It was known – The high casualty cost of open training markets – Economics 101

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fool

The voc. ed. and training open market train-wreck was completely predictable. Some of us, senior educationists, tried to tell the Government and Government bureaucrats of the time and we were ignored. [Bruce D. Watson, 2015]

An open market puts the needs of companies above the needs of consumers.

Lack of  ideal conditions makes the open  market mechanism ineffective. the perfect conditions required are possible only in theory.

The fundamental point of the desirability of market forces in VET has almost always been resolved simply by assertion, often with reference back to a report which had previously made the same act of faith. ‘Skills for Australia,’ a discussion paper issued by then education minister John Dawkins in 1987, quoted in his next document, ‘A Changing Workforce’ in 1988, set off this self-referential chain.  (Robin Ryan, Evidence free policy, Campus Review, 17 November 2008, 11)

Enthusiasm for market solutions ran ahead of development of the conceptual infrastructure that is essential for rational policy development and effective implementation. Not much has changed.

Source: Economics book, a complete course for IGCSE and O Level by Dan Moynihan & Brian Titley Endorsed by the University of Cambridge International Examinations

Why did open market voc. ed. & training happen?

A few Government bureaucrats, with no understanding of education or open market economics, let alone vocational education and training,  thought they could could form a new “industry-led” market driven model of provision, without any reference or advice from economists or educationists. To this day, educationists are excluded from advising or contributing directly to voc. ed. and training policy.

Empirical evidence of benefits of privatising Voc. Ed. & Training

In an astonishingly frank article, Robin Ryan (2008: 11) who was involved in the development of marketisation policies in VET, argues that these policies were developed on the basis of little evidence. ( Evidence free policy, Campus Review, 17 November 2008, 11)

Economics 101

The key feature of a open market economy is that market forces dictate what is produced, in what quantities, at what price, and for which consumers. Resources are privately owned by individuals and companies. Profit and return on investment are the main drivers of businesses.

The idea behind a open market is that prices will regulate themselves.  Supply and demand will reach the point of equilibrium where the most money will be made.  However, what is best for the company is not necessarily what is best for the people.  An open  market puts the needs of companies above the needs of consumers.

No perfect free market economies

In reality there are no perfect open market economies. Even in countries like USA considered to be champions of open  market, there are many areas of government control. For example there are laws intended to check unfair trade practices. Also there are considerable restriction on what can be imported and how much quantities through the mechanism of import quotas and tariffs. Then there are provisions like anti dumping laws.

The power of choice

The open  economy has its advantages as well as limitations. The biggest advantage of open  market economy is that it gives the people the power of choice. They have greater freedom to choose how they want to spend their income. Another major advantage is that it makes best use of individual entrepreneurial abilities, which it also encourages.

The major problem is that to be most effective it needs some ideal environmental conditions like full, free and instantaneous availability of all relevant information to all buyers and sellers. It also requires complete freedom to manufacturers from one industry to another. Perfect conditions like these are possible only in theory.

Lack of ideal conditions makes free market mechanism ineffective

Lack of these ideal condition makes open  market mechanism ineffective in many ways. Thus monopolies and oligopolies develop, that may act against the interest of the consumer. Also we cannot always take it for granted that what consumer want is in his or her best interest. For example, no reasonable person will say that drugs should be freely sold to people who want to buy it.

Another major limitation of open  market economy is that it has no mechanism to reduce the disparities between the haves and have nots. It just creates a system in which everyone pays as per their ability. Actually because of the imperfection in market mechanism, open  economy tends to further increase the disparities between people.

Advantages:

  • the market produces a wide variety of goods and services to meet the consumer’s wants
  • the open  market responds quickly to people’s wants
  • the market system encourages the use of new and better methods and machines to produce goods and services

Disadvantages:

  • factors of production will be employed if only it’s profitable to do so
  • the open  market can fail to provide certain goods and services
  • the open  market may encourage the consumption of harmful goods
  • the social effects of production may be ignored
  • the market system allocates more goods and services to those consumers who have more money than others

 

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