Few higher education institutions around the world appear to have escaped the collapse of financial markets. In Asia, Africa, North America, Europe, Britain and down under in Australia and New Zealand, universities have been hit hard as the value of their investments in property and shares and, in many cases, their income from diverse sources crumples. How to counter, or at the very least cope with, this alarming situation - unique in the experience of university managers - will be the great challenge in the year ahead. As the following stories show, for higher education the boom days are well and truly over.

With the worldwide collapse in financial markets, the result has been catastrophic: Komazawa University, a major private institution in Tokyo, incurred losses of 15.5 billion yen or almost US$170 million in trading high-risk derivatives. The university put up its land and buildings on the campus to obtain $120 million in loans from the Mizuho Bank to cover the losses.

Likewise, Keio University, the alma mater of numerous Japanese politicians including former Prime Minister Junichiro Koizumi, accumulated 22.5 billion yen (US$233 million) in unrealised losses on investments ranging from hedge funds to real estate investment trusts.

Waseda University, a training ground for Japanese politicians since 1882, expected a 500 million yen ($5.4 million) loss, incurred on investments as of March, to deepen significantly.

Many other universities are also in trouble after relying on high-risk financial products in managing their assets in the face of difficult operating conditions.

* In the US, the University of Texas has reported losing $1 billion so far on its investments and endowments in 2008. Elsewhere, Loyola University in Chicago faced losses to its endowment in early October of more than $30 million while Dartmouth University announced it had lost $220 million.

The wealthiest universities, among them Harvard and Yale, have begun cutting spending, cancelling new building plans and upgrades, and putting a halt to hiring new staff.

"The effects of the deepening global financial crisis and economic recession are now spreading and ravaging all sectors including higher education," says Paul Tiyambe Zeleza, an African-born US historian, literary critic, scholar and head of the department of African American Studies at the University of Illinois at Chicago.

Writing on his blog, The Zeleza Post, Zeleza says, "A dozen US states have announced funding cuts to their universities, rich private universities are watching with mounting trepidation their huge endowments melt, and student funding streams are drying up as student-loan companies fold or tighten credit.

"Parents can no longer tap into their evaporating home equity and universities' financial aid portfolios dwindle, all happening at the same time as more people seek to wait out the crisis by returning to college. On my own campus and in my college faculty searches have been suspended, budget cuts are being made, and layoffs are expected."

* In Britain, the first signs that universities were facing grim times came in October when reports that several universities including Cambridge, as well as hospitals, police forces, charities and more than 100 local councils, were potentially involved in financial crises after being blocked from accessing funds in Icelandic banks amounting to more than £1.16 billion (US$1.71 billion).

Cambridge revealed it had £8.5 million (US$12.6 million) in a subsidiary of the failed Landsbanki and £2.5 million in another, although the funds represented only 3% of the university's total bank deposits. Another 11 universities, including Manchester, the Open University, Glyndwr and Manchester Metropolitan, had deposits in Icelandic banks adding up to £66 million.

* In Australia, as in the US, the nation's oldest and wealthiest universities have seen the value of their properties and investments plummet. The University of Sydney revealed falls in its investments had resulted in cuts to its annual budget of 10% or some $150 million (US$99 million); staff were told to cut spending planned for next year.

The University of Western Australia said it would slow its building programme to cope with its losses while other universities have begun making retrenchments and some have called for hiring new staff to be put off until the financial situation improved.

* In New Zealand and Germany, as the following reports by our correspondents explain, universities believe that boosting spending on higher education could be a means of countering the worst effects of the financial downturn.

geoff.maslen@uw-news.com


Printable version
Email to a friend
Comment on this article