By Iqbal Quadir
Iqbal Quadir is the founder and director of the Legatum Center for Development and Entrepreneurship at the Massachusetts Institute of Technology.
As students in universities across the country enroll in fall courses and the school year begins afresh, new ways of thinking are more appropriate than ever. List America's top export industries, and higher education will be absent. Given the tremendous potential of the industry, this omission deserves some further examination.
America's institutions of higher education dominate global rankings and are the envy of the rest of the world. Our $400 billion plus industry is hugely strategic on a global scale and has massive growth potential. Yet only 3.5% of students in the US are foreign nationals. Still, these 700,000 students contribute about $21 billion annually in tuition and living expenses--America's third largest services export industry behind financial services and management consulting services. Millions of families want to send their children to US universities. Internet-based initiatives from Khan Academy to MITx are poised to give greater access, very possibly altering the nature of education in some ways, but concurrently fueling interest for US education in general and the deep, interactive learning that only on-campus instruction can provide--not to mention the unmatched networking opportunities of physical universities. Despite the transformative potential of online education, traditional universities are far from likely to become obsolete, and the interest boost from internet-based initiatives can help attract to US universities at least a small fraction of people from developing countries--say, 3 million of the more than 3 billion currently living in these countries.
Why shouldn't we increase university capacity (through resources I later describe) and accommodate an additional 3 million foreign students, bringing in over $100 billion to US universities and possibly $1 trillion in various ripple effects to the US economy? The answer starts with thinking differently. Australia and New Zealand already do: Australia's top service export, at about $16 billion, is its education of 225,000 foreigners, or 22% of all students. My proposal of 3 million new foreign students would bring the percentage of foreign students in the US from 3.5% to a still comparatively modest 15% of all students--on par with the UK's percentage.
Thinking differently starts by recognizing that the US economy actually advances by becoming more knowledge-intensive. In the last three decades as some manufacturing has moved to other countries, the US economy has more than trebled by moving up the economic ladder through continuous innovations, past outdated manufacturing to services and the production of knowledge. Further, as manufacturing moves toward a more information-intensive, automated, and flexible future, it is returning to the US. With new materials, new techniques and demands for mass-customization, manufacturing will increasingly rely on knowledge, design capabilities, innovation and research. The US has these advantages, but a more successful reclaim in new manufacturing hinges on the expansion and enrichment of its universities--which builds with the addition of new foreign students.
Strengthening the tertiary education industry gives rise to at least three benefits beyond increased university revenues: expertise and resource development in educational institutions; enrichment of the knowledge ecology from foreign graduates who remain in the US; and connections between this augmented American knowledge base and foreign graduates who return to their countries. With an additional 3 million foreign students, some will stay in the US, providing greater technical expertise and significantly enriching the US economy. Even today when 20 million Americans are out of jobs, there are 3 million job openings requiring technical expertise that remain unfilled. Moreover, a greater emphasis on tertiary education in the long run energizes the overall educational system, even prior to the college level.
To further illustrate the far-reaching benefits of a strong higher education sector, let us look to Massachusetts, home of an exceptional number of universities (California, with a state population six times larger, confers only 2.5 times as many bachelors' and higher degrees). Perhaps because an ecosystem of innovation and prosperity organically develops around universities, this higher educational intensity has allowed Massachusetts to earn a per capita income 19% greater than California's and 27% higher than the national average.
Exporting education opens possibilities that extend outside the US to the world at large. Beyond educating foreign students in existing programs, the US can draw on a major strength--entrepreneurship--to create new programs aimed at educating entrepreneurial students from countries that could greatly benefit from enterprise-driven growth. Research has shown that face-to-face interaction with seasoned entrepreneurs is key to the effective training of budding ones, and the US has a wealth of highly successful entrepreneurs, many of them originally from developing countries, who can help universities train students from developing countries. Furthermore, bringing ambitious and entrepreneurial students to our shores delivers a compounded effect on the U.S. economy. Even when they leave and start businesses in their native countries, they expand US exports. The brain gain/brain drain debate is in the past. Opportunities have dispersed; "brain circulation" is the new reality.
The U.S. already has the financial resources to strengthen its universities--we need only follow the history of our own economic progress, achieved through entrepreneurial efforts rather than state-led programs. We waste hundreds of billions of dollars on foreign aid to governments, through policies first used during the Cold War that now serve only to centralize power and stall bottom-up progress. Today, remittances sent by immigrant workers and the spread of the Internet and cell phones should render state-to-state management obsolete. Indeed, even the State Department is looking to promote entrepreneurship in developing countries.
Instead of aid, we should redirect money to U.S. universities for program expansion to accommodate 3 million new foreign students and have a much more tangible and beneficial effect on the rest of the world. These redirected funds could be used to create capacity for the new foreign students without taking away spots from American students, both by expanding existing universities and creating new ones, while also creating scholarships to enable talented students from developing countries to attend.
As students around the country start a new chapter in their lives, the U.S. and its academic institutions should also open a new chapter. Even in an unrecovered economy, the number of foreign students in the US jumped nearly 5% in academic year 2011. Students from India and China, where growth has been the highest, increased by 12%. Economic growth elsewhere can work to our advantage. We should stop taking for granted our strengths, lamenting progress elsewhere, and preparing for markets of yesterday--we must build the markets of tomorrow.
This material published courtesy of Singularity University.