more than 10% in February of 2009 compared to the previous year and its economic problem is probably the main cause for its position at number 8 in the world in terms of suicide rate.
South Korea is another Asian country that did well in the ranking with four of its universities listed among the top 200. But Korea was among the countries that suffered the worse effects of the Asian financial crisis in the late 1990s. Its finances were so badly affected that, unlike Malaysia, it had to go cap in hand to the IMF to ask for financial help. South Korean’s economy is still in a precarious position with its foreign debt at the end of 2008 at USD380 billion or 28% of its GDP. South Korean’s position at number 11 in the world in terms of suicide rate is probably also linked to its economic problem.
It is therefore clear that nowadays having the most number of universities in the higher echelon of THE-QS ranking does not mean that the country’s social and economic welfare is also among the best in the world.
This situation is puzzling as one of the most important functions of a university is to produce academicians and graduates who can help generate ideas and formulate policies that will eventually lead to the creation of a nation with a high level of social and economic welfare. When academic institutions are unable to stop economic and social rot from taking place in society, then clearly they are not playing their true roles even if they are among the top in global rankings.
Therefore, the question that needs to be asked is why is there little linkage currently between the economic and social welfare of a country and the performance of the universities of that country. There are two plausible explanations. First, there is a possibility that the top THES-QS-ranked universities from the US, Britain and other socially and economically ill countries have not been producing real intellectuals or thinkers. They may have merely been producing `workers’ or technocrats who are meant to fill the job markets rather than intellectuals who can generate ideas in and provide advice on social values, economic systems and the practices needed to build an economically and socially stable nation. Another possible reason is that the wrong type of research and teaching activities are going on at these universities. In other words, maybe the economic and social frameworks that underlie research and teaching activities there are flawed? If this is true, then what kind of frameworks do we need in Malaysian universities to ensure that our country do not suffer the same fate? These clearly are the types of very complex issues that need further analysis and discussions. Mere concern with the superficial issue of our universities’ position on the THE-QS ranking may be a classic case of missing the forest for the trees.

Thursday, October 1, 2009

No need for excitement over temporary recoveries

Those familiar with Jalan Universiti near Universiti Malaya (UM) will remember that some time ago, rush hour traffic jams in front of the Sultan Abdul Samad Secondary School were horrendous. The main reason was that at the intersection of Jalan Universiti, Jalan Kemajuan and Jalan Dato' Abu Bakar, there was a roundabout. Any traffic expert can tell you that a roundabout is suitable only for those places where the traffic volume is not too high. But if the volume is high, a roundabout will only worsen the traffic flow. Only a systematic method of alternating the rights to transverse the roads could prevent a gridlock. The traffic problem was therefore unavoidable as long as the roundabout was there and this had little to do with whether road-users were ethical or civic-minded or otherwise in their attitude. Mercifully, the local authority had the common sense to replace the roundabout with a traffic light junction and a fly-over. Now traffic jams aroundthe location has lessened drastically even during peak hours.

This is similarly the case with the economy. When the financial system is flawed due to its predication on the lending-for-profit industry, there is no avoidance of periods of crises. The nature of the system creates conditions very similar to those of traffic jams. Certainly there will be periods of economic growth, just as there were periods of smooth traffic flow on Jalan Universiti. But that would be around 6.00am when the day has just started. But as more road users enter the road on their way to work, the flow would start to slow down. At 7.00am the first sign of a gridlock would appear. In the context of the US and the global economy those early signs of economic gridlock were around late 2007. At 7.30am the gridlock would be obvious to all. Transposing that to the US economy, this was in 2008 when the sub-prime problem was in full swing. Between 7.30am and 9.00am, the traffic situation around Sekolah Sultan Abdul Samad at Jalan University would be almost at a standstill.

And that is the state of the US economy from 2008 up to now when the credit situation caused the financial system to seize up. Operations at thousands, if not millions, of firms were brought to a stand-still. A large percentage of these firms will also be experiencing insolvency problems, as is the case with General Motors, Lehman Brothers, Freddie Mac and Fannie May in the US. Stimulus packages may get the economy moving again but only temporarily. Eventually the system will seize up again and the problem will get worse and worse, due to the worsening credit problem and increased level of indebtedness as the stimulus packages are also carried out using borrowed funds with interest charges attached. Stimulus packages, as economists are only too aware, merely serve to postpone the problem to a later time. Any growth in the economy due to stimulus packages will not be permanent. They will replaced by another period of slow-growth and recession.

In other words, the recovery situations are not unlike the temporary periods of smooth traffic flow at Jalan Universiti. It provides no reason for us to celebrate just as the daily commuting motorists at Jalan Universiti saw no real reason for joy when traffic jams eased up around 11 am. This was because they realised that as long as the roundabout was not removed, traffic congestion and gridlock could occur at any time. In fact they were also very sure that the problem would repeat itself every day between 5 pm and 8 pm and between 7.00 am to 10 am.

Back to the economy, we are now seeing some signs of apparent recovery. Strangely enough, we are now hearing excited comments by some economists who, for reasons best known to them, seem to completely ignore the temporary nature of these recovery periods. They seem to be behaving more like politicians rather than professional economists. Of course we can understand why politicians have to put a positive spin on any news as their political fortunes are dependent on whether the electorate feels good about the economy or not. But why are some economists behaving the same way? The only plausible explanation is that the fortunes of these economists are also probably contingent on those of the politicians.

In any case, we should remind both the politicians and those economists that despite the positive signs in the Malaysian economy, the Japanese economy, which is the second largest in the world, is still mired in a deep slump. In August Japan's exports shrunk by 36%, especially in the auto and steel industries. Much of Japanese exports go to the most important economy in the world - the US. But Japan's export to the U.S. fell by 34.4% this year with the largest decline being in the metal sector which fell by 82.2% in August. The weak Japanese domestic economy is reflected by the fact that its imports fell by 41.3% compared to that of August of 2008. All these reports indicate to us that as far as the world economy is concerned, the traffic jam has not eased up. Furthermore, if we bear in mind that the `roundabout' has not been replaced, it is far wiser for us to be thinking more on how to eventually remove it rather than to waste our time standing by the sides of Jalan Universiti and cheering the temporary easing of the traffic jams. Otherwise the students at Sekolah Sultan Abdul Samad will look at us and think that we are all a bunch of idiots.

A Case of a `Double Whammy’

Back in 1997, world leaders drew up a protocol in Kyoto, Japan to implement the United Nations Framework Convention for Climate Change. After several years of debate, it officially became an international treaty on 16th February 2005. The protocol represents one of the most serious collective attempts by the world’s political leaders to tackle the various grave environmental problems facing humanity.

As of February 2009, 183 states have signed and ratified the Kyoto Protocol. Sadly, the US which is the producer of the world’s largest amount of greenhouse gas per capita till now refuses to ratify the treaty. One of the main reasons for this refusal is her concern that abiding with the agreed limits will harm its economy.

The US government obviously realised that it was impossible to achieve environmental targets, as stipulated by the Protocol, and economic growth targets at the same time. This fear is not unfounded as total US greenhouse gas emissions in 2004 actually went up by 15.8% compared to 1990 levels. But to castigate the US over this single statistic may be unfair as global greenhouse emissions had also increased by 38% in the period 1992 to 2007.

In any case, the issue of climate change has not been consigned to the back-burner. The world’s political leaders agreed in 2007 to come up with a successor to the Kyoto Protocol. At the 33rd G8 summit, G8 nations agreed to reduce carbon dioxide emissions by half come 2050. In December 2009, global leaders are going to meet again in Copenhagen to discuss a framework to solve the problem of climate change.

Is there a basis then to anticipate significant improvements in the control of greenhouse gas emissions in future years? Sadly, the prognosis is not that good and the reason is very simple. The more important and immediate task in the minds of almost all political leaders around the world nowadays is on achieving economic growth rather than on reducing emissions of greenhouse gases. Political leaders are experienced enough to know that generally the electorate is nowadays concerned more about the economy than the depletion of the ozone layer. Due to their impact on jobs and income, political leaders’ management of economic issues rather than environmental issues will significantly determine their political fate. If we study the history of many countries including Malaysia, it is quite remarkable that compared to previous leaders, current political leaders’ are very much more concerned with the economy. For example, in the case of Malaysia, Datuk Seri Najib six months into his prime ministership has made more statements on the economy than Tunku Abdul Rahman during his thirteen years in the same office. Moreover, the statements nowadays are almost always, in one form or another, the reassurance to Malaysian voters that the country’s economy will continue to grow.

This need to reassure is because, unlike before, there is a very high level of `financial leverage’ or indebtedness among many private and public sector organizations, indebtedness which carries interest charge, often of the compounding type. To illustrate, the total US debt which includes households, business and financial sector debts is now estimated to be around USD57 trillion compared to only about USD5 trillion in 1957. Highly leveraged firms carry higher risk of becoming bankrupt if sales slow down. So the pressure to generate sales revenue and profit is very high or intense in order to ensure the ability to meet debt commitments. Any lateness in repayment will simply be penalised by additional interest charges. And once major players in any industry engage in financial leveraging, it is difficult for their competitors not to follow suit. Soon almost all firms in all industries cannot avoid becoming leveraged or highly indebted. For them revenue growth is essential. The alternative is bankruptcy or insolvency. Hence, the growth imperative for all economies regardless of the implications for the environment. In the case of the US, when the economy grounded to an almost complete halt in 2008, the US federal government, despite its own enormous public debt of more than US$11 trillion, quickly stepped in to ensure credit will continue to flow to business organizations and for the economy to continue to grow. The cost to the environment due to these measures is hardly discussed.

Humanity is currently facing two extremely serious problems. The first is the global climate problem which is getting worse. The second is the very serious problem of underpaid employees everywhere having to work harder to generate more revenue for their firms. In a way present day employees are now being enslaved. In the past, slaves are physically chained. Modern day slaves are chained by their nation’s indebtedness, their firms’ indebtedness as well as their own personal indebtedness from housing, car or credit card loans and the like. So for most people nowadays, there is no choice but to work if they are to avoid losing their personal possessions and avoid bankruptcy. Pay and working conditions considerations are now not as important as getting secure employment itself.

There are social costs to be borne in all these. For many families, both parents will work day and night. Many have hardly any time for their children’s upbringing. For those who can afford it, maids will do the task for them. It is not a wonder that we are witnessing increases in cases of juvenile delinquencies and family breakdowns. Tackling these problems should be the priority for our political leaders if the fate of our future generations is of the utmost concern. Global warming undoubtedly is a serious problem for it is said to be responsible for many ecological disasters including storms and floods. But it is arguable that the more serious problem is the debt-generated phenomena of modern-day human slavery and oppression and all its attendant negative social consequences. Humanity is now drowning in floods of water and floods of debt. It is a classic but tragic case of a `Double Whammy’. Sadly, these are also all man-made problems caused by making debt an industry integral to the modern economy.