Friday, May 3, 2013
Abolishing PTPTN – A Populist Folly
Pakatan Rakyat has promised to abolish the National Higher Education Loan (PTPTN) programme; to immediately forgive the RM44 billion in loans outstanding; and to provide free education for all (along with subsidies for costs of living). This is dangerous populism.
Undeniably, many find the promise of a free education desirable. However, nothing is free. Someone must pay for it, and the abolition of PTPTN must be paid for by the government.
This simple fact seems largely lost on the Opposition pact, which makes no promise on how to fund either the loan forgiveness or tuition. It has also been noted that university employees are paid salaries and the grounds require upkeep, so even without PTPTN, and with complete funding of tertiary education, the government will need to spend some RM8 billion+ (and rising) each year to pay for "free" tertiary education.
That promise, too, is as of yet unfunded.
An example of how this would work in practice is the short-lived and controversial experiment last summer during which students enrolling at Universiti Industri Selangor found their loans frozen. While not the kindest way to test Pakatan's pledges, it is worth noting that the PKR Selangor government was forced to prepare to sell significant assets to cover the sudden tuition bill.
It is also worth noting that Pakatan leaders immediately demanded the reinstatement of the loans, because the long-term costs became obvious.
Cost aside, there are other dangers to this proposal. A culture of entitlement sets in among youth and the surplus of university graduates depresses wages and distorts the labour markets.
As seen in Southern Europe, the provision of free tertiary education has led to a perception of entitlement. When subsidies dry up, the rioting begins. Greece and Spain have been at the epicentre of this as a highly educated youth runs into a poor employment situation and riots.
In the U.S., tertiary education is covered by government subsidies and loans, making education so cheap as to be virtually free. The effects are bizarre. The most recent data show that over 5,000 janitors in the U.S. have a PhD, and over 34,000 are on the dole.
In the UK, when the government sought to increase the fee for university, youth rioted. It is reported that over one-third of all university graduates have gone on benefits. Half are not employed on graduation. Over time, 25 per cent will never enter full-time work.
All of this worry may be for nothing. Pakatan Rakyat has already back-tracked on its promise to close the Lynas rare earths plant mere days after publishing that very promise in its manifesto. Selangor's PKR government declared in court that its manifesto's promises are not in fact promises.
With Datuk Seri Abdul Hadi Awang publicly questioning the decision to abolish PTPTN and Datuk Seri Anwar Ibrahim's penchant for revision, Pakatan may even decide to expand the programme instead.
That would certainly be a wiser choice than destroying it and hoping all goes well.