How not to privatize schools

Topics: Education
07 Oct 1994

From: ervan

On the 10/5/94 (Wednesday) MacNeil/Lehrer there was a (repeat) piece about
Hartford considering turning its public schools over to Educational
Alternatives, Inc. (EAI). Of course, the American Federation of Teachers
(AFT) was opposed. The AFT's statements were a long list of nonsense about
how much we care about kids, etc. Of course, they skipped the most
important point: EAI can save money because, unlike the city, it doesn't
have to hire union teachers.

Unfortunately, it would seem that the AFT has a point when they complain
that EAI cannot deliver the quality that it promises (based on its, at best,
dubious performance in Baltimore). This adds to the appearance that
privatizing schools will not work. That's most unfortunate, because this is
not privatization. It's not even a vague shadow of privatization. It's
nothing but a union busting move on the city's part (which is fine, but it
is not relevant to school privatization). There is still no school choice.
Parents cannot take their kids elsewhere (short of paying double, like it is
now). EAI has been given no authority to change anything. It must follow
all of the dictates that are strangling public schools, so-called
self-esteem courses, mainstreaming the mentally handicapped, inability to
summarily expel students, and, of course, mountains of paperwork to prove
they are complying with every bit of nonsense regulation from local, state,
& federal governmental bodies.

It reminds of blaming the S&L fiasco on deregulation. It was no such thing.
It was worse regulation than before that came to be called deregulation, argh!

As evidence of how deep this error goes, the reporter (whose name I have
forgotten) interviewed a University of Wisconsin professor (they didn't
identify him for some reason) who was "researching" EIA. He said:

Professor: "One of the problems with these various businesses coming is is
that they know very little about how you set up and organize a classroom.
They don't have an educational vision. They have a business philosophy and
in their arrogance they believe that a business philosophy is the most
important and prime value that can be put in place and that they can hire
people to do the rest."

Reporter: "That's a pretty American concept. What's wrong with it when
applied to public schools?"

Professor: "It doesn't work."

Reporter: "Why not?"

Professor: "It doesn't work because schools are inherently unprofitable
enterprises. Public schools take all comers and in order to do that it
means we have to spend time & money in ways that would never, ever turn a

The first statement is curiously true. The final reveals a profound
ignorance though. First, it's an example of the trap that I just mentioned,
thinking that EAI represents privatization. But it also shows a profound
ignorance of even basic economic sense (I suppose that's why he is a
professor at the U of Wis.). Just raise the money spent on schools 10% and
there would be lots of people ready to take them over, leave them just like
they are, and take the extra 10% as profit. Profit is entirely compatible
with education. Or, in the real world, privatize, and people will sell the
same service for less, and take part of the difference as profit. Everyone
wins (except the AFT, and screw them).

More specifically, what he means is that society has deemed it appropriate
to spend exorbitant amounts on money on handicapped children who will never
pay back even the investment represented by a normally expensive public
education. Whether or not it's morally appropriate to fund such charities
is not immediately relevant. Society can continue to spend the same amount
it does now on special cases, but do it more efficiently via privatization.
Tell a private school that they must provide a specially "qualified" teacher
to exclusively watch over one handicapped kid continuously if they want the
$50K (or whatever) now being spent, and they will agree.

At a deeper level, it shows a misunderstanding about what profit is. Profit
is either payment for the use of capital (i.e. dividends) or the payment for
the application of talent. In the latter form, profit is simply the
business owner's income for the work he does. The profit that would come
from any venture must still be paid, even in the case of schools. Payment
for capital to build schools is simply realized as interest on public bonds
instead of dividends. There is no savings there. The profit that would
accrue to the business owner is instead the salary for the education
bureaucrat (and far less efficiently applied that way than if it were

I suppose the bottom line here is that the professor just does not even
realize we are spending real money on schools. If schools are "inherently
unprofitable" that means society is also spending more on them than they are
worth. In that case, let's abandon them!