Hidden Markets

Public Policy and the Push to Privatize Education

Patricia Burch

• Publisher: Routledge
• Year: 2021
• Print ISBN: 9780367760892
• eBook ISBN: 9781000376227
• Topic: Education
• Subtopic: Education General

Across the United States, test publishers, software companies, and research firms continue to take advantage of the revenues made available by federal policies like the No Child Left Behind Act, Race to the Top, and the Elementary and Secondary Education Act. In effect, the education industry has assumed a central place in the day-to-day governance and administration of public schools—a previously hidden trend that has begun to be a ubiquitous component of public education. Drawing on analytic tools, Hidden Markets examines specific domains that the education industry has had particular influence on—home schooling, remedial instruction, management consulting, test development, data management, and staff development. With updated and new material added, this second edition also highlights how technology and technology policy shape the conditions for teachers' work, the role of natural disasters as education market opportunities, and the connection between racism and educational privatization. Burch's analysis demonstrates that only when we subject the education industry to systematic and in-depth critical analysis can we begin to demand more corporate accountability and organize to halt the slide of education funds into the market.

Additional updates include:

• Discussion of the role that policy elites play in allowing CEOS to regulate the student identity market
• Examination of the rise of online tutoring engineered in part by the No Child Left Behind Act
• New chapter that offers an updated road map for policymakers and activists concerned about the issues raised within the book

1

Trends and Origins

The New Privatization

The center of gravity in public policy has shifted. Once considered relatively fringe, market principles of competition, consumerism, and incentives linked to performance, have become accepted policy strategies for improving social outcomes. Proponents of the market model claim that problems such as unsafe highways and crowded jails stem from government-run programs and government monopolies. Their idea is that if policy making is modeled after market relationships, government will become more cost efficient; government services will improve and society will benefit.¹

This book examines an aspect of this trend within American public education—a trend that I call the new privatization.² In the new privatization, education policy and the market have become more closely linked. The No Child Left Behind (NCLB) Act (the 2002 revision of the Elementary and Secondary Education Act of 1965) has helped private firms make inroads into local education markets. The firms gaining prominence under the new privatization are drawing on political networks, new technologies, and capital investments to become major suppliers to school systems for a vast array of educational services. This includes services such as test score data storage, remedial instruction for the poor, online curriculum, and online school management.

Public monies including Federal, state, and local dollars intended for schools help fund the operations of the businesses that I describe. While drawing on public money and on the authority of public policy, the work of the new privatization is relatively hidden from view. The activities are largely invisible to taxpayers and general citizens. The firms keep a low profile. They work with school districts through a complex web of contracts and subcontracts. They sell their services under different brand names. Further, many are privately held and thus have little obligation to report their finances and operations.

The new privatization is framed for increasing access to high-quality education and making government more accountable.³ Given these claims, much more transparency is needed about these firms and their implications for public policy. In this book, I begin this project by mapping the financial and operational reach of some of largest for-profit firms in the K-12 education industry and in describing three cases of education privatization.

This book will not attempt to answer the question: Do for-profit firms in the education industry contribute to increases in student achievement? Neither is it a book that aims primarily to expose corporate greed. Both are questions in which readers may be interested, but they are beyond the scope of this work. Instead, my intention is to offer a close look at the activities and roles being transferred from the public to the private sector under new forms of education contracting and to begin to trace the implications of these trends. I hope the book will heighten public awareness of this topic, encourage us to think critically about the risks involved, and provide a basis for launching further empirical work.

In the next section, I begin with a discussion of the discourse that is propelling the new privatization. In the second half of the chapter, I describe the framework that I use to study these developments. In this framework, I draw on ideas from critical studies of education markets as well from the new institutionalism in organizational analysis.

Underlying Ideologies

The new privatization is harnessed to those broader ideological shifts in theories of economic and political regulation that are referred to as neoliberalism.⁴

Neoliberalism

Under neoliberalism we are expected to believe that the market can do everything better and that government should be remade in the market's image.⁵ Private property rights, free trade, consumerism, performance audits, and entrepreneurs become the means for improving social welfare. Government becomes an extension of the market; it is expected to do its work and follow its principles.⁶

Neoliberalism was once a new idea and required justification. In the current decade, neoliberalism has achieved more legitimacy.⁷ It is called a prudent and measured policy alternative, rather than being viewed as extremist. Neoliberalism has lodged in domestic policies and practices across the globe in part through the efforts of international organizations such as the World Trade Organization and the World Bank. Neoliberalism has also helped establish and extend the reach of multinational conglomerates doing business in the global economy. Like many movements, neoliberalism is viral in the sense that it attaches to expedient political concepts. Through these dynamics, neoliberalism spreads across policy under the cover of concepts such public–private partnership, privatization, and globalization.⁸

The privatization of government services represents an important chapter in the rise of neoliberalism in the United States. As Stephen Ball notes privatization is “not an end in and of itself but part of a mix of [neoliberal] strategies.”⁹ Privatization generally refers to the use of the private sector in the provision of goods and services. Arguments for privatization derive from standard market theory: As the theory goes, the higher the competition across suppliers, the higher the quality product and the lower the production costs. From this perspective, the outsourcing of functions previously performed by government creates a competitive market for public services, increases the quality of those services, and reduces costs for taxpayers.

Arguments for privatization also derive from public choice theory. Under public choice theory, government employees are motivated by self-interest as opposed to public service. They do things that will protect this self-interest; for example, by seeking funding increases for their particular department or unit. In the aggregate, the self-interested actions of government employees can build bureaucracy and make government unresponsive, claim the public choice theorists. Privatization is invoked as a means for reducing the control of bureaucracy over government services.¹⁰

Privatization has a long history in the United States; but in recent decades has achieved more political clout. Once called a radical idea by mainstream conservatives, privatization is seen now as a legitimate strategy for reforming government. Some policy activity has centered at the Federal level.¹¹ For example, the past four presidents, including Democratic President William Clinton, have promoted various forms of privatization. Congress has passed laws enabling private firms to access public funds to provide social services previously considered the domain of Federal agencies. Federal Research and Development Laboratories are being privatized. In local government, the privatization agenda also is spreading. In states such as Florida, South Carolina, Indiana, and Massachusetts, governors have privatized state transportation, prisons, and child welfare and adoption services. In Indianapolis and Chicago, mayors advocating privatization have outsourced much of the city's infrastructure including its bus fleets, parking fines, computer maintenance, and city record-keeping.

Privatization and Education

As in other areas of American social policy, privatization has become a buzzword in education circles. In education, the term covers a broad range of activities, initiatives, programs, and policies. This includes reform ideas such as charter schools, vouchers, and the contracting out of education services such as school management.¹²

Education privatization has a long history in the United States. However, before the 1990s and the era of the Educational Management Organizations, contracting for services in education tended to focus on what has been called noninstructional services or nonessentials. Noninstructional services have included things such as food service, vending, transportation, and custodial services.¹³ Historically, the most commonly privatized services in K-12 education have tended to be transportation, cafeteria services, vending, and equipment maintenance.¹⁴ There are reasons for this. First, the argument has been made that these services supplement rather than supplant the role of government in education. Second, those who support the contracting of noninstructional services do so on the grounds of cost efficiencies. By this logic, if an outside vendor can provide a service more cost efficiently than a government employee, and if the service is nonessential or represents a onetime need, then government contracting in education makes sense.¹⁵

However, education privatization entered a new chapter in the 1990s, with the rise of educational management organizations (EMOs). EMOs are comprehensive in nature and include companies that manage entire schools or school systems. These firms typically assume full responsibility for all aspects of school operations, including administration, teacher training, building maintenance, food service, and clerical support. Educational Alternatives was one of the first EMOs. In 1990, it contracted with Dade County Florida to manage several schools. Soon thereafter, other EMOs were established and competing for contracts with urban school districts. From 1999 to 2003, the number of private companies managing public schools (mostly charter schools) tripled.¹⁶

Edison Schools, the brainchild of entrepreneur Chris Whittle, is perhaps the best known of the EMOs. Whittle had built a media empire around businesses such as television marketing broadcast in the waiting rooms of doctors’ offices. Through Channel One, Whittle entered the public school market. Channel One provides schools with free television equipment and in return guarantees advertisers a captive audience of students.

Whittle's next project, EMOs, gained traction, in part because it coincided with a push for public school vouchers by Republicans, under the administration of President George H.W Bush.¹⁷ Chris Whittle was part of what one political insider called the education privatization brain trust. This group included Lamar Alexander, former Governor of Tennessee and Secretary of Education under President Bush, David Kearns, the Chief Executive Officer of IBM, and William Sanders, Professor at the University of Tennessee among others.¹⁸

This was the post Nation at Risk era—a time when corporate models of school reform were touted as a means to turn around both schools and the nation's economy. Policy talk and action centered on decentralizing authority to the building level and holding schools more accountable for performance outcomes. Books such as Politics, Markets and America's Schools by John Chubb and Terry Moe argued that the democratic institutions by which America's schools had been governed for the past half century were incompatible with effective schooling.¹⁹ It was in this political climate, that the private management of failing public schools gained a foothold.

In spite of mounting political support, in the 1990s, there were strong negative public reactions to EMOs. It was reported that Edison was inflating test score performance in its schools as a strategy for buoying public and investor support. There were rumors, later confirmed, that Edison also was in deep financial trouble; it was losing money and going into debt. Wall Street investors in Edison grew skittish after Fortune magazine published an article identifying the Edison project as a failure. In 2003, the company went private.

The Market Model and Federal Education Policy

The Edison experiment attracted much public and media attention. However, at the national level, another defining moment in the rise of privatization was the Improving America's Schools Act of 1994 (IASA) and Goals 2000. Under these policies, states were expected to “establish challenging content and performance standards, implement assessments that measured student performance against these standards, and hold school and school systems accountable for the achievement of all students.”²⁰

Several states had been experimenting with content standards when IASA and Goals 2000 were passed. States such as Michigan and California had adopted what became known as standards-based reforms. Standards-based reforms established goals for what students should know and be able to do at different grade levels. In the mid- to late-1990s, mayors of several large urban school districts, including Chicago, Seattle, and New York, attempted a high stakes version of standards-based reforms with incentives for test score performance.

Following in the wake of these local efforts, the administration of President George W. Bush successfully pushed through Congress, even stronger Federal education legislation that had accountability, choice, and privatization as an organizing framework. As noted above, the administration called the legislation The No Child Left Behind Act (NCLB). NCLB is commonly understood as a turning point in US Federal education policy because it significantly expands the Federal reach in state and local education programs through spending conditions linked to test score performance. The law mandates annual testing of children in grades 3–8 including children in non-Title I schools and two populations previously excluded from testing—special education students and English language learners. In addition, NCLB attaches progressive sanctions to test score performance. I discuss these sanctions in more detail below.

NCLB represents a significant departure in Federal education policy in terms of its reach and regulations. However, another defining characteristic of the law is its neoliberal and proprivatization stance. It is not just a Federal version of standards-based reform with the added twist of high stakes consequences. NCLB also is a free market Federal education policy of a scope that we have not seen before.

To be sure, NCLB is a complex law. It is a law of intense regulation and a law of deregulation. It is a law that includes serious attention to the poor, and a law that benefits large corporations. It should not be reduced to being viewed as one thing. But, in NCLB, one stream of thinking, market principles, has without qualification, become more dominant. To a much greater extent than we have seen in the past in education, NCLB invokes the need for private involvement in public education and secures public funds for use by private firms. Under NCLB, Federal education policy becomes a vehicle for stimulating and protecting the market.

In some areas, the connection between NCLB and the market model is very explicit. The obvious links include statutes that require schools to make test score targets under strict timelines. The market model is also explicit in NCLB choice provisions. After two years of not making test score targets, schools must offer parents the option of transferring to a nonfailing school in the district. After three years, the school must make after-school program vouchers available to families, paid for with NCLB funds. Over time, schools not making test score targets may be closed and their staff fired. They may be reopened as charter schools and taken over by for-profit private firms.

But there are other ways that NCLB advances the privatization agenda that are much harder to see. This more invisible aspect of the Federal privatization agenda appears in the language of statutes, in the regulations that fill in the blanks of the statutes and in the nonregulatory guidance where appropriate action is defined. Deborah Stone has called this category of policy “standing orders.” Under standing orders, there are no specific sanctions attached but there is always the threat of noncompliance.²¹

One also can think of the language of regulations, guidance, and budgets as a second layer of policy. They lie beneath the laws that are the focus of popular debate...

Table of contents

• Cover
• Endorsements
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Contents
• Series Editor’s Introduction
• Acknowledgments
• Introduction
• 1 Trends and Origins: The New Privatization
• 2 Inside the Market
• 3 Privatization and Its Intermediaries
• 4 Shadow Privatization: Local Experiences with Supplemental Education Services
• 5 Invisible Influences: For-Profit Firms and Virtual Charter Schools
• 6 In the Interstices: Benchmark Assessments, District Contracts, and NCLB
• 7 Out from the Shadows: Contracts for Remote Digital Instruction
• 8 Working for Transparency
• Conclusion: Policy Actions for Stronger Accountability within the School Improvement Industry
• Appendix A: Research Design and Methodology
• Appendix B: New Privatization Trends and Questions Conjoined
• Appendix C: Characteristic Companies
• Notes
• References
• Index