Profit and Education Don’t Mix
Britain should learn a lesson from the US

Greg Palast

By Gregory Palast for The Observer/Guardian UK

The daring escape of three very expensive headmasters from the schools to which they were confined, prompted a flummoxed Education Secretary David Blunkett to do what he does best at times of crisis: issue a press release announcing a new programme to expand the privatisation of state schools. This desperate wheeze was for so-called city academies, which will operate outside the control of local education authorities and free of the Government’s own curriculum and employment controls.

Although Blunkett made no mention that for-profit operators would run the academies, the National Union of Teachers smelt a rat. But I smelt Benno Schmidt.

Dr Schmidt is president of New York-based Edison Schools, the biggest, hottest corporation hoping to cash in on calls from US Republicans for the privatisation of America’s state-funded schools. It is bankrolled by Microsoft co-founder, Paul Allen.

Blunkett’s description of the city academies sounded suspiciously close to a profile of Edison’s controversial ‘charter schools’, so I called Edison’s headquarters. The company confirmed that a few weeks ago, Edison hosted a delegation from Blunkett’s Department for Education and Employment. And Schmidt himself told me that this was only one of several exploratory approaches he has made to the DfEE since New Labour came to power. (Once I mentioned the Edison connection to the DfEE, a spokesman would say only that it welcomed the firm’s participation.)

A potential new market in Britain could be ideal for Edison, which is not going through the best of times. Despite the Microsoftian connection and the stock market fever over company flotations, an initial offering of Edison shares last November at $18 each saw the price crumple to $12, though it was up to around $20 last week.

Part of the reason for Edison’s falling share price was an announcement by Nasdaq, the over-the-counter market, that Tesseract, once known as Educational Alternatives (EAI), would be de-listed for failing to meet Nasdaq’s minimal tangible assets requirements. EAI was the pioneer of US schools privatisation, and Edison must have hoped that memories of it would be dead.

Before Blunkett turns his press releases into the bricks and mortar of new schools, he might want to check the reasons for the death of America’s initial experience of schools privatisation.

EAI became a stock market sensation and neo-liberal icon in 1992 when its founder, copying machine salesman John Goole, schmoozed the city of Baltimore into turning over nine schools to his company. EAI promised that, using no more cash than the city would spend, it would improve the pupils’ test results.

It did so. However, reporters at the Baltimore Sun exposed the test results as inflated. In truth, EAI students scored less well than a matched control group. The company was sacked before the end of its five-year contract.

But by then, EAI had already convinced the city of Hartford, Connecticut, to turn over the running of its entire school system to the company. (Hartford has roughly the size and demographics of the Islington school system, which the DfEE will this month place in the hands of a private consultancy.) In Connecticut, EAI promised building repairs, better test scores, cash savings and lots of school computers.

The scheme collapsed in little more than a year following allegations of financial impropriety and educational failure.

EAI’s high-profile belly-flop appeared to kill off the privatisation of US schools. But the dream of educating for a profit lived on with Republican candidates and bankers hungry for a piece of the $350 billion US education market.

In 1995, in stepped Edison, announcing its takeover of two schools in Sherman, Texas. Today, Edison’s sales pitch rests on a claim that it has raised pupils’ test scores by ‘5 per cent’.

What do the experts say? Not much, because some are afraid to speak. The Observer has learnt that the one big independent study, by the respected American Institutes for Research, removed its analysis of the Edison schools in response to a perceived threat of legal action by the company.

The institutes’ chief researcher on the project, Dr Rebecca Herman, confirmed the Edison material was excised from her report following a complaint by the company. Asked whether this decision was a response to threats of legal action, she said: ‘I promised the lawyers I would not talk about that.’

The institutes’ unpublished findings, you will not be surprised to learn, are less than glowing about Edison’s performance. Company president Schmidt says he ‘knows nothing’ about the alleged strong-arming of the institutes. He told me that this body should not have dared to evaluate his company. ‘Honest education researchers would say you need at least five years of data’ to assess performance, and Edison has run only four schools for that long.

I wondered whether Schmidt was accusing his own company’s researchers of dishonesty for selling school boards on its ‘5 per cent gain’ reports.

He downplayed the company’s own claims of success but was ‘very confident of the long-term outcomes’.

Dr Sam Stringfield of the Johns Hopkins University Center for the Social Organization of Schools is less sanguine about Edison’s forcing the institutes to censor its report. ‘It is ethically troubling when a group of educators won’t allow scrutiny of its methods and falls back on courts’ to stifle a review.

Schmidt says profit motivates his company to succeed. Profit also motivates Edison to find ‘savings’ that could, say some educationists, cost children dearly. In 1997, the US Department of Education’s Office of Civil Rights heavily fined Edison for failing to provide legally required classroom help for a disabled child.

This month, facing its first contract’s renewal, Edison withdrew from the schools at Sherman, Texas, rather than face banishment.

The city’s school superintendent said that, while Edison promises to educate kids for the same cost per pupil as the public system, taxpayers ended up forking out an added $4 million to subsidise Edison’s operation. Worse, the test scores of pupils in Edison’s schools fell behind those of the others in the area.

‘They were more about money than teaching,’ said the official, Phillip Garrett.

Schmidt, however, says Garrett misread the data, and the company was happy to dump Sherman, having lost millions on the venture.

And that’s the nub of it. Despite Paul Allen’s piggy bank and miles of journalists’ ink spilt in its cause, Edison remains a blip on the scene, controlling only about 60 schools, and a major money-loser. The problem is that the privateer hangs itself with its own promise to provide better educational outcomes at no extra cost.

Underpinning the privatisation game is the nostrum that: ‘You can’t cure a school’s problems by throwing money at it.’ This diseased notion has floated over from America’s rancid right, and an outbreak of educational ‘free lunchism’ has infected Islington, where Blunkett has forced the borough to turn over the direction of its schools to private consultants who have promised to radically improve schools without extra money.

The affable Derek Foreman, operations director of Cambridge Educational Associates, the Islington consultants, told me that CEA’s solution is ‘leadership’ and ‘vision’ and, of course, ‘computers’. And, in light of the crying need to obtain and retain better staff, it will pay higher salaries – to CEA consultants. ‘I’m not ashamed to say money matters in hiring good staff,’ said Foreman.

But this shameless truth, he added, does not apply to teachers. There will be no higher salaries to attract and retain good instructors. Blunkett would not permit that. Teachers will be motivated by the Torquemada system of educational reform.

When the failing George Orwell school in Islington was transformed into the failing Arts and Media school, all but six teachers were cast out by DfEE inquisitors. Under CEA’s contract to operate Islington schools, the firm can receive a bonus of up to £600,000 a year if test scores improve.

Thus, the message to those working in these tough schools is: ‘If you perform poorly, you lose your job, and we smear your professional reputation. But if you perform well, the consultants get a bonus.’ What teacher could turn down such an offer?

One man who might turn down Blunkett’s offers is, surprisingly, Edison’s Schmidt. Though he personally favours forming an Edison UK, and he is flattered by New Labour’s ill-disguised infatuation with Edison’s profit-motivated methods, his investors have reservations. Because Edison contracts to take no more money per pupil than governments spend, it refuses to operate in US states which notoriously underfund education, such as Louisiana (where, in Randy Newman’s song, ‘Our Boys go in Dumb, Come out Dumb too’).

There’s little room for profit in the UK, Schmidt notes, so long as Britain’s annual spending of £2,000 per pupil remains 25 per cent below that of the poorest US swampland districts.

The Government could, of course, raise spending to Louisiana levels, but it pleads that resources are limited. How interesting that poverty should be the excuse for Blunkett’s educational failure.

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Gregory Palast’s other investigative reports can be found at www.GregPalast.Com where you can also subscribe to Palast’s column.

Gregory Palast’s column “Inside Corporate America” appears fortnightly in the
Observer’s Business section. Nominated Business Writer of the Year (UK Press
Association – 2000), Investigative Story of the Year (Industrial. Society – 1999), Financial Times David Thomas Prize (1998).