A Peek into How the Education Sector Works

Many of us have the sense that profit has become increasingly involved in the world of education, but while the term “education sector” has come into our lexicon, we have only the vaguest idea about the many ways profit is driving privatization in and around our public schools.  Nor do we really understand how the for-profit education sector is wound together with the operation of laws and policies like No Child Left Behind and Race to the Top.

A new article, For Education Entrepreneurs, Innovation Yields High Returns: Learning from Larry Berger, Jonathan Harber, and Ron Packard, posted on the website of conservative Education Next, helps fill in the gaps about the growing role of venture capital and for-profit corporations in education.

Writer Julie Landry Petersen describes the struggles and frequent failures of many private education companies over the past 25 years, but contends that, “the economics of education investing are changing.  Schools are now wired and have accountability incentives to invest in technology to boost student achievement, while teachers are ready to experiment with new tools.  For start-ups, hardware costs have come down and software is cheaper than ever to develop.  Longtime education banker Michael Moe of GSV Capital says a higher quality of entrepreneurs is entering the space. Consequently, education technology companies raised $1.1 billion in funding from venture capitalists in 2012, more than double the amount raised the prior year and nearly 10 times as much as a decade earlier.”

Peterson profiles education technology entrepreneurs Larry Berger of Wireless Generation, sold in 2010 for $390 million to Rupert Murdoch’s News Corporation as the anchor of its ed-tech division Amplify, headed up by former NYC schools chancellor Joel Klein; and Jonathan Harber, founder of SchoolNet, sold to education publishing giant Pearson in 2011 for $230 million.

Both start-ups initially grew when they scrambled to discern ways to fill a technological niche when new federal laws or policies were enacted.  “Wireless Generation employees poured over the No Child Left Behind Act (NCLB) the night it was signed, looking for potential opportunities, and found that the act’s Reading First component ‘created an unusual amount of liquidity centralized at the state level (about $200 million per year) that did not already have a bureaucracy trained to spend it,’ as Berger has written.  Wireless Generation went on to secure at least 18 state contracts….”

SchoolNet, on the other hand, planned to cash in on Race to the Top as well as the need for data demanded by NCLB.  “In 2009 and 2010, states competing for Race to the Top grants began looking for ‘instructional improvement systems’ that would earn them points against the grant program’s criteria for providing teachers, principals, and administrators ‘with the information and resources they need to inform and improve their instructional practices, decision-making, and overall effectiveness.'”  SchoolNet filled the niche with “systems that could capture, analyze, and report formative data quickly to allow teachers and principals to make instructional changes accordingly, a gap that grew even wider when NCLB began to shine a spotlight on the dismal progress of student subgroups and put pressure on schools to improve their performance.”

Petersen also profiles Ron Packard, the founder and CEO of K12, the huge, for-profit, on-line academy.  Petersen’s profile of Packard and K12 acknowledges the serious criticism of this company that has made enrollment growth its priority, while ensuring neither student achievement by any generally accepted measure nor an acceptable course completion or graduation rate.  She quotes investor Whitney Tilson who advised other investors against K12: “K12’s aggressive student recruitment has led to dismal academic results by students and sky-high dropout rates.”  K12 has succeeded as a for-profit company, however, “with revenues skyrocketing from $141 million in 2007 to $848 last year, drawn mostly from its management contracts with states and districts to operate virtual and blended-learning schools, but also from operation of three private online schools paid for by parents and from direct sales of its courses to schools and districts.”  Packard’s annual salary was $670,000 plus stock options.

Those promoting privatization in education value individualism, competition, efficiency, deregulation, innovation, profits and creative disruption.  These are, of course, the values of the marketplace.

Entirely different core values underpin the public school system that has historically served our children in the United States. We have long valued public schools for civic as well as personal benefit and we have counted on a vast and stable publicly owned system designed to serve the needs and protect the rights of all children.  We would do well to consider the warning of political philosopher Benjamin Barber—who reflects on the loss of public ownership and public oversight—as we contemplate the implications of the growing privatized market for education technology and services:

“Privatization is a kind of reverse social contract: it dissolves the bonds that tie us together into free communities and democratic republics.  It puts us back in the state of nature where we possess a natural right to get whatever we can on our own, but at the same time lose any real ability to secure that to which we have a right. Private choices rest on individual power (brute force), personal skills (randomly distributed), and personal luck.  Public choices rest on civic rights and common responsibilities, and presume equal rights for all.  Public liberty is what the power of common endeavor establishes, and hence presupposes that we have constituted ourselves as public citizens by opting into a social contract.”

On a less philosophical level, there are also several really basic things that the three entrepreneurs profiled in  Petersen’s article never consider as they look for a corporate niche in our public schools. What about the school children and their need for personal connection with teachers who will nurture their learning and development?  And what about the stewardship of our tax dollars?  Should we be spending public funds for services from tech companies, for on-line schools, and for corporate profits, salaries and bonuses when we might instead, for example, hire more classroom teachers and thereby lower class size?