The American lesson: How to be top

Why are American universities on balance so much better than those of continental Europe? And why do the universities of the rest of the English-speaking world fall, on average, somewhere in the middle? The wealth of these industrialised countries is comparable, so the different qualities of their universities cannot be attributed to economic disparities. But a simple empirical overview confirms that university quality grows out of independence: the more independent a nation's universities, the better they are likely to be. Ironically, though, the leading American universities never wanted to be as independent as they now are: their greatness was forced on them.

Nine Colonial Colleges were created in North America before the Revolution of 1776: Harvard was founded in 1636, the College of William & Mary in 1693, Yale in 1701, Pennsylvania in 1740, Princeton in 1746, Columbia in 1754, Brown in 1764, Rutgers in 1766 and Dartmouth in 1769 (I use the institutions' present-day names). Generally those institutions were founded by local clergymen as theological academies, and the universities soon received money from the local colonial governments.

The American universities were then largely like most British universities today - private bodies that took government money. But in consequence they sacrificed autonomy, and many of the academics and clergymen who had initially staffed their governing bodies were displaced by politicians.

After the Revolution, the state governments continued to support their local universities, and the rise of the independent Ivy League was an unintended consequence of a dispute at Dartmouth. The professor of theology at Dartmouth then also acted as pastor of the local First Congregational Church, but in 1805 the college and the church fell out over whom to appoint to the joint role. Ten years later, the dispute had still not been resolved. In 1815, the state government - arguing that because it largely funded the college it could direct it - threw out Dartmouth's president, installed its own and started to nationalise the institution. Some trustees resorted to litigation, and in 1819 the US Supreme Court found for them, judging that the state could not nationalise an independent corporation.

This case caused the governments in all the states eventually to withdraw funding: whenever a dispute arose with the local university, the legislatures asked why they should be financing a private body whose academics insisted on their autonomy. Consequently, the universities were soon struggling.

The universities did not want full independence; in the hope of reversing the legislatures' decisions, they retained the politicians as trustees long after the government grants had dried up. But eventually the universities had to acknowledge reality, and they replaced the politicians with alumni and donors. To many people's surprise, seven of the Colonial Colleges did survive (thanks to donations and fee income), and they are now known - together with Cornell, founded in 1865 - as the Ivy League universities. Rutgers and William & Mary, however, were nationalised.

Industrial-Revolutionary Britain followed Revolutionary America in creating independent universities. The universities of London (established in 1836, ten years after the founding of University College London), Manchester (established in 1851 as the Victoria University of Manchester), Newcastle (which began as a school of medicine in 1834), Birmingham (1900), Liverpool (1903), Leeds (1904) and Sheffield (1905) were as independent as Harvard and Oxford. Although a government Committee on Grants to University Colleges distributed public money to the British universities, by 1913 this provided only £150,000 annually, shared between all the civic universities (with Oxford and Cambridge staying aloof) and it did not exceed 20 per cent of their collective income. Nor did it come with intrusive conditions.

The subjection of the British universities to the higher education funding councils was an unintended consequence of the Great War. Wartime inflation destroyed the universities' endowments - the war also swallowed up potential students (and their fees) - so the universities were bankrupted. In 1919 the University Grants Committee was instituted, with an annual budget of £1 million (rising to £1.8 million in 1920), and leading to today's higher education funding councils with their vast subventions and powers of intrusion.

Independence translates into excellence because it not only encourages a university to view its students and its scholarship - not government - as its clients, but also enriches the institution. As the European Commission noted in its 2003 report, The Role of the Universities in the Europe of Knowledge: "American universities have far more substantial means than those of European universities - on average, two to five times higher per student ... The gap stems primarily from the low level of private funding of higher education in Europe."

But the loss of university independence on the European Continent was no unintended consequence; it was a crime born of absolutism. Europe's universities, like its parliaments, were originally medieval institutions, and many of the early universities such as Bologna were independent, as were the parliaments. But absolutism crushed the independent universities and parliaments of continental Europe, and soon England (protected by its Glorious Revolution of 1688) and America (protected by its Constitution of 1787) were unusual in retaining either.

The Western university was born independent but has too often been bound to government. Let us praise the separation of powers that facilitated the 1819 Dartmouth College case that allowed the universities to show that independence is best.