School Choice & Charters Opinion

Wall Street’s Investment in School Reform

By Diane Ravitch — May 22, 2012 4 min read
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Dear Deborah,

You and I used to have lively debates about standards, curriculum, pedagogy, and a lot of other matters where we disagreed. Now those debates seem antique compared with the current uncertainty about the future of public education.

The question today is whether a democratic society needs public schools subject to democratic governance. Why not turn public dollars over to private corporations to run schools as they see fit? Isn’t the private sector better and smarter than the public sector?

The rise of charter schools has been nothing short of meteoric. They were first proposed in 1988 by Raymond Budde, a Massachusetts education professor, and Albert Shanker, the president of the American Federation of Teachers. Budde dreamed of chartering programs or teams of teachers, not schools. Shanker thought of charters as small schools, staffed by union teachers, created to recruit the toughest-to-educate students and to develop fresh ideas to help their colleagues in the public schools. Their originators saw charters as collaborators, not competitors, with the public schools.

Now the charter industry has become a means of privatizing public education. They tout the virtues of competition, not collaboration. The sector has many for-profit corporations, eagerly trolling for new business opportunities and larger enrollments. Some charters skim the top students in the poorest neighborhoods; some accept very small proportions of students who have disabilities or don’t speak English; some quietly push out those with low scores or behavior problems (the Indianapolis public schools recently complained about this practice by local charters).

Contrary to the vision of the founders, the charter sector is overwhelmingly non-union. It has come to depend on young college graduates, who start at the bottom of the salary scale and leave within a few years. This keeps costs low and enables the charters to pay their executives handsomely and to create rewards for the for-profit industry. Charters are known for high turnover of both teachers and principals.

The results are in: Some charters get high test scores, some get low scores, most are no different in test scores from public schools. The wonder is that there are so many low-performing and mediocre charters when they have everything the reform movement demands: no unions, no tenure, no seniority, performance pay, and plenty of uncertified or alternatively certified teachers.

A major reason for the phenomenal growth of charters, both nonprofit and for-profit, is the zealous support of Wall Street hedge-fund managers. As The New York Times has reported, charters are the favorite cause of hedge-fund managers. The hedge fund managers even have their own organization, Democrats for Education Reform. DFER’s agenda is indistinguishable from the conservative Republican agenda of choice and test-based accountability. The Los Angeles Democratic Party recently sought a “cease-and-desist” order to prevent DFER from using the word “Democrats” in their name since their policy agenda was not that of the Democratic Party.

The hedge-fund managers love to get public funding to manage schools that enroll minority children; this not only reduces the cost to them of running a charter school, but it enables them to fantasize that they are part of the civil rights movement of our day. Frankly, it is hard to imagine Dr. Martin Luther King Jr. linking arms with Wall Street hedge-fund managers in a crusade to eliminate unions and to promote privately controlled alternatives to the public schools where the great majority of children are enrolled. Some of us remember that Dr. King was assassinated in Memphis while supporting the right of the city’s sanitation workers to join a union.

I didn’t understand just how devoted the hedge-fund managers are to charter schools until someone sent me this article from a business magazine: “Joining the school yard battle.” It lists the many hedge-fund managers who are on the board of charter schools in New York City. There are also hedge-fund managers in other states (like David Tepper in New Jersey) who use their vast resources to promote charter schools and to attack teachers’ hard-earned job protections.

The power of Wall Street is obvious. Political candidates must swear fealty to charter schools if they want to raise campaign contributions from hedge-funders. Perhaps that explains the enthusiasm for charter schools by the Obama administration, New York Gov. Andrew Cuomo, and Connecticut Gov. Dannell Malloy. There is no need to explain Republican enthusiasm for charter schools, because Republicans have been promoting school choice for the past 40 years. The only thing new is that the Wall Street guys have adopted the Republican agenda and rebranded it.

Wall Street understands success and failure. When companies fail, investors bail out. As studies continue to show that charters on average don’t get better test scores than public schools, will Wall Street continue to be bullish about charters? Will they support only the ones that skim and exclude? When will they cut their losses?

That day will come, as the results continue to show that charters are no silver bullet, and that they succeed mainly by adding extra resources and picking their students carefully.

What will happen to American public education after Wall Street loses interest in charters and discovers other fun causes?


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