The TEAC (Tertiary Education Advisory Commission) Reforms

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Bill English
Shadow Minister for Education Wellington, New Zealand

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In this article Bill English, New Zealand's Shadow Minister for Education, tells the story of New Zealand's tertiary education policy development over the past several years. His perspective comes from time in government and from time in opposition. He concludes with the lessons to be learnt, and his prognosis of the main issues to be confronted by that tertiary sector, in the years to come. The lessons to be learnt are just as valuable for the Australian sector as they are for New Zealand academicians.

In this article, Polytechnics are the equivalent of the old Colleges of Advanced Education in Australia, or roughly between the TAFE and university sectors. MMP (mixed member proportional) is the proportional system of electing the New Zealand Parliament. This system is similar to the method by which Australians elect their federal Senate. A Wananga is a tertiary institution set up by statute to focus on the educational needs of Maori.

This article is important for Australia because the Australian federal government is in the process of implementing policy that has been trialled in New Zealand for several years. The challenges and learnings from New Zealand are just as relevant to Australia as they are to New Zealand.

The New Zealand Government is setting out to produce a new Tertiary Education Strategy for 2007-2012. It promises to be a vigorous and contested discussion after two years of political controversy over tertiary education spending. Particular tertiary courses, such as 'Twilight Golf', featured on political billboards and in election campaign advertising. Such popular profile is unusual for tertiary education policy, and almost by definition trivialises the complexity of public policy on intellectual and human capital. So something must have gone badly wrong with policy on tertiary education to attract the attention of the wider population in a close election campaign. This is the story of what went wrong and why. New Zealand's experience since 2000 shows the hazards of translating the rhetoric of directing the tertiary education sector in the national interest into reality.

My view is a necessarily partisan view. I was a participant in, and sometimes a catalyst for the controversy that made tertiary education an election issue. In that role, I chose to highlight aspects of tertiary education policy that caught public attention rather than explain the many complexities that lie behind tertiary education policy.

These political activities were, however, informed by 20 years' experience of working in public policy in New Zealand. I was an official in the Treasury when the government of the day introduced demand-driven tertiary education funding as part of a major economic reform programme. During the 1990s, I was Minister of Health and then Minister of Finance, implementing or fixing more public policy reform.

I have a particular interest in what is possible in public policy. That last 15 years are littered with examples of expectations of public policy that were not met and promises not delivered. New Zealand's attempt to reshape tertiary policy is among those examples.

This paper argues that governments can try too hard to control too much of tertiary education. New Zealand's recent experience shows tertiary education policy should aim first to meet fundamental responsibilities of government, fiscal accountability, and quality control. These responsibilities embody obligations to taxpayers on the one hand and students on the other. Any taxpayer should be able to trust the government to account for the money it has spent. Any student should be able to rely on the minimum standards implied by public funding and accreditation of any course.

I conclude with a simpler model of oversight of the tertiary sector, focussing on these responsibilities to the exclusion of more refined but more costly and potentially unmanageable control mechanisms.

Background To The TEAC Reforms

New Zealand governments through the late 1980s and early1990s carried out sweeping reforms of the economy with now well-documented social dislocations and sufficient political pressure such that the country opted to change the electoral system from 'first past the post' to the MMP proportional system in 1996. By the late 1990s, reform fatigue had set in and a public debate over the benefits of the economic and social reforms was picking up momentum. The conservative National Party Government, in which I was a Minister of Health and then Finance, was also showing signs of fatigue. By 1998, National had dispatched its long-term leader and the governing coalition had fallen apart. The economy was hit unexpectedly hard by the economic crisis in Asia, and six years of growth ended in a sharp economic downturn.

The perception grew that New Zealand's commodity-driven economy had not fundamentally changed despite painful economic reforms, and it was time to take a new direction. Debate turned to a more active role for a government, and use of a wider range of tools for economic development in order to move to the 'knowledge economy'. Policy related to research and development, skills and training, and tertiary education took on new importance in the 1999 election campaign.

It became an article of faith that demand-driven or 'bums on seats' tertiary education funding was flawed. The Labour Opposition made it clear they would be reviewing and changing the tertiary education system for both strategic economic reasons and ideological reasons. A key theme of their election platform was to reverse the National Government's policies of policy-provider splits, competition and contractualism in public services. Labour promised a 'less market driven' tertiary sector.

Tertiary policy through the 1990s was based on the Hawke Report, itself a result of a major review conducted by the previous Labour Government in 1988. The Hawke Report led to the Labour Government's 1989 policy statement, 'Learning for Life'. All tertiary institutions were given their own governing councils with the autonomy to make decisions about their assets, and to design and develop their own courses and programmes. The changes were designed to increase the flexibility and responsiveness of tertiary education.

The Learning For Life reforms also led to changes in the funding system, with the introduction of bulk funding, and uniform funding formulas for all institutions, regardless of type. Funding was based purely on student numbers. Polytechnics were funded according to the same course cost categories as universities, and during the 1990s other classes of institutions were included in this system - private training establishments (PTEs) and Wananga.

Universities maintained control over their own standards and polytechnics set up a joint quality control agency with powers delegated from the newly formed Qualifications Authority.

The Labour Government, newly elected in 1999, began its comprehensive review of the tertiary education system in April 2000 with the appointment of the Tertiary Education Advisory Commission (TEAC).

Both National and Labour parties supported this framework at least until the late 1990s because it delivered steadily increasing participation rates across all groups.

TEAC was charged with devising an approach for implementing the Labour Government's vision for the tertiary education sector. The Government's terms of reference, developed in consultation with the sector, specifically sought:

A 'more cooperative and collaborative' tertiary education sector
A greater sense of 'partnership' between the key contributors to the sector
An environment where all those involved in teaching, scholarship and research are 'committed to contributing to the nation's future direction'
An environment supportive of Maori aspiration
Support for regional and local communities
A more 'widely-shared' strategic direction and understanding about tertiary education.

The overarching goal of the reform process was to end the 'bums on seats' system and develop tools to steer the tertiary sector to align it with national economic and social goals.

TEAC went on to produce four reports on recommended reforms to the tertiary education system. The first was called 'Shaping a Shared Vision', the second 'Shaping the System', the third 'Shaping the Strategy', and the fourth 'Shaping The Funding Framework'.

A comment in the first TEAC report that 'The [tertiary education] system in 2001 is as much a result of the unplanned consequences of the changes as the planned-for changes themselves' was a signal that tertiary policy would be measured against principles of central control.

Positive aspects of the existing tertiary policy were noted in terms familiar to any participant in tertiary policy debate over the previous 15 years: diversity of provision, relatively high levels of participation, a wider range of people participating in the system, more students returning to study later in life, an increase to the average length of study, and improved completion rates.

The logic of these reports reveals a mindset that I call 'revenge of the middle management'. People in middle management of any large public organisation have clear ideas abut what senior management should be doing. Because of their detailed knowledge of the organisation, the problems are obvious to them. So are the solutions, if only they had sufficient power and authority to implement them. The TEAC reports demonstrate a mindset focussed on rigorously listing extensive problems on the assumption that stronger central control can always fix them. The early reports didn't distinguish between the real policy problems that better policy settings might solve, and the challenges of running a modern service organisation that are not amenable to policy change.

Long lists of shortcomings demonstrated that the sector was tired of the challenges of keeping up with the competition, changes in students and industry demand, and the responsibility of making accountable decisions.

The first report, 'Shaping a Shared Vision', detailed general concern about a lack of coherence in the system, including uncoordinated policy advice, a failure to attract a wide range of students, fragmentation, duplication, a lack of coherent information, sectoral infighting, and a lack of overall priorities.

The following list of problems from the first TEAC report might give a sense of the scale of the task the Government set for itself.

Funding arrangements that drive competition and discourage cooperation, inward looking governance and management, tunnel vision, lack of good performance data, and fragmentation within the system.
Risk aversion, compliance mentality, change fatigue and low morale, perverse incentives that promote homogeneity, mediocrity and credential inflation, lack of inspired leadership, lack of research on tertiary education itself.
Unequal access and outcome for many individuals and communities, particularly the poor, Maori, Pacific peoples, those with disabilities, and recent immigrants; lack of education for citizenship in a democracy; low status accorded to entry level education; affordability and high levels of indebtedness; over-emphasis on procedural accountability.
Lack of understanding of the mutual benefits of the Treaty of Waitangi, lack of meaningful participation by Maori in decision-making within and about the system, failure to implement Charter requirements, lack of accountability and results by institutions and the Crown, lack of resourcing for wananga and other Maori education initiatives, arbitrary limit on number of wananga, many small providers lacking advocacy.
Inadequate understanding and communication of the system's contribution to the discovery, integration, application and dissemination of knowledge, and the preservation of our cultural traditions; a lack of stable, long-term resourcing for research-intensive tertiary education providers; the vulnerability of important research areas to volatile learner demand; the limited range of funding sources for research, including in the humanities and social sciences; difficulties in allocating

This and subsequent reports failed to analyse these problems into any workable shape. One example is the way the reports dealt with the issue of competition among tertiary institution. The Minister and TEAC railed against competition and stated a strong preference for collaboration. They argued that competition lay at the heart of a lack of coherence and drove institutions to recruit students for financial reasons without regard to quality. Nowhere do the reports deal with the obvious source of competition - the simultaneous existence of more than one student and more than one institution. Institutions may be fully committed to collaboration but students continue to weigh up the benefits of one against another. The analysis didn't distinguish between management, institutional, or national perspectives on the costs and benefits of competitive behaviour. Because of a lack of understanding of the dynamics they were dealing with, TEAC was unable to advise the government on the costs and benefits of competition, much less provide the tools for the Government to eliminate or reduce actual competitive behaviour - one of the key objectives of the reform.

Perhaps overwhelmed by the scale of these problems, TEAC advised the Government to direct Crown agencies to tackle these immediate problems, while TEAC would focus 'on the longer-term resolution of the underlying causes of these problems'.

So the agencies were given the job of solving the problems in practise while TEAC kept for itself the job of resolving them in theory.

TEAC's second report, 'Shaping the System', outlined six key weaknesses in existing policy tools and central steering instruments for the tertiary education system. They stated that these deficiencies were of such 'magnitude' that a totally new approach was required in order to allow for more effective engagement and steering of the system by government and stakeholders.

The report exhibited a strong preference for what it called 'regulatory coherence' instead of 'excessive reliance on demand-driven funding and competition between providers'.

Accordingly, 'Shaping the System' recommended the creation of the Tertiary Education Commission (TEC). It would be charged with developing tools like charters and profiles, and presumably a strategic framework within which to use the tools.

The third TEAC report, 'Shaping the Strategy', focussed on developing this framework, a 'Tertiary Education Strategy'. Its language and intent is best illustrated by comment from the Associate Minister of Education (Tertiary), Hon Steve Maharey, who stated that, '... the tertiary education system needs to be more explicitly aligned with wider government goals for economic and social development. The key message is that the tertiary education system can no longer be seen in isolation from the Government's wider social and economic development initiatives and strategies.'

Again the report betrays a strong preference for alignment mechanisms that are recognisable as mechanisms for centralised control. Since there did not appear to be mechanisms for central control, it is assumed that the tertiary system must be failing to meet national and local needs. Whether interactions between providers, employers and students might reflect national needs is not discussed.

In mid-2002, the Government decided to develop the Tertiary Education Strategy, in consultation with the sector and wider stakeholders, and to establish a permanent Tertiary Education Commission from January 2003 to execute that strategy

The fourth and final report was called 'Shaping The Funding Framework'. This set out admirable principles for a new funding framework: that it promote steering of the tertiary education system, that the framework should be transparent, have low transaction costs, assign financial risk appropriately, ensure equitable access, promote allocative, dynamic and productive efficiency, respect academic freedom and institutional autonomy, and accord with the principles of the Treaty of Waitangi.

TEAC proposed changes to the existing funding system that, in its own words, preserved its strengths. Total funding would be determined by subsidy per student, adjusted according to various indices, including an educational subsidy index which allowed for differential subsidy rates for different courses, and a desirability test. Their changes also featured separations of research funding and a strategic development fund to assist the steering process.

Among its more radical conclusions was a move to higher university entrance standards, merit-based rationing of courses, and an end to controls on tertiary fees.

The fourth report finally gave some shape to the high-level rhetoric and a more realistic response to the extensive problems listed in earlier reports. However, it included a number of politically unpalatable recommendations which TEAC must have known would not be adopted by the Government, so the report lacked the underlying integrity required for it to be picked up by the Government as a whole and effectively implemented. It did, however, strike a better balance of student interest in relation to the national interest. The idea that a student's decisions and aspirations were important had virtually disappeared from public debate

At the completion of the advisory phase, the Government had already moved to separate out research funding and set up the Performance Based Research Fund (PBRF), an allocation system which provided strong incentives to recruit staff with strong international research records and an ability to attract PHD students. This policy was implemented successfully with widespread support in the tertiary sector.

The Government had also followed through on the concept of Centres of Research Excellence (CORE), again successfully implementing a widely supported policy.

However, funding for students remained unchanged.

While the politicians and bureaucrats waded through the policy-making process, the tertiary sector was producing regular political and fiscal surprises. The Government found itself scrambling to deal with current crises, unable to consider or implement longer-term changes.

The political events unfolding around tertiary policy focussed initially on growth in what was called Community Education. This was a category of funding for informal learning with no qualifications; similar to traditional adult education delivered by schools in night classes. For many years these courses absorbed almost 1% of total tertiary spending, with minimal growth. After 2000, tertiary institutions were confronted with financial pressures from the Government expectations of surpluses and slowing growth in mainstream courses. A few latched onto the informal community education courses as an opportunity for high-volume, high-margin growth. Polytechnics found they could offer informal courses with no fees, low costs delivery and collect as much revenue per equivalent full-time student (EFTS) as a mainstream course. So free community computer courses exploded in number. So did courses in Maori language and culture. Polytechnics started to do deals with the NGO (Non-Government Organisation) sector to generate more revenue. Existing training courses were converted into tertiary funded courses by agreement and splitting the new and generous EFTS revenue between the polytechnics and the charity that continued to provide the course. Unsuspecting members of the public who attended first aid, coast guard and parenting courses found themselves enrolled in a polytechnic hundreds of miles away.

Particular controversy surrounded a CD-based course in computer use run by a large polytechnic in joint venture with a software producer. The polytechnic enrolled people in shopping centres, libraries and through school fundraising committees, where the school received a fee per enrolment. Each student was handed a CD containing four courses in Microsoft products, creating four enrolments. The course generated about a 90% gross margin per enrolled student, and only 3% of those enrolled were known to have finished the course. In a few months more than 20,000 people were enrolled and the TEC paid out $15 million.

Other innovative courses operated on a smaller scale. Twilight golf coaching, funded as a tertiary subject, caught the public imagination and became part of popular discussion. Another controversial example of uncontrolled growth was Te Wananga O Aotearoa (TWOA), translated as University of New Zealand. A wananga is a tertiary institution set up by statute to focus on the educational needs of Maori. TWOA has catered mainly to adult Maori who have had little or low quality experience of public education. TWOA leadership showed considerable entrepreneurial flair by growing revenue from $5 million in 1999 to over $200 million in 2004. The wananga successfully marketed informal distance learning courses involving six-weekly contact from a tutor by phone in provincial and rural areas.

So, by late 2003, the Government was confronted with rapid growth in informal courses, causing spending blowouts and building up yet-to-be-realised political risks. At the same time, polytechnics were growing their certificate and diploma courses rapidly, pushed along by attractive financial margins.

Managers in polytechnics were under pressure to maintain financial viability, hampered by low or negative margins on more traditional trades and vocational courses. They took advantage of loose rules and confusion between the newly formed TEC, which approved courses for payment, and the Qualifications Authority, which was responsible for approving courses for quality.

The speed and direction of this growth in informal and low-level courses directly contradicted the objectives of Government policy. Extensive publicity followed about low-quality courses and spending blow-outs.

The Government discovered that the TEC legislation did not give them the power to refuse to pay on enrolment, or to recover funds where a course wasn't actually offered or completed. Administrative control of the sector was in transition between the Ministry of Education and the TEC, neither of whom maintained operational focus

In any case, the bureaucrats who were charged with cleaning up embarrassing courses were already dealing with too many complex issues. The Tertiary Education Commission and other agencies were required to take over existing funding mechanisms pushed to the limit by institutions struggling for viability, or growing exceptionally fast. At the same time they had to develop a new national tertiary education strategy, as well as a new set of stakeholder relationships to underpin the strategy. The TEC was required by law to develop new control mechanisms from scratch using staff who were unfamiliar with the sector. In addition to these tasks, the TEC had to develop its own culture out of two distinct predecessors. The tertiary section of the Ministry of Education was merged with a larger partner, Skill NZ, which had been responsible for managing transition to work programmes run by NGOs.

The Government appeared to have no conception of what was possible and manageable.

Policymakers also appeared confused and bewildered by the gap between the high level strategy they had to implement and expectations of detailed course and programme level decisions. The Tertiary Education Strategy has been expressed in terms so general as to render if almost useless for making decisions. Years of custom and practise are required to build the common understandings to make general terms such as 'relevance', 'access', 'equity' and so on.

The Government came to its own conclusions on the TEC. In its first two years it was subjected to three significant reviews, covering structure, governance and TEC's role alongside other education agencies. The third review concluded that the TEC, along with other education agencies, were under so much pressure that any action to fix the problem might make it worse.

Where To From Here?

By any assessment, New Zealand's tertiary reforms have so far failed. In the mind of the public, dodgy courses and wasted money are higher profile than any perception of strategic direction. After the 2005 election, the Government has given Dr Michael Cullen, the Finance Minister and the most capable Cabinet Minister, the job of cleaning up the policy.

Dr Cullen has recently foreshadowed significant changes to the EFTS funding system. As a new Minister he has greater freedom to fix problems rather than defend the indefensible. In the meantime, stakeholders are taking advantage of the Government's defensiveness to re-litigate arguments buried in the confusion of the past five years.

In announcing a new policy, the Government will have to take account of an evenly poised political balance, and the perception that it is vulnerable and tired in its third term. Dr Cullen does not have a mandate for bold changes.

However, the Government is likely to favour a conceptual shift to funding tied to outcomes, and more differentiation between funding for universities and other institutions. Every attempt will be made to minimise the impact of funding changes over the next three years, while at the same time demonstrating that the long-promised change in direction from 'bums on seats' has finally happened.

Any reform produces some benefits, even if the cost has been high. Dr Cullen should move to consolidate those aspects of the tertiary reforms which point in a useful direction.

Setting up the TEC proved to be a more difficult task than anyone imagined, but now that huge costs have been incurred, the organisation needs to consolidate, whittle down its mandate and its functions, and build on hard-won institutional knowledge.

Part of building credibility will be establishing a greater level of political independence. In the course of my work as an Opposition politician, the TEC often appeared to behave as an arm of the Minister's office. Tertiary institutions are large, complex and difficult to manage. Managers will make better decisions if public policy is transparent and credible. Such credibility is hard earned and easily lost by Ministers moving to soothe every political anxiety in the sector.

The TEC should focus on fiscal and quality control before it tries anything too sophisticated. Providers would take more notice of the policy and the TEC if the TEC were seen to actually make strategic decisions. In this respect there is a long way to go. It should not mistake a mass of unanalysed detail for the substance of strategic thinking. TEC appears to be buried in process issues and chasing too many conflicting government objectives to be able to make credible decisions that add value to the tertiary sector.

In particular, the TEC and education providers need to establish again in the public mind the notion that every publicly funded course has sufficient educational value to be worth turning up to class. The TEC needs the ability to refuse funding for courses that don't reach basic requirements of tutor-student contact, student participation and provable educational value.

Clear direction from the top will help polytechnics demonstrate that they retain the ethos of professional and educational integrity expected of public institutions.

Remedial work on low-quality courses was initiated by the previous Minister of Education under election-year pressure. Community education has effectively been abolished, sub-contracting is under the microscope, and some short courses have been cut. In Budget 2005, the Government announced the Quality Reinvestment Programme (QRP) designed to provide discretionary funding to polytechnics that need to change direction because they are affected by the course cuts.

Any shift of funds will exacerbate financial problems across the sector. Universities are involved in negotiations with staff unions and the Government to lift pay rates to internationally competitive levels. Fee caps, flat or falling enrolments, and small flat per-student funding increases mean there is insufficient revenue to meet staff expectations.

Polytechnics are entering a second round of bailouts, with about half of them likely to fail Government tests of financial viability in the next 12 months.

The Government has little choice but to leave the cash in the system and try to shift it to higher-value courses without causing too much political trouble. The results of an uncontrolled shift in funding streams are too unpredictable for a Government that lost a number of regional electorates in the 2005 election.

So the QRP is likely to be the tool for ensuring financial viability in the first place and to buy time while polytechnics unwind their more entrepreneurial activities of recent years.

So an environment where growth delivered more cash for staff and management will be replaced by an environment were there will be strong political competition for more funding, and tension over how it is allocated.

Distribution of the QRP is already showing these characteristics. Polytechnics were paid an initial instalment if they passed a resolution agreeing with the QRP idea. The second instalment is conditional on showing a willingness to re-do strategic plans. Both instalments are small. No one appears to know how larger amounts of funding will be allocated. One large polytechnic has recently named a co-chief executive to take day-to-day charge of the institution so the current CEO can set up office in Wellington to ensure the institution's future.

The next few years are likely to see more structural changes in public tertiary institutions. There have been virtually no changes generated by TEC decisions, and in the past six years market-led rationalisation has slowed to a halt. Information technology and flat or dropping student numbers have changed cost structures. Struggling polytechnics have been able to rely on cash injections so there has been no incentive to respond.

The TEC is likely to shift the focus of its interventions in the sector. Recently some signs of sanity emerged when it decided to exempt small-scale providers of adult and community education from the demanding tasks of submitting charters and profiles, and assessing each course against five criteria in the national tertiary education strategy. TEC should jettison interventions that require masses of low level data and focus on deepening its understanding of economic conditions, student preferences and the strengths and weaknesses of providers.

Compliance would be greatly enhanced by making an example of management who exploit the system. Ideally, providers should be able to deal with most quality issues. Where they fail to demonstrate professionalism and integrity the sanctions should be swift and serious. The polytechnic sector in particular is now vulnerable because it has lost the trust of a group of politicians dominated by university academics. They should expect from the Labour Government more central direction, less academic autonomy and significant rationalisation.

Universities will be less vulnerable to shifts in policy by the Minister or by TEC.

New Zealand universities earn a high proportion of their revenue from non-government sources compared with other public university systems in the OECD. They have adapted to greater uncertainty in revenue and more control over how and where their revenue is earned. Universities have responded quickly to the changes in research funding, and from here their focus will be on extracting more revenue from government by whatever means possible. Unions, government and universities are involved in a tripartite negotiation to reinstate national industrial awards and achieve globally competitive pay rates.

In the next few years, tertiary funding policy will continue to move away from a predictable formula to a more discretionary basis. Institutions that can master the politics will do better than those that can't. The skill-set of senior managers in the tertiary sector are likely to follow this trend. Knowledge of students, teaching and economic trends will be less important than the ability to exert influence on officials and politicians.

Again, this shift will be more important for polytechnics and private providers than for universities. Both are finding it difficult to formulate strategy for their own organisations in the face of this trend towards more discretion.

Polytechnics and private providers will need to reassert their independence and the educational integrity of their offerings if they are to push back the Government's momentum to more central control. A group of large polytechnics appear to be organising themselves to take advantage of rumoured Government preferences for a hub and spoke model - where smaller institutions are shut down and managed as branches of larger institutions under a policy of building a sustainable network.

However, rationalisation is likely to be hotly contested. The Labour Government lost a number of provincial city seats in the last election, and the one Government-initiated merger of recent years has so far failed to produce the expected benefits.

The Government could help the TEC by dropping its obsessive opposition to private training establishments. Their students are disproportionately Maori and Pacific students, and they compete with polytechnics for about 2% of existing courses. Only disadvantaged students will suffer if the Government succeeds in closing them down, and there will be little benefit to polytechnics.

Conclusion

New Zealand's tertiary reforms demonstrate that there are practical limits to how far a government can steer the tertiary education system. Policymakers need to be aware that a complex and dynamic tertiary sector is not easily measured or manipulated. The costs and energy of New Zealand's complex attempt to do so have not been worth it.

Tertiary education is now a mass market. It covers the range of learning from adult literacy to specialised research. It is driven by a myriad of interactions between students, institutions, the job market and the shifting sands of academic ambitions and disciplines. Ultimately, taxpayers are funding students, and students make decisions for aspirational as well as vocational reasons. No central control mechanism can second-guess those decisions.

Tertiary institutions should advocate for a much-simplified system with less central bureaucratic discretion, certain sanctions, and greater institutional autonomy. They should be demanding that central government stick to quality monitoring and funding limits until it can demonstrate that its own strategic processes can in fact add value to the institutions.

The Labour Government sees the tertiary sector as a large jigsaw of very small pieces. They believe a central agency can look at every piece and decide where they fit. In fact, the tertiary sector is more like a crowd going shopping - governments work on good crowd control and make sure there are some higher-end boutiques.

In a small country it is possible to know all the key personnel in large institutions and the particular circumstances of their institutions.

In a small country it is possible to prod and coax institutions to minimise wasteful behaviour, maintain minimum standards, and promote a small number of high-cost, higher-risk activities in the national interest. This kind of collaboration, along with simple rules thoroughly enforced with reserve ministerial or bureaucratic power, should be enough.

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