Neoliberal Reforms in Higher Education and the Import of Institutions

Abstract

The implementation of neoliberal reforms in higher education coincides with the radical institutional changes in the transition from a planned to a market economy. The modernization of higher education is also connected with the concept of the “entrepreneurial” university that represents a third-generation university with an emphasis on optimization and marketing. However, economic policy aimed at reforming and developing the public sector is based on the import of institutions related to the production of public and mixed goods. In this paper, we show that neoliberal reforms threaten the welfare state in transition economies such as the Russian Federation. In addition to marketing, monetization, and commercialization, all areas of the public sector underwent an optimization policy, which primarily implied a relative reduction in the cost of producing public goods. The rhetoric of the marketing of education represents the modern state’s masked refusal to fulfill a part of its social obligations. Moreover, we argue that market channels intended for financing education are highly dependent on the income level of the population, the availability of institutions and the infrastructure for raising funds, and, most importantly, the development of the educational services market. Within this context, another significant factor is represented by the positive externalities from the prevalence and quality of education. Thence, our results show that insufficient private demand for education, including higher education, can negatively affect the prospects for the country’s socio-economic development in the medium and long run.

1. Introduction

Generally, university education represents a classic example of the import of institutions in quite a number of countries, especially in transition economies. However, most often, this import is carried out in the country that is catching up on its development, which largely determines the characteristics and consequences of this import. This is also the case of university education in the Russian Federation.

The neoliberal approach to reforming Russian higher education is frequently associated with the import of institutions, which coincides with the transition to a market economy. The ambiguous results of these reforms are largely due to the peculiarities of the institutional development of the country, which is catching up in its development and which inherited a well-developed higher education system from the Soviet period.

The Soviet system of higher education that existed in the Union of Soviet Socialist Republics (USSR) was created to meet the needs of a planned economy, which largely determined its organizational and institutional structure. Therefore, it is quite natural that such a system did not focus on the market and, in the conditions of a transition economy, there emerged some new challenges to which there were no satisfactory answers within the framework of the old institutional structure of higher education. Overall, features of institutional changes in Russian higher education can be better understood if they are considered in the context of historically determined processes of evolution of university types from the first and second generations to the third generation.

In this paper, we study the neoliberal reforms in higher education in the context of the import of institutions, which represents a case when marketing, monetization, and commercialization, as well as all areas of the public sector, underwent an optimization policy that primarily implied a relative reduction in the costs of producing public goods. We demonstrate that the rhetoric of the marketing applied to education is a hidden form of the refusal of the modern state to comply with its social obligations.

We employ a synthesis of the methodology of the original institutional economics and historical institutionalism in Douglass North’s tradition. We provide the identification and description of the impact of institutional changes during neoliberal reforms on historical and statistical data, as well as based on our own results, observations, and discussions.

This paper is organized as follows: Section 2 provides an overview of the relevant research literature, Section 3 outlines the theoretical framework and explains the scope of our research, Section 4 describes the materials and methods used in this research, and, finally, Section 5 concludes with the main outcomes, implications, and pathways for further research.

2. Literature Review

The theories of institutional changes became widespread in economic theory at the end of the 20th century. The development of these theories took place against the background of a radical transformation of the socialist system. The transition to the market economy was associated with a radical restructuring of the entire institutional structure of the economic order.

The problems of transformation of institutions in economic theory have not attracted significant attention for quite a long time. The importance of institutions was underestimated, as they fit poorly into the harmonious models of economic development that were constructed as part of the mainstream. The growing attention to the role of institutions in the economic processes is largely associated, on the one hand, with the development of interdisciplinary research, and, on the other hand, with significant institutional changes associated with the collapse of the socialist system and the triumph of neoliberalism.

The problem of institutional change was successfully developed by the famous institutional economist Douglass North (see North 1981, 1990, 2005), who actively used elements of historical analysis in the transformation of institutions. The use of an interdisciplinary historical and economic approach to the analysis of the role of institutions in the economy made it possible to attract a multitude of empirical data to explain the patterns of evolution of institutional structures within various social orders. The development of historical neo-institutionalism was conducted in the works of Greif (2006) and Mokyr (1992, 2016), who presented a version of the development of the historical version of neoinstitutionalism. For example, Greif (2006) uses extensive historical data and modeling with elements of game theory to explain the formation of institutional equilibria during the development of medieval trade. Mokyr (2016) uses historical and narrative methods to describe the basic laws of the evolution of institutions that contribute to technological development.

Institutional changes are closely related to institutional innovations, which are in turn associated with collective action and political processes. The role of self-organization and self-government in the use of shared resources in the context of institutional changes is described by Ostrom (1990, 2009). It follows that the complexity and high cost of collective action is one of the reasons for the stability of institutions in the conditions of stable existence of special interest groups. Olson (1965, 1982) analyzed the problems of small and large groups in the production of collective goods and the related issues of slowing economic growth and the dysfunctions of institutions as reflections of social sclerosis.

Theories of institutional change also exist within the framework of the original (old) institutionalism. In the old institutionalism, the evolutionary approach traditionally plays a large role, in which the emphasis is on the role of social values and related behavioral patterns (see Bush 1987 or Elsner 2012). This approach is based on the legacy of Veblen (2017a, 2017b, 2017c), Munkirs (1988), or Valentinov (2013), who emphasized the importance of the dichotomy between instrumental and ceremonial values.

In the tradition of the original (old) institutionalism, institutions are viewed more broadly in the context of the dominance of a transformative downward causation related to the formation of values, beliefs, and preferences (see Hodgson 2003). In addition, in the framework of original institutionalism, the formation or import of effective institutions is not automatically associated with the successes of economic development: “Old Institutional Economists (OIE)-scholars reject the assumption that institutions mechanistically generate employment, production, distribution, and growth” (Spithoven 2019, p. 441). Within the framework of original institutionalism according to the Veblen tradition, the issue of intentionality and causality in the evolution of institutions is significant (Hodgson 2004). The evolution of institutions is perceived as a time-unfolding process that depends on a plethora of specific historical, cultural, and institutional conditions. Moreover, in this scientific area, much attention is paid to the problem of the interaction of technologies and institutions within the framework of the Veblen–Ayres dichotomy, which focuses on the asynchrony of changes and the role of interest groups.

Institutional change is increasingly viewed in the context of the emergence, diffusion, and evolution of ideas. In turn, ideas as a conceptual concept are associated with the formation of rules and the actions of special interest groups that affect public opinion. Within this context, the problem of intentionality can also be considered, within which, according to North (2005), it is necessary to consider the evolution of economic institutions.

Within the framework of original institutionalism, the ideas are considered as a source of rule formation. The widespread dissemination of ideas in public discourse through the psychological processes that form behavior leads to the formation of habits in the communication process and structures repetitive interactions between actors (see, e.g., Markey-Towler 2019).

The institutional turn in the social sciences led to the emergence and development of independent institutional schools covering various disciplines, from sociology and political science to geography, which often use the term “new institutionalism” as a self-name. Non-economic new institutionalism gained popularity in the framework of political science. According to the classic work of Hall and Taylor (1996), three types are traditionally distinguished within this direction: (i) Historical institutionalism (Historical Institutionalism), (ii) institutional rationalism (Rational Choice Institutionalism), and (iii) sociological institutionalism (Sociological Institutionalism). Later, this typology was supplemented with two more types: (i) Constructivist Institutionalism (see Hay 2009) and (ii) Network Institutionalism (see Ansell 2009). Within the framework of this work, historical and constructivist institutionalism (or discursive institutionalism) are of a special interest (see Schmidt 2008, 2010).

The transformation of institutions and their import within the framework of historical and constructivist institutionalisms can be considered as a time-unfolded process of the adoption and institutionalization of the ideas related to socio-economic policy. Ideas influence the emergence and change of institutions through repetition in public discourse, which limits and forms the space of choice for the economic policy. The ideational approach to building institutions is opposed to an approach based on national or private interests in politics. Scientific discussions about whether ideas influence the change of institutions, whether they are the reason for such changes, or whether the ideas determine interests have been going on for decades in various scientific areas and have not yet led to the creation of a consistent theory (see, e.g., Tambovtsev 2019).

In order to conduct theoretical and empirical studies on the import of institutions as a special case of institutional change in the framework of this project, one can rely on two theoretical approaches of constructivist and historical institutionalisms. The use of these approaches allows the most organic integration of interdisciplinary approaches in economic theory and political science in terms of the organic use of historical and qualitative data for building explanatory models and theories.

In the context of studying the import and export of economic institutions, the subject field is created on the basis of a synthesis of approaches of historical and constructivist institutionalisms, which allows us to expand the theoretical horizon by expanding factors relevant to the study of the institutional changes. Accordingly, the formation of a research program analyzing the import of institutions as a special case of institutional changes is based on the creative use of modern achievements of institutional economic theory, the synthesis of relevant scientific literature, the emphasis on the use of historical, discursive, and constructivist approaches (methods) intended to achieve a comprehensive understanding, and explanation of the transformation of institutions.

Neoliberalism arose as an intellectual trend in the first half of the 20th century. The main impetus for its formation was the discussion between representatives of the Austrian school (Mises and Hayek) and various kinds of socialists about the possibility of economic calculation under socialism (Mises 2016; Hayek 1935). However, both Hayek and Mises were, at that time, rather classical liberals in the understanding of Europeans of that time, and they defended the ideals of freedom and a market economy against threats from socialism and fascism. An important milestone in the widespread dissemination of liberal ideas was the book by Hayek entitled “The Road to Slavery” (Hayek 2014), where he presented compelling arguments against planning and expanding in the economies of totalitarian states. In 1947, at the initiative of Hayek, the first Mont Pelerin Society conference was held, which brought together the most prominent liberals of his time, such as, for example, Friedman, Mises, Popper, Eucken, Robbins, and many others. Widespread after the WWII, the Keynesian ideas underlying the economic policy of the welfare state generated a response from intellectuals who defended the principles of free market and capitalism.

Neoliberalism as an ideology can be interpreted from the standpoint of both economic and political science. In the economic sense, neoliberalism is the belief that all sectors of the economy related to both private and corporate business and the public sector can be organized in the most efficient way on the basis of market principles: Competition, private ownership, and profit orientation. The ideas of neoliberalism began to have the greatest influence on economic policy since the 1980s, which is associated with the policies pursued by the governments of Reagan and Thatcher.

The widespread dissemination of the ideas of neoliberalism is associated with a phenomenon that is called the “narrative economy” in modern economic science (Volchik and Maslyukova 2018). Paradoxically, classical liberalism has little to do with neoliberalism. The emergence of neoliberalism is associated with a reaction to the spread of socialist and communist ideas and theories. However, it must be remembered that market and democratic forces were not only represented by neoliberals. With a certain degree of simplification, it can be said that supporters of capitalism also fought fiercely between Keynesian representatives and neoliberals. One of the most important issues in this discussion was the issue of regulation and financing of the public sector and education. Under the neoliberal doctrine, public sector organizations must operate in a competitive environment (Slobodian 2018). One of the main ideologists of neoliberalism, Friedrich Hayek (2011), believed that state control in the field of education will inevitably lead to total state control not only over educational organizations, but also over the content of education. Therefore, the logical conclusion of neoliberals regarding the sphere of education was its maximum privatization and market orientation.

Neoliberalism, like any significant intellectual movement, is heterogeneous. There are several versions of the neoliberal doctrine, which are based on the ideas of the Chicago school, Ordoliberalism, and the Austrian school. However, all areas of neoliberalism have common principles accepted by all, the most important of which is the belief that competitive markets can be purposefully created and that such markets will lead to more efficient results of the use of resources.

Neoliberalism is based on intuitively simple provisions that the market, competition, and private property lead to a more efficient use of resources and the realization of the political rights of individuals. However, the implementation of the ideals of neoliberalism is associated with the non-trivial task of organizing effective market exchanges of non-market (public, trustful, and experienced) goods (Tambovtsev 2019).

The emergence of neoliberalism as an ideology is usually associated with the names of Hayek and Friedman. Neoliberal ideas were based on an understanding of human nature as a machine aimed at maximizing pleasure (Efimov 2016; Hodgson 2012). Overall, neoliberal ideas were well incorporated into the modern neoclassical economic theory. The compatibility of the ideas of neoliberalism with the economic mainstream contributed to the widespread dissemination of his ideas. Another factor contributing to the spread of neoliberal ideas among intellectuals was the rivalry between the two systems of capitalism and socialism. The historical loss of Soviet-style socialism led to the fact that neoliberalism monopolized the economic agenda in scientific and public discourses (Micocci and Di Mario 2017). Indeed, the tendencies toward the monopolization of regulatory functions, as well as bureaucratization, have also become integral features of neoliberal politics (Graeber 2015).

In the framework of neoliberal policy, economic processes are considered too simplistically. The ideals of classical liberalism were formed in completely different institutional conditions, which were associated with the first great transformation and the formation of new markets, primarily the labor market. In the postindustrial economy, we are faced with yet another transformation, which may be called the great one, during which the institutions characteristic of the previous social order are destroyed. There is a significant increase in instability in the field of employment, which affects not only the quality of human and social capital, but also leads to a significant change in the organizational structure of production. In the academic field, job instability is often associated with the precariatization process (Klimenko and Posukhova 2018).

3. Theoretical Framework

Education (in particular, higher education) in many developed and developing countries constitutes an integral part of the public sector. This situation is primarily due to the nature of the produced goods and the related external effects. However, at the end of the 20th century in Russia, the allocation of additional funds for newly opened or transformed universities was impossible in the conditions of the sharp reduction in the public sector. Moreover, it came into conflict with the liberal rhetoric of the ruling class. In order to cover the policy of a sharp reduction in costs for an increased number of higher education institutions, neoliberal theories and models became widespread and served as the ideological basis for the reforms in the public sector.

Hereinafter, we understand the import of institutions as the deliberate borrowing of foreign institutions during radical socio-economic reforms in the country. We can say that the import of institutions is a special case of revolutionary (radical) institutional changes carried out by politicians who were inspired by the ideas of neoliberalism and its patterns.

The neoliberal doctrine came a long way towards institutionalization in developed and developing countries, as well as in economies in transition. In Russia, neoliberal policy was primarily associated with the import of institutions and regulatory mechanisms during an economic downturn. The sharp influx of students to universities increased the classroom load on teachers, which led to a reduction in the time that teachers traditionally allocated to research. Hyperinflation contributed to the fact that many teachers were looking for second and third jobs. However, these forms of work for themselves were not associated with science, but primarily with teaching, which provided more substantial income in the short run. On the other hand, students, who are trying to avoid conscription, are increasingly entering the commercial departments of state and non-state universities.

In addition, a sharp increase in the training of economists, managers, and lawyers led to a noticeable deformation of the labor market, which is manifested primarily in the growing shortage of technical specialists. At present, Russia is increasingly turning into a country that is forced to import not only highly qualified specialists, but also working personnel, like some oil-producing Persian Gulf countries.

However, there is not an absolute shortage of technical specialists in Russia. It all depends on their qualifications. Most Russian technical universities do not have the developed technical facilities and qualified specialists capable of teaching the latest technologies. The employment of graduates of the economic professions of 64.6% and the humanitarian specialties of 68% is completely correlated with the average employment rate of 68.7%, and is comparable with the employment of graduates who graduated in the fields of metallurgy and mechanical engineering (60.9%) (see Cherednichenko 2018, p. 97). Therefore, one can talk about the imbalances in the labor market in connection with the quality of education received, which largely depends on the effectiveness of the reforms.

The intensification of inequality in post-socialist Russia and the expansion of the paid education system have led to the fact that, at present, the existing education system does not reduce, but instead widens the gap between different layers of society (see Figure 1 that follows).

Such ideas as a scientific concept again become an important subject of analysis from modern institutional economic theory. At present, the ideational approach to institutions is gaining ground, within the framework of which the formation of institutions is associated with the widespread dissemination of ideas in public discourse (see Volchik and Maslyukova 2018 or Markey-Towler 2019). In the case of Russian reforms in the post-Soviet period, it is necessary to consider that along with the borrowing of formal institutions, neoliberal ideas that were widely spread in the elites played roles of no less importance. An important role in the dissemination of ideas is played by intellectual elites that translate the theoretical concepts of the social sciences. In the case of Russian neoliberal reforms in the public sector, the spread of neoliberal ideas in their radical form was carried out simultaneously with the import of institutions.

However, the neoliberal concept of the development of the public sector underwent significant changes during the import of institutions and their diffusion within the institutions of Russian corporate (crony) capitalism. The underdevelopment of private, public, and mixed goods markets under Russian conditions is complemented by distortions that are determined by the functioning of political and administrative markets and are deeply rooted in the socio-economic order.

Neoliberal policy involves the development of competition through the marketing of service delivery in the public sector. In the Russian Federation, the neoliberal institutions have been exempted and, under the rhetoric of marketing and optimization, allowed to create conditions for the exercise of monopoly power and institutional rent for individuals and organizations affiliated with regulatory and supervisory authorities. We can say that the specifics of political markets greatly distorted the implementation of neoliberal policies, which negatively affected the effectiveness of the reforms.

The neoliberal reforms were based on ideology, in which institutions played a key role in the creation and effective functioning of markets, including global ones (Slobodian 2018). Therefore, the spread of neoliberal politics as the dominant political and economic trend is closely linked with the import of institutions. Understanding of the widespread dissemination of neoliberal politics can be obtained by studying the genesis and trajectory of the development of the ideology and institutions of neoliberalism.

Neoliberal economic policy itself is based on a kind of import of business institutions to regulate the activities of public sector organizations (Redden and Low 2012). Thus, the main principle of neoliberalism is to use market coordination and competition (like competitive markets for private goods), regardless of the specifics of the goods produced, to achieve indicators of economic efficiency, which, in turn, is the main target. Accepting by default the thesis that market coordination best leads to economic efficiency, neoliberals offer to create markets where they did not exist or their influence was limited (Mirowski and Nik-Khah 2017). However, the process of rational market design and its spontaneous functioning already contains a contradiction, which may be aggravated by the interests of actors associated with the design of market mechanisms and key performance indicators (KPI). Moreover, the use of indicators is becoming an important tool for targeting and motivation. Indicators and indices become substitutes for prices, thereby creating powerful incentives that are not related to market coordination (Davies 2015).

The practice of implementing neoliberal reforms has shown that, during their development and implementation, very strong assumptions about market efficiency were made, and the role of institutions and social values was significantly underestimated. Moreover, in developing countries, neoliberal policies have led to the formation of sustainable institutional structures for the redistribution of income and resources in favor of special interest groups that are closely related to government structures (Pavlovic 2019).

Most likely, the thesis that the state should create conditions for the functioning of efficient markets and the market mechanisms will then lead to an increase in welfare from which all sectors of society will benefit was also mistaken. However, as experience shows, neoliberal reforms do not solve the most important socio-economic problems associated with inequality and environmental pollution. Unfortunately, along with these problems, neoliberal reforms have led to significant negative effects in higher education and science.

The neoliberal reforms in the field of education over time coincided with radical institutional changes associated with the transition to a market economy in countries with planned economies. The fact that the transition to a market social order was largely associated with neoliberal ideas gave such ideas a significant advantage in terms of translating them into concrete measures of economic policy. Modernization of education has become largely associated with its marketing. The formation of the concept of an entrepreneurial university was also well combined with the marketing of education, which strengthened the arguments of supporters of the development of the educational services market.

Universities have gone through several phases in their development, which can be distinguished in three main stages (Wissema 2009). In the context of the typology of universities, it will be appropriate to briefly cite some historical facts of the development of universities in the world and in Russia. It should also be noted that the Russian higher education system has been formed, developed, and is currently developing under the strong influence of imports of institutions of developed countries of the West. The first universities in Europe appeared in the 12th–13th centuries. Since 1158, the University of Bologna has had its history; since 1180, the University of Paris; from 1188, the University of Oxford; from 1209, the University of Cambridge. Universities in the Middle Ages originally arose as church corporations. Studying was then considered a deeply religious occupation. The name “University” itself comes from the Latin “Universitas” (“association, community”) and means the union of teachers and students. Universities consisted of faculties. This word also has Latin roots. It came from the Latin “Facultas”—“readiness to be capable of anything”—and meant at that time that graduates of these departments of universities are able (“ready”) to teach the appropriate disciplines. Even the name of the head of the department is the dean (from the Latin Decanus, descended from Decem—“ten’s manager”)—also borrowed from the Church structure.

The classical medieval university had four main faculties: Artistic (applied arts), theology, law, and medicine. The first faculty was required to enter the next three. It included the study of seven disciplines, divided into two stages: The trivium (which included grammar, rhetoric, and dialectics) and the quadrivium (which studied arithmetic, geometry, astronomy, and music). Organizationally, universities in the Middle Ages were rather loose organizations, so they held leading positions only for a short time. Only gradually, the time spent in the post of rector of the University of Paris increased from a month to a two-year term.

One can see that many other names associated with higher education have Latin roots: A student (from Latin “Students”—hardworking, capable)—engaged, studying—and holidays (from the Latin name of the star—“Caniculus”—means the constellation “Canis Minor”; the Roman Senate declared a day of rest on the hottest days of the summer just when the star appeared in the sky); this tradition was preserved in the Middle Ages. Students of a medieval university united in fraternities, which were formed according to a territorial or linguistic principle. The community members acted on the principles of self-government and at first represented a higher level of organization than the faculty. Initially, it was the totality of fraternities and faculties that formed what was called the university. Depending on which of these organizations had a large role, universities could be divided into student (University of Bologna) or professorial (University of Paris).

In their structure, perhaps only Oxford and Cambridge retained this characteristic feature of feudalism and preserved it even better than the universities of continental Europe. The center of the first-generation university was training. It was conducted in Latin, which ensured unity and continuity and allowed students to freely move from one university to another.

In the Russian state, there were no first-generation universities. With a certain degree of conventionality, they can be attributed only to the Slavic–Greek–Latin Academy—the first higher educational institution established in Moscow in 1687. It was created on the initiative of Simeon of Polotsk and his student Sylvester. Initially, classes were held in a specially constructed building of the Collegium on the territory of the Moscow Epiphany Monastery, and later in the chambers of the Zaikonospassky Monastery.

In 1701, Peter I (Peter the Great) gave it the character of a state institution. Initially, 100 students studied at the Academy, followed by 600 at the beginning of the 18th century and 1600 at the beginning of the 19th century. It was the founder of Moscow University, MV Lomonosov, who graduated from the Academy. In 1814, the Academy was closed.

At the end of the 18th and beginning of the 19th centuries, second-generation universities appeared, the purpose of which was not only education, but also research. The role of natural faculties grew, and scientists were no longer engaged in the search and upholding of eternal truth, but in discovering the laws of nature and society. Research and education were monodisciplinary.

The languages of communication ere national languages. This led to a well-known regionalization of instruction, since instruction began in national languages. Students were recruited from nearby regions and universities existed apart from each other.

Various university models emerged: The Prussian model, the main purpose of which was not only teaching, but also scientific activity; its founder was Wilhelm Humboldt. The English model also emerged, in which the main focus was on the education of the gentlemen (dandy), in addition to the French model, where emphasis was placed on preparing for practice, as well as the Italian model (Cardinal Newman), which developed the concept of medieval Catholic universities.

Russia took the university model from Germany, although it was later significantly modified and supplemented. The universities of the Humboldt type, as we noted above, were characterized by an emphasis on education in connection with scientific research. Therefore, the ranking of universities was determined in accordance with the discoveries—authoritative publications of university professors. Students for these universities were recruited from nearby districts from those who passed the entrance exam. Professors independently chose the topics of their research and universities existed relatively apart from each other. The main source of funding was the state, which did not require direct returns in exchange for the funds provided. While the role of tuition fees is increasing, the main source of funding is government grants, either directly or through research-funding agencies.

With a certain degree of conventionality, three stages of development of Russian universities can be distinguished: Pre-Soviet, Soviet, and post-Soviet. Each transition to a new stage was accompanied by a sharp increase in the number of universities. Before the October Revolution, there were 16 universities in the Russian Empire. In 1918, 18 new universities were opened. By 1992, their number increased in the Russian Federation to 48 pieces. In 1992, the number of universities in Russia increased from 48 to 97 (Avrus 2001). In 2006, there were already 260 public and private universities. Currently, attempts are being made to reduce their number and qualitative differentiation. After 2006, qualitative growth began and the differentiation between universities began to appear. Federal, national research, and supporting universities appeared, as well as universities, academies, and institutes.

At the beginning of the 2000s, a sharp influx of students into universities increased the classroom load on teachers, which led to a reduction in the time that teachers traditionally allocated to research. High inflation and the low salaries of teachers contributed to the fact that many teachers were looking for second and third jobs. However, these forms of work themselves were not associated with science, but primarily with teaching, which provided more substantial income in the short term. On the other hand, students, trying to avoid conscription, are increasingly entering the commercial departments of state and non-state universities.

In addition, a sharp increase in the training of economists, managers, and lawyers led to a noticeable deformation of the labor market, which manifested primarily in the growing shortage of technical specialists. At present, Russia is increasingly turning into a country that is forced to import not only highly qualified specialists, but also working personnel, like the oil-producing countries of the Third World. The old system of advanced training turned out to be destroyed, and the new one has not yet had time to form.

Currently, the formation of third-generation universities is taking place in the West. In the 21st century, the division of traditional universities into world-class universities and universities of local importance is intensifying. The goals of the traditional university were science and education. A classical university, as a rule, did not have an interest in applying the knowledge created within its walls. In the world-class universities, teaching in English is becoming increasingly important, which contributes to the development of cosmopolitan trends. Regional limitedness is being overcome, as students and teachers are recruited from different countries.

At present, the extraction of economic benefits from new knowledge is becoming an important activity, and increasingly even the main activity of third-generation universities. The university begins to collaborate with many partners, more often to enter the international arena. It is not surprising that the best universities are trying to become third-generation universities, combining mass and elite education.

Third-generation universities are characterized by an international focus on research and a significant expansion of funding sources. The role of government funding sources is gradually declining. It was clearly insufficient due to the sharp increase in the cost of research work. Therefore, universities are forced to search for alternative sources of funding and, above all, to establish contacts and use the capabilities of high-tech companies. Along with state grants and tuition fees, university grants for research and commercial income, which allow the formation (or receipt) of endowment funds, are becoming increasingly important. Universities become original incubators that span the entire value chain from idea to innovation, including preparation for practical use. The social environment around universities is changing dramatically; they are overgrown with various companies, contributing to the development of innovative technology parks.

If the research of second-generation universities was mainly monodisciplinary, now an increasing number of scientists are engaged in interdisciplinary research. A contradiction arises between the monodisciplinary nature of faculties and the interdisciplinary nature of research, which requires finding new organizational forms. Currently, institutes, centers, and temporary labor collectives that unite scientists of various specialties are becoming such a form. While undergraduate programs remain the prerogative of faculties, master’s programs become the prerogative of new interdisciplinary institutes.

The intensification of global competition, a new wave of technological changes, and the search for an alternative to export and raw material development pose ever new problems for university education. These global challenges are reinforced by the unresolved nature of a number of social and institutional problems:

• High levels of social inequality and regional differentiation,
• maintaining barriers to doing business,
• weak interconnection of education, science, and business,
• lack of necessary competition in a number of markets, and
• low level of development of social capital.

The problem is compounded by the poor development of forms of self-organization and self-regulation of private business, underdeveloped competition in a number of markets, low levels of public confidence, and inefficiency of public administration.

The internationalization of activities is fully consistent with the neoliberal principles of the development of higher education. Thanks to internalization, competitiveness in the education and research market is increasing. The orientation of higher education toward the market is also associated with the formation of a global knowledge economy and the heterogeneous development of educational institutions in different regions of the world.

4. Material and Methods

In the field of education, neoliberal reforms began in the eighties of the twentieth century in developed and developing countries building market economies. Such reforms are called new public sector management or managerialism (Klikauer 2013). For example, under specific Russian conditions, managerialism in the field of education and science was implemented in the process of importing institutions. The most important of these institutions are the following: (i) An entrepreneurial university, (ii) performance-based management (KPI), (iii) commercialization of scientific results, (iv) Unified State Exam (USE), (v) a leveled and modular education system, and (vi) optimization of the teaching staff.

The main directions of the implementation of the neoliberal economic policy in the field of education are (i) marketing (a system of measures orienting educational organizations to actively act in the educational services market), (ii) targeted planning of educational and scientific performance indicators, (iii) optimization of educational and scientific organizations, (iv) consolidation and merging of educational organizations in the process of creation of federal and reference universities, (v) the implementation of universal standards for examination tests that are used as performance indicators, and (vi) strengthening bureaucratic controls that are based on the achievement of performance indicators.

Almost all of the above institutionalized measures of economic policy are typical for the developed and developing countries that pursued neoliberal policies. For example, in European countries, in the course of the implementation of the New Public Management policy, marketing, optimization, bureaucratization and reduction of academic freedoms, and orientation to quantitative KPI to the detriment of the quality of education were consistently carried out (see, e.g., Lorenz 2012).

During the neoliberal reforms, under the pretext of increasing efficiency, the higher education was optimized (hundreds of organizations were closed and merged). Optimization in the field of higher education has led to an absolute and relative reduction in the provision of higher education for Russian citizens. In the Russian Federation, from 2011 to 2019, the number of universities decreased from 1115 to 741, and the number of students per 10,000 people decreased from 493 to 284 (see

Table 1. Higher educational institutions and educational programs in the USSR and Russian Federation.

Year	Institutions and Organizations	Students—Total, Thou. Persons	Including by Mode of Attendance			Students Per 10,000 Population
			Full-Time	Part-Time	Distant
1914	72	865	865	–	–	10
1917	150	149	149	–	–	16
1927	90	1142	1142	–	–	…
1940/1941	481	4781	3351	15	128	43
1950/1951	516	7967	5026	17	2771	77
1960/1961	430	14,967	6992	1676	6299	124
1970/1971	457	26,717	12,965	3898	9854	204
1980/1981	494	30,457	16,856	401	9591	219
1990/1991	514	28,245	16,477	2845	8923	190
2000/2001	965	47,414	26,252	3022	17,618	324
2010/2011	1115	70,498	30,737	3047	35,572	493
2011/2012	1080	64,900	28,477	2634	32,897	454
2012/2013	1046	60,754	27,243	2297	30,514	424
2013/2014	969	56,467	26,188	1892	28,386	393
2014/2015	950	52,090	25,750	1585	24,755	356
2015/2016	896	47,665	23,796	1491	22,378	325
2016/2017	818	43,995	24,030	1242	18,723	300
2017/2018	766	42,459	23,805	1350	17,304	289
2018/2019	741	41,617	23,698	1556	16,363	284

Source: Rosstat (2019).

).

As shown in Figure 2, in Russia, compared with the United States, the number of students per 100,000 people has deteriorated, which is the result of the optimization of education and science. Figure 2 illustrates a significant period of time, from the times of the USSR to the present. In the USSR, the country’s development was traditionally considered under the slogan put forward by N.S. Khrushchev: “Catch up and overtake America”. Of course, Russia and the United States are economically very different, but they also have common features—these are federal states with a large number of entities that are geographically and institutionally heterogeneous, a large number of universities, and a developed research infrastructure.

An example of the import of educational institutions is the total implementation of effective contracts. Effective contracts in the social sphere and in education were aimed at stimulating employees, increasing labor productivity, developing the market for teachers, and professional competition. However, during the implementation of the effective contract project, goals were not achieved. Instead of stimulating and increasing productivity, teachers began to adaptively work on the indicator without improving quality; instead of developing the teachers’ market, administrative oppression intensified; instead of collegiality and self-government, bureaucratization increased. Most importantly, there was no significant increase in teachers’ salaries; instead, various mechanisms of their “statistically fictitious” growth, as well as negative selection for administrative posts of persons ensuring formal compliance with the indicators, were widely used (Kurbatova and Donova 2019).

The use of the key performance indicators in the field of education for motivation and control leads to an adaptive reaction of the main actors, which can be characterized by the “work on the indicator” typical of the Soviet era. For example, the widespread use of quantitative bibliographic indicators to evaluate the effectiveness of scientific and pedagogical workers led to a significant increase in the number of publications in predatory journals and a decrease in their quality.

The results of the import of institutions as part of the implementation of the neoliberal educational policy cannot be considered satisfactory at present. Optimization leads to the dominance of short-term incentives and destroys the professional and creative potential of domestic higher education and science.

The implementation of neoliberal reforms in higher education relates to yet another seemingly paradoxical consequence—an increase in control and supervisory procedures and regulations within educational organizations. This control is a consequence of the principle of accountability. However, in complex activities, such as science and higher education, control is associated with the presence or absence of the necessary expert knowledge, and high costs are associated with organizing and implementing control measures. Strengthening control may also conflict with basic social values, such as academic freedoms. The principles of neoliberalism in theory suggest that bureaucratic control should be gradually replaced by control by the market and public associations; however, in practice, these mechanisms lose out to the rapidly growing bureaucracy, which actively generates endless regulations and standards for assessing the quality of education and science (Lorenz 2012).

In the education system, the creation of markets should also be seen through the prism of an institutional organization. Commercialization of higher education is possible only in conditions of developed infrastructure for raising funds and certainly solvent demand. The increasing market orientation of higher education during reforms is associated with the widespread occurrence of such a phenomenon as managerialism (Volchik and Maslyukova 2017). Managerialism is a phenomenon associated with neoliberal politics, where, unlike classical neoliberalism, not political–economic, but managerial imperatives play a dominant role (Klikauer 2013).

Following the logic of managerialism, scientists need to focus on the needs of the market when choosing the topics of research. With regard to this, academic freedoms are replaced by the dictates of managers in the choice of areas that create competitive advantages in the struggle for funds. A similar competition for financing involves additional transaction costs (filling out endless reporting forms) that fall on teachers and researchers, which reduces their working time, which they could spend on solving important scientific and social problems (Klikauer 2013). In practice, market-oriented reforms in higher education result in the creation of organizational forms and regulations involving scientific and pedagogical workers in a whirlpool of bureaucratic activity (Graeber 2015).

The implementation of the ideas of managerialism in the field of higher education is associated with the extension of the criteria of effectiveness, efficiency, and detailed accountability to all aspects of teaching and research. However, the benefits that are created at universities often have signs of experienced and expert benefits (Tambovtsev 2019). Evaluation of such benefits by external regulatory and planning bodies can take grotesque forms, for example, when the increase in funding is associated with multiple increases in publications in leading scientific journals. The indicators that are used for reporting in such a system are revised annually upward. Russian teachers are already required to have publications indexed not only in international databases, but certainly in journals included in the first and second quartiles of journal indexation databases, such as Scopus or Web of Science. Trends in increasing indicators to stimulate the effectiveness of professions run counter to the characteristics of academic activity, where effectiveness cannot always be demonstrated in a short reporting period.

Let us consider the arguments for and against the neoliberal marketing of higher education. The main argument “for” is based on the assertion that orientation to the educational services market will make it possible to increase the efficiency of educational organizations through intensified competition. Achievement of efficiency goals is due to the intensification of competition. In this context, education is seen as a market service, and, therefore, the achievement of efficiency depends on the degree of perfection (or imperfection) of market mechanisms. The creation of an educational services markets also requires the creation of appropriate institutions, which, as theorists of neoliberalism suggest, are the result of rational choices in the process of institutional change (Knight 2001). In fact, theorists of neoliberalism, identifying the market with the only effective mechanism for creating new knowledge admitted at the same time that they can be purposefully created by designing markets (economic mechanisms) (Mirowski and Nik-Khah 2017). The practice of conducting neoliberal reforms demonstrated that corruption, special interest groups (conflicts of interests), and increased transaction costs due to bureaucratization of regulation can impede the effective creation of markets.

The main argument against the marketing of higher education is based on the assertion about the predominantly non-market nature of education as an economic good. The denial of the market nature of education is closely related to its importance for the development of modern society: Significant external effects, the impact on the problem of inequality, and the provision of conditions for sustainable socio-economic development. Proponents of this approach do not deny that higher education can be partially considered as a mixed blessing, but hold that the state should take on a significant part of its financing, ensuring wide access.

The modern Russian system arose in the 1990s by copying the Bologna system. Instead of a five-year specialty, a six-year two-stage system (including bachelor’s and master’s degrees) appeared. A quantitative leap in the development of Russian universities occurred in 1992, when the government allowed the transformation of specialized institutes into universities, which many of them hastened to do in order to increase the salaries of their employees. In 1992 alone, the number of universities in Russia doubled (from 48 to 97). From the beginning of the nineties, over the next 20 years, an educational bubble formed in Russia, which was accompanied by a rapid increase in the number of universities and teachers: “From 1990 to 2008, the number of universities increased by 2.2 times, and the number of students by 2.7 times. At the same time, the number of faculty members has increased by 1.9 times” (Balatsky 2014, p. 59).

If the growth was mainly due to humanitarian and socio-economic specialties, which could not be properly developed for ideological reasons in the USSR, then the educational bubble was reduced in proportion to the target indicators that were raised from above (for example, when the number of students was associated with the number of teachers) in the best traditions of neoliberal optimization policy. During this optimization, the number of universities and branches decreased from 2014 to 2018 from 2268 to 1171 (Kommersant 2018).

Of course, reforms in the field of Russian higher education were necessary for its modernization. However, as a result of neoliberal reforms, there was a mechanical optimization of the number of universities; for example, the number of students per 10,000 people decreased by more than 40% (Rosstat 2019).

In Russia, in the last ten years, there has been a significant reduction in the number of students. Less than a third of the Russian population in the age cohort of 17–25 years old is enrolled in higher education (Figure 3) or development. The import of institutions related to neoliberal optimization has created a situation in which, in the medium term, Russia may lose not only the ability to conduct high-level research and educational programs, but also the reproduction of the necessary personnel and schools in higher education and science. Therefore, without changing the direction of the reform vector, these alarming trends will inevitably lead to a decrease in the characteristics of human capital and further degradation of the sphere of scientific research in Russia.

These transformations took place in the conditions of a sharp reduction in state financing of higher education and were accompanied by an increase in state control and a monopoly in higher education. For example, in Russia from 2014 to 2018, the number of non-governmental organizations of higher education decreased from 371 to 178 (Kommersant 2018). In the context of a constant decline in the incomes of the Russian population (from 2015 to the present), solvent demand for higher education is declining, which, along with a decrease in state funding for higher education, contributes to a further reduction in their number.

Within the framework of higher education organizations themselves, the implementation of managerial ideas and policies leads to a reduction in academic freedoms, autonomy, and self-government. The absence and erosion of academic freedoms is key to maintaining an institutional environment conducive to creativity and new research (Volchik and Maslyukova 2017). In fact, the curtailment of academic freedoms leads to the destruction of the modern university, as shown in metaphorical form in (Rittberger and Richardson 2017).

In order to overcome the negative effects of neoliberal politics, it is necessary, first of all, to stop the curtailment of academic freedoms and self-government within the framework of higher education organizations. To do this, the academic community must act as more organized interest groups. It is also necessary among intellectuals to raise the question of curtailing academic freedoms over and over again, so that narratives linking the curtailment of academic freedoms with a decrease in the productivity of scientific research and education are preserved in a wide public discourse.

The issue of financing is also important for Russia under the prevailing conditions—financing primarily of the state. The overwhelming number of Russian state universities have been developing under the conditions of underfunding for several decades, which lead to the leakage of human capital and the destruction of the mechanisms of reproduction of the academic sphere in the medium and long run.

5. Conclusions and Implications

All in all, it becomes clear that the neoliberal economic policy is based on logical and easily understood principles that have been traced back to the time of classical liberalism of the 19th century. However, in modern society, the needs and conditions to produce public and mixed goods have changed significantly. For example, higher education from the elite has become widespread and encompasses a wider population. More and more countries partially or even fully finance higher education from budgets at various levels. In such circumstances, the reform of higher education on neoliberal principles is an attempt to reverse institutional evolution.

Neoliberalism is a complex system of ideology and measures of socio-economic policy. However, within the framework of the neoliberal doctrine, a reductionist approach to explaining socio-economic interactions is implemented. In fact, if we consider the neoliberal policy cleared of layers of a conservative, rhetorical, and plutocratic nature, then it is based on a very simple but effective idea of reducing the social obligations of the state to wide sections of society. The development, dominance, and implementation of this idea in economic policy measures follows from an uncritical borrowing of the theoretical constructs of the founders of the neoliberal doctrine, Hayek and Friedman. Although Hayek recognized the need to ensure a minimum level of social insurance, his ideas about the nature of social insurance remained at the state of the beginning of the 20th century (Horwitz 2019).

It becomes apparent that markets cannot be oversimplified as the naturally existing mechanisms for economic coordination. Neoliberal theorists do not recognize that the idea of the natural formation of markets is utopian, ignoring numerous historical examples and focusing on the technical aspects of market allocation of resources. Historically, the formation of many markets, and especially the labor market, was accompanied by significant institutional reforms, during which conditions were created for their functioning. It is very important to understand that market exchanges, like other forms of economic choice in specific historical conditions, exist only in relation to the institutional design of the economic process, which gives stability to repeated social interactions.

Hayek linked the restriction of government intervention in the economy with the dichotomy of market coordination represented by a democratic political order (Hayek 2011). According to his logic, the restriction of market mechanisms and the expansion of social insurance will inevitably lead to a restriction of democratic freedoms. However, the case of the welfare states in the Scandinavian countries provides historical examples of when the large amount of the provided social benefits does not destroy democratic political institutions and does not lead to authoritarianism, but creates conditions for stable economic development in various indicators not inferior to those of countries with more liberal economies. The neoliberal approach focuses on the problems of optimization and efficiency; however, in the current conditions of the post-industrial economy, it is also necessary to take into account the problem of significant externalities from the spread of higher education that have a beneficial effect on economic development. Therefore, the implementation of reforms in the field of higher education should consider the features of the evolutionarily established academic institutional structure, which ensures the adaptation of universities to non-ergodic processes in modern society and the economy.

When it comes to the pathways for further research, it appears that a somewhat more comprehensive institutional analysis comprising not just the transition and the post-socialist economies and developed countries (such as the United States) might be necessary to grasp the whole complexity of the problem. Moreover, it might be interesting to assess the import of institutions in the social and economic spheres, as well as in the education in countries that embrace some characteristics from both models. Countries from Southeast Asia or Latin America might represent very interesting cases for such an analysis.