Every once in awhile it’s useful to take a look at how things are developing in other parts of the world. Today, a quick trip to the three Scandinavian countries.

Norway is by some distance the most affluent of the Scandinavian countries, thanks to a few bazillion barrels of offshore oil. But as the price of oil tumbles, financial pressures are appearing. A wave of institutional mergers – touted not as a cost-saving measure but as a means to strengthen institutions – has brought the number of tertiary institutions down from 33 to 21 (map here). While the argument for mergers strengthening institutions has truth – Norway has a population similar to British Columbia and 33 institutions is a lot, even given the dispersion of population – it’s also true that government funding, which is increasing by about 2% per year, is not quite keeping up with enrolment growth. Since there are no tuition fees, that means institutional expenditures per student are about even over the last five years. In turn, since staff wages tend to grow over time, that means cuts – and institutional mergers are one way to do that.

The problem is that in a place like Norway, which contains an awful lot of thinly- populated settlements, is that mergers tend to create sprawling multi-campus entities. Once you get centrally run multi-campus entities, people start to question to cost efficiencies of some campuses. This is what happened at the then ten-campus Nord Universitet, which controversially decided to shutter three of the campuses. Cue the outrage from small communities who lose a major community economic pillar out of the deal.

Denmark doesn’t have oil wealth to fall back on and a budget deal from 2013 limits structural deficits to 0.5% of GDP. That has limited the amount of money the Danish government has been able to spend on education over the course of the decade; in fact, growth in student numbers has been occurring about twice as fast as growth in government grants. Add to that the fact that as a matter of policy the Danish government has been shifting money out of the education envelope for higher education and into the research envelope – about 2% per year for the last five years. (The Danish government, like many of its European counterparts, gives institutions two separate pots of operational grant money, one for teaching and another for research, as opposed to the North American practice of handing over a lump sum to institutions to cover base costs for both research and teaching).

The result has been a long-term squeeze on institutions, accompanied by various government policy changes such as replacing a funding formula that rewarded increased student numbers with one containing a larger performance component and systematically reducing intakes in fields deemed to be unrelated to labour-market needs (mainly in the humanities). In this, a conservative government was largely assisted by a national chamber of commerce which was very interested in higher education issues and which kept up a drumbeat of calls for greater efficiencies.

So, it was with some relief that universities greeted the election of a Social Democratic government last spring, one which promised to be more supportive of universities. Which they were – to a point. The annual 2% cuts were abandoned, and significant money was allocated for green research (though some of the funding was reallocated from other research projects). But at the same time, the government elected to cut about ten percent from the teaching grants to the humanities, which is now widely expected to generate more program closures.

Sweden has hit a similar kind of funding wall in the last few years: since 2014, real government funding has been falling. Unlike Denmark and Norway, though, Sweden has responded in a very different way – mainly by restricting new student enrolments. Swedish universities expanded rapidly in the late 2000s in response to a very weird and short-lived baby boom in the late 1980s and early 1990s (tl;dr, the introduction of a new maternity benefit had the effect of compressing births without considerably increasing the long-term total, with the result that births rose by about 40% in the space of three years and then fell by the same amount a few years later), and managed to keep overall participation rates fairly constant. But as soon as the demographic wave passed, institutions chose to shrink in the name of “quality”. Which was an interesting choice – I cannot think of another country where a university system was permitted to restrict access when it had the choice to expand it. Can you imagine, for instance, if Ontario universities had tried to shrink again after the double cohort? And it’s not as though access is satiated in Sweden: one out of every two students who applied to university is denied a place (see page 18 in the quite wonderful annual report put out by the Swedish Higher Education Authority).

Now, none of these countries are shirkers when it comes to spending on tertiary education. Total expenditures per student in all three countries match are among the highest in the world, close to levels seen in Canada and the US, with the difference being that 100% of that – or near enough as makes no odds – comes from government. Give or take some international (non-EU) students in Sweden, students in these three countries pay no fees.

But that policy comes at a cost. The slow grinding effect of Baumol’s Law – which causes costs in higher education to consistently grow faster than inflation – takes its toll, and so to does the need to accommodate ever-growing public demands for higher education expansion. To deal with both those issues while keeping expenditures per student constant would require increasing spending every year by 4-5% above inflation. Even generous welfare states like Denmark, Norway and Sweden can’t do that. And so they find ways to trim: in Sweden, they find ways to keep enrolments down. In Norway they get universities to merge, and close expensive campuses. In Denmark they gradually cut teaching grants, and make universities focus more on labour market outcomes.

They could ease the pressure on institutions, of course, by allowing them to charge tuition. But as long as this considered verboten, trade-offs will need to be made. This isn’t neoliberalism, it’s just budget constraints. They’ve existed since the dawn of time and will continue to do so until the end of the world. Even the most generous public funding can’t provide an escape.