Universities in Iceland and Ireland expanded dramatically during the 1990s boom, in part to promote regional development and absorb more students. But when the economic bubble burst, experts recommended a reduction in the overall number of institutions through painful mergers, as Denmark had already done.
For decades Iceland had only two universities, but during the 1990s it sustained seven higher education institutions - four state-owned, the rest private - to serve a population of just 320,000. In the wake of the economic downturn, which devastated Iceland, an international panel of experts recommended that the country merge its universities.
In Ireland, another country severely affected by the downturn, experts are also recommending university mergers. Not surprisingly, there is resistance to the idea.
"Iceland was harder hit than most countries by the economic crisis. Already the state funding of all seven universities has been cut while the number of students is growing," said Ingjaldur Hannibalsson, a professor at the Iceland School of Business in the capital Reykjavik.
"A nation of 320,000 probably does not need more than two institutions of higher education, including one research-based university," he stated at the OECD's Institutional Management in Higher Education conference held in Paris in September 2010 and titled Higher Education in a World Changed Utterly: Doing more with less.
"It was not very sensible to establish so many different universities," Hannibalsson told University World News.
Rationalisation and productivity improvements made it possible for institutions to survive through 2009 "and will probably be sufficient for survival in 2010. But as more budget cuts are expected in 2011 and 2012, more drastic measures have to be taken," he said.
At the same time the number of students in 2009 was 15% higher than in 2008. More students were sitting out the economic downturn at university, while "some people with masters degrees have returned to university to study for a second masters," Hannibalsson said.
In Ireland, meanwhile, higher education has experienced an 11% reduction in core funding since 2008, and further reductions are expected in 2011 - and student numbers have been growing at the rate of around 5% a year.
Just as Iceland's higher education sector overreached itself, in Ireland the "pursuit of world-class status has over-determined the strategies of both Trinity College Dublin and University College Dublin in recent years, with both universities going into deficit even before the current downturn", said Ellen Hazelkorn of the Dublin Institute of Technology, in a paper delivered at the OECD conference.
She noted that in Ireland, too, there was "a strong chorus" arguing that the country had too many higher education institutions relative to population and the financial environment, "amid concerns that the cost of resourcing a single world-class university would be equivalent to [Ireland's] entire annual higher education budget".
Ireland has set up a review group to decide on the future of universities. "A recommendation to reduce the number of higher education institutions was never in doubt," Hazelkorn said. "There is strong emphasis on mergers for greater efficiency, rationalisation of resources, better specialisation and sharing back-office functions."
Higher education participation rates in Ireland are now over 55%, up from 44% a decade ago, and the government has set a target of 72% by 2020. Demand is projected to increase over the next 20 years, from some 160,000 students today to 200,000 by 2020 and 275,000 by 2030.
Even so, Hannibalson believed Ireland may fare better than Iceland. "Irish institutions are larger," he said. "In a downturn small institutions will hurt a lot more than larger ones."
In Iceland, much of the expansion in the 1990s occurred outside Reykjavik and was "related to the regional policy at that time to strengthen the regions," he said. Meanwhile small private institutions mushroomed, mopping up demand through heavy marketing.
"The government task force has suggested the number of institutions be reduced, possibly down to two," Hannibalsson said. But having "two different systems of higher education [public and private] makes cooperation difficult".
Mergers are politically charged and the government appears unwilling to force them. "The government is trying to get institutions to agree to mergers, to make this happen without being told to do so, but that is not going to happen. The private institutions are not keen to merge their activities," he added.
Iceland has now appointed a committee to look into merging the four state universities. "But those mergers will not save a lot of money in my opinion," said Hannibalsson.
The international experts also recommended closer integration of Iceland's public research institutes with universities. "Most universities have the ambition to be research universities, but that is out of the question," Hannibalsson said. "Developing a research base is very expensive."
There have been mergers in Denmark, Finland and Sweden.
In Denmark in particular, universities are merging with government research institutions for more efficient research output. At the beginning of the decade there were 12 universities in Denmark and 21 public research institutions. By this year they had been reduced to eight universities and four government research institutions, following mergers that began in 2007.
"We have been following changes in Denmark very closely," said Hannibalson.
Permille Meyne Mithers, a special adviser to the Danish University and Property Agency, said in a paper presented at the OECD conference: "The aim was not only to ensure that research in government research institutions supported the education of graduates and PhDs but also to create a stronger basis for enhancing the international impact of Danish research."
The reforms were followed by a considerable increase in public funding of universities - the rise was as high as 24%, Mithers said, "even in a downturn as a result of incorporating research institutions".
It is still too early to assess whether Denmark's mergers have worked overall. But an independent panel said the increased autonomy made the institutions more robust in facing the financial crisis.
"Danish universities were strong, independent institutions when the financial crisis appeared, which has been one reason why Denmark has so far escaped relatively graciously...compared to other European countries," said Mithers.
In Ireland, an expected 30% surge in student numbers could pose a serious threat to quality, making it more difficult to take action. "The perceived quality of the higher education system is a key factor in helping to attract inward investment," said Hazelkorn.
Even if the recommended mergers never actually occur, the review of Irish higher education was timely, according to Hazelkorn. "Even if the economy had not collapsed, a strategy taking into account global competitiveness, internationalisation and excellence was required. Indeed, it is arguable that Ireland has been very late tackling many of these issues."
Hannibalsson said he thought mergers would go ahead in Iceland. "I believe if we had not had the economic crisis, nothing would have happened and we would have continued with seven institutions in higher education."
* To read the report by the Expert Panel that reviewed education in Iceland, entitled Education, Research and Innovation Policy: A new direction for Iceland, click here
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