Education Profiteering: Wall Street's Next Big Thing?

I suggest reading the whole article at the following link:

http://www.alternet.org/education/education-profiteering-wall-streets-next-big-thing?akid=9532.1068945.Hw_b6m&rd=1&src=newsletter727057&t=2&paging=off

By Jeff Faux October 15, 2012 |

Editor's note: Jeff Faux's new book is The Servant Economy: Where America's Elite is Sending the Middle Class (Wiley, 2012).

The end of the Chicago teachers' strike was but a temporary regional truce in the civil war that plagues the nation's public schools. There is no end in sight, in part because -- as often happens in wartime -- the conflict is increasingly being driven by profiteers.

.....

It is well known, although rarely acknowledged in the press, that the reform movement has been financed and led by the corporate class. For over twenty years large business oriented foundations, such as Gates (Microsoft), Walton (Wal-Mart) and Broad (Sun Life) have poured billions into charter school start-ups, sympathetic academics and pundits, media campaigns (including Hollywood movies) and sophisticated nurturing of the careers of privatization promoters who now dominate the education policy debate from local school boards to the US Department of Education.

In recent years, hedge fund operators, leverage-buy-out artists and investment bankers have joined the crusade. They finance schools, sit on the boards of their associations and the management companies that run them, and -- most important -- have made support of charter schools one of the criteria for campaign giving in the post-Citizens United era. Since most Republicans are already on board for privatization, the political pressure has been mostly directed at Democrats.

.....

Yet, with the wide variety of social causes and charitable needs -- poverty, health, housing, global warming, the arts, etc. -- why would so many Wall Streeters focus laser-like on this particular issue? The Times suggest two answers. One is that the money managers are hard-nosed, data-driven investors "drawn to the business-like way in which many charter schools are run; their focus on results primarily measured by test scores."

Twenty years ago, one might have reasonably believed that the private charter schools, which are managed to produce the numbers, would produce better outcomes -- as measured by the numbers. But the overwhelming evidence is that they do not. The single most comprehensive study, by researchers at Stanford University, found that 17 percent of charter school students performed better than their public school counterparts, 46 percent no better and 37 percent worse. Stanford's conclusions have been reinforced by virtually all of the serious research, including those at the University of California, the Economic Policy Institute and the policy research firm Mathematica.

Nor do charter schools seem more efficient. Those promoted as the most successful examples have been heavily subsidized by foundations and Wall Street donors. The film, Waiting for Superman that portrays a heroic charter school organizer fighting a selfish teachers union was widely hyped in the media -- including popular TV shows like Oprah Winfrey's. Yet, as Diane Ravitch, an assistant secretary of education under George H.W. Bush and a former charter school supporter turned critic, noted, the film neglected to report that the hero educator kicked out the entire first class of the school because their test scores were too low, that the school was heavily subsidized by the pro-reform foundations and that the hero took an annual salary of four hundred thousand dollars.

Neither do the data on international comparisons support either privatization in general or charter schools in particular. The foreign education systems that out score America's are government-run, unionized, monopolies. Ravitch asks: "I look around the world and I don't see any country doing this but us. Why is that?"

.....

The Times' other guess about Wall Street's motives was that hedge funders are attracted to the anti-union character of the charter schools. This is undoubtedly true; the attack on the pubic schools is clearly a part of the broad conservative campaign to discredit government.

.....

Education privatization would not, per se, create a net new stimulus for the economy. But by diverting large existing flows of money from the public to the private sector it would create new profit-making ventures that could be capitalized and transformed into stocks, derivatives and leveraged securities. The pot has been sweetened by a 39 percent federal tax credit for financing charter school construction that can double an investor's return in seven years. The prospect of new speculative opportunities could well recharge the animal spirits upon which Wall Street depends.

Some "liberal" privatization promoters claim that charter schools should not be considered private. But that's an argument the management companies that run the schools only use when they are asking for more government funding. At the same time they argue in courts and to legislatures that as private enterprises they should not be subject to government audits, labor laws and other restrictions.

These companies rent, buy, and sell buildings; make contracts for consulting, accounting and legal services, food concessions, and transportation; and pay their managers far more than public school principals earn. In cases where city governments have given land to charter schools, for profit real estate companies have ended up owning the subsidized land and buildings. In states where charter schools are required to be nonprofit, profit-making companies can still set them up and then organize a board of neighborhood residents who will give them the right to manage the school with little or no interference.

.....