For-profit schools — a total disaster

29 December, 2016 at 17:53 | Posted in Economics, Education & School | Leave a comment

To make education more like a private good, [voucher advocates] tried to change the conditions of both supply and demand. On the demand side, the central proposal was that of education ‘vouchers’, put forward most notably by Nobel Prizewinning economist at the University of Chicago, Milton Friedman. The idea was that, rather than funding schools, government should provide funding directly parents in the form of vouchers that could be used at whichever school the parents preferred, and topped up, if necessary by additional fee payments.

Pros and Cons of PrivatizationAs is typically the case, voucher advocates ignored the implications of their proposals for the distribution of income. In large measure, vouchers represent a simply cash transfer, going predominantly from the poor to the rich. The biggest beneficiaries would be those, mostly well-off, who were already sending their children to private schools, for whom the voucher would be a simple cash transfer. Those whose children remained at the same public school as before would gain nothing …

The most notable entrant in the US school sector was Edison Schools. Edison Schools was founded in 1992 and was widely viewed as representing the future of school education … For-profit schools were also introduced in Chile and Sweden …

The story was much the same everywhere: an initial burst of enthusiasm and high profits, followed by the exposure of poor practices and outcomes, and finally collapse, with governments being left to pick up the pieces …

Sweden introduced voucher-style reforms in 1992, and opened the market to for-profit schools. Initially favorable assessments were replaced by disillusionment as the performance of the school system as a whole deteriorated … By 2015, the majority of the public favoured banning for-profit schools. The Minister for Education described the system as a ‘political failure.’ Other critics described it in harsher terms (The Swedish for-profit ‘free’ school disaster).

Although a full analysis has not yet been undertaken, it seems likely that the for-profit schools engaged in ‘cream-skimming’, admitting able and well-behaved students, while pushing more problematic students back into the public system. The rules under which the reform was introduced included ‘safeguards’ to prevent cream-skimming, but such safeguards have historical proved ineffectual in the face of the profits to be made by evading them …

Why has market-oriented reform of education been such a failure?  …

Education is characterized by market failure, by potentially inequitable initial allocations and, most importantly, by the fact that the relationship between the education ‘industry’ and its ‘consumers’, that is between educational institutions and teachers on the one hand and students on the other, cannot be reduced to a market transaction.

The critical problem with this simple model is that students, by definition, cannot know in advance what they are going to learn, or make an informed judgement about what they are learning. They have to rely, to a substantial extent, on their teachers to select the right topics of study and to teach them appropriately …

The result is that education does not rely on market competition to any significant extent to sort good teachers and institutions from bad ones. Rather, education depends on a combination of sustained institutional standards and individual professional ethics to maintain their performance.

The implications for education policy are clear, at least at the school level. School education should be publicly funded and provided either by public schools or by non-profits with a clear educational mission, as opposed to corporate ‘school management organisations’.

John Quiggin/Crooked Timber

Neo-liberals and libertarians have always provided a lot of ideologically founded ideas and ‘theories’ to underpin their Panglossian view on markets. But when they are tested against reality they usually turn out to be wrong. The promised results are simply not to be found. And that goes for for-profit schools too.


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