Paying The Price; Europe's universities must start considering innovative new methods of raising money if they want to stay competitive.

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Blair is the prime minister of Britain.

Academics have a venerable tradition of sharing ideas and knowledge across national boundaries. In today's shrinking world, the universities that employ them must also look outward to survive, compete and grow. And governments must be more imaginative in finding the right funding solutions to support that growth.

Throughout the developed world, a growing proportion of the population is accessing higher education. Across Europe, there are now upwards of 17 million students, 20 percent more than in 1997. In England, 10 percent of secondary-school graduates went to university in 1966; today 42 percent of those under 30 have college degrees--a proportion we expect will rise to half by 2010.

Student numbers are growing as the economy places knowledge at a premium and traditional blue-collar jobs migrate in search of lower wages and production costs. So today's graduate must be ready to work in a world where jobs are rarely for life and where adaptability is as prized as knowledge and creativity.

This presents governments and universities with big challenges. With the demand for college graduates increasing rapidly, the costs of higher education can no longer be borne by taxpayers alone. Universities have to find extra resources through student fees, overseas recruitment, industry partnerships and alumni donations.

The reasons are clear. In the U.K., we are fortunate in having many great universities, including Oxford and Cambridge. But to remain world leaders, they need to continue to provide the highest standards of instruction and research. To remain competitive our universities must attract the right level of public and private investment. The European Commission has calculated that across the EU there is a spending gap with the United States of 150 billion.

European universities, some of which stretch their lineage back to the Renaissance, find these challenges difficult; their governments even more so. Free tertiary education has been regarded as sacrosanct as free primary or secondary schooling throughout much of the Continent.

Yet those who benefit from higher education earn substantially more than their fellow citizens, whose taxes pay their fees--which is why tuition fees are increasingly on the agenda. European governments are starting to recognize that it is no longer feasible to continue providing wholly free higher education from general taxation, and many are considering fees.

In England, we have introduced undergraduate fees of up to 3,000 ($5,000) a year from this September (they were 1,175 until last year, but, before 1998, no fees were paid). Students effectively borrow the cost of tuition along with money for their living expenses, and repay it alongside their income tax after they graduate and start earning. There are grants available for lower-income students.

Fees are not enough on their own. The U.K. government provides substantial research funding to its universities, but research is increasingly supported by industry and business foundations, too. Such links can help make research more useful to economic development. The United States has had a long tradition of giving by alumni; U.K. universities are starting to build similar programs, and have reported a growth in donations.

And as Lambert and Butler's recent report shows, diversity must also be part of the solution. The future success of higher education will depend on more than just world-class research, though that is a crucial element. It will also require good business schools, opportunities for lifelong learning, strong teaching universities and good regional schools.

Each can and should play to its strengths. But to thrive and survive, universities cannot stand still. There will be more mergers and partnerships. Innovation will be an increasingly prized commodity. European governments must give their great universities the same freedom to innovate that their American--and even Chinese--counterparts enjoy through strong independent governance.

As our world gets smaller, our capacity to acquire and apply knowledge must expand. This is not just a challenge for individual countries or universities. It is an imperative for the entire global community.