The revival of the Western university can be attributed to the Dartmouth College case of 1819. Nine universities had been created in North America before the Revolution (starting with Harvard in  1636) and they were like most British universities today: legally private bodies that received government grants, in exchange for which they surrendered autonomy. 

But in 1815, the University of Dartmouth appointed a professor of Divinity whose theology was not acceptable to the state government of New Hampshire, which responded by nationalising the college outright, deposing the trustees and installing its own president. But in 1819 the Supreme Court ruled that, despite all the money the state had given the college, it remained an independent institution under charter and could retain its autonomy.

This case provoked all the US states eventually to withdraw their funding whenever a dispute arose with the local university. Everyone — including the universities themselves — supposed that the loss of government grants would bankrupt them. But instead it was the making of them, and thanks to alumni-giving, fee income and autonomy, the Ivy League universities have become the world's best.

The history in continental Europe is the reverse. After centuries of absolutism the universities are generally owned by the state. In consequence they are dire, with vast class sizes and little personal tuition. The global university lesson is clear: the more independent a nation's universities, the better they are.

But that does not preclude government funding if it is donated in ways that do not discourage private money. The Ivy League today receives lots of government money, especially for research, but the key to its success is that the money comes with few strings. In Britain, however, the government makes the universities sign a so-called Financial Memorandum. 

Under the terms of the Memorandum, a university loses its financial and logistic freedoms: it may not set its own fees, or accept more students than have been centrally allocated. Indeed, for every student a university accepts in excess of its government allocation, it is fined around £3,700. The Higher Education Funding Council for England is seeking to recoup some of the £36.5 million that London Metropolitan University illegitimately over-claimed from public funds. Vladimir Ilyich Lenin, you should be living now. 

The solution to the universities' crisis is to construct a system of government support that helps them grow rather than one that fines them for being successful. The government should stop supporting universities and support only students. We should, indeed, copy America's system of needs-blind admissions.