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Endowed by a culture of giving

By Ben McNeil - posted Thursday, 6 January 2005

Australian universities cannot hope to compete effectively in the international arena without a strong and expanding financial base. But is that just the responsibility of government?

Working as a researcher at Princeton University a few years ago I was astonished at the level of philanthropic wealth available to both public and private institutions in the US. In one four-year funding drive, Princeton raised $1.6 billion to fund new infrastructure, buildings and scholarships. Considering the small amount of students attending Princeton (only about 6300) in comparison to other universities, I was absolutely stunned that they could generate such philanthropic wealth. This figure doesn’t even include the revenue gained via annual tuition fees (about $39 000) from Princeton students.

Princeton’s total endowment (an accumulated amount of funds from donations or bequests) is worth $12.4 billion and makes it the 3rd largest endowment of any US university. Harvard University is the behemoth of university endowments, weighing in at $28 billion. By comparison the two oldest universities in Australia, University of Sydney and the University of Melbourne have endowments somewhere between $200 and 400 million.


Harvard and Princeton have become two of the most prestigious institutions through breakthroughs in research, with nearly 70 faculty staff between them being awarded Nobel laureates. Obviously excellence and innovation in research requires luring the best researchers from anywhere in the world. However more importantly it requires state of the art infrastructure to facilitate their needs. If there aren’t the resources (equipment, technology etc) it doesn’t matter how brilliant the scientist, research outcomes will not be achieved. I guess it’s like luring Ian Thorpe to swim for a country that doesn’t have a swimming pool.

This research infrastructure comes at a huge cost to universities. With such massive amounts of disposable income, Harvard and Princeton can acquire both world-class academics and sustain long-term research facilities. For example, Princeton just completed constructing a huge building worth $28 million for a new department of integrative genomics, which was paid for completely by Carl C. Icahn, a stockbroker, philanthropist and Princeton alumni. Another alumni, auto-insurance millionaire, Peter B. Lewis, put forward $50 million to launch scientific programs for the institute over the next 10 years. The building and institute are therefore aptly named after Icahn and Lewis. While giving back to their institution, these philanthropists receive a 100 per cent tax deduction on their gifts thereby reducing their tax burden each year.

This sort of generosity is entrenched all over the US and doesn’t solely benefit the private university sector. During 2003, the top 10 public institutions ranging from Ohio State University to UCLA were donated a total of $3.9 billion. With 366 000 students enrolled, this means that on average the top public institutions received about $10 000 per student per year. The top 10 private universities such Harvard and Princeton, received about $4.9 billion, which represents about $30 000 per student.

Australia is severely lagging behind. Our top 8 institutions (Sydney, Melbourne, NSW, Queensland, Adelaide, Monash, ANU and WA) were donated about $70 million during 2002 with a combined student population of 250 000. This means that our top universities receive about $280 per student, about 36 times less per student than US public institutions and over 100 times less than the “Ivy Leagues”. Overall if we normalise against GDP, the US donates about 10 times more to universities (0.2 per cent of its GDP at $28 billion) than Australia (0.02 per cent of its GDP at $111.5million). Why is this so?

Some may argue that Australian universities are too young to have developed a spirit of giving back that is found within older institutions in the US. Although the “Ivy League” institutions are older, other US institutions such as Stanford (est. 1891) or Chicago (est. 1890) are actually 40 years younger than Sydney (1850) or Melbourne (1853), yet have accumulated $12 billion more in endowment. Stanford for example recently received $550 million from one of its early alumni, William Hewlett of Hewlett-Packard, by itself accounting for 5 times the annual donations given to all Australian universities.

Others may argue that it has to do with Australia’s taxation regime. According to OECD statistics it is true that the proportion of Australia’s level of government taxation per GDP (36.7 per cent) is about 5 per cent higher than the US (31.4 per cent). However Canada has an even higher taxation regime than ours (41.4 per cent) but donates $2 billion per year at 0.2 per cent of their GDP, which is equivalent to the US rate. As an example, just recently the university of Waterloo was given $35 million by the founder of Research in Motion to fund a quantum computing research centre.


The level of government incentive does not explain the discrepancy: philanthropic donations attract a 100 per cent tax deduction here, as they do in the US.

Perhaps the disparity comes from a cultural mindset in Australia that sees university funding as solely the government’s role. The problem is that government support here is also low (1.5 per cent of GDP) in comparison to Canada (2.5 per cent) or the US (2.7 per cent). Combining this with our poor rate of private giving means that Australia’s universities will continue to suffer in the international arena.

Maybe a few high profile donations from eminent, wealthy Australians or corporations would start to change the notion of giving back. In reality however, everyone has a role to play in supporting our universities. Over 75 per cent of undergraduate alumni give back to Princeton in some way. With 1.34 million alumni in Australia and numerous corporations economically benefiting from university research, teaching and graduates, it would seem we have plenty of scope to change this for the better.

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First published in The Australian on December 15, 2004.

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About the Author

Dr Ben McNeil is a climate scientist and economist from the University of NSW and author of The Clean Industrial Revolution: Growing Australian Prosperity in a Greenhouse Age.

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