/ 21 September 2012

Equality not aligned with free-market forces

Researchers claim for-profit institutions in the US have a higher failure rate than their public counterparts and saddle their students with high levels of debt.
Researchers claim for-profit institutions in the US have a higher failure rate than their public counterparts and saddle their students with high levels of debt.

Inequality is arguably the defining feature of post-apartheid South Africa and nowhere is this starker than in education. But, contrary to the recent spate of arguments for the privatisation of education, current inequalities cannot be left to "the market" to correct.

The problem has too deep an aetiology in our history for us to surrender intellectually to the commonsense wisdom peddled by the proponents of privatisation that there is no alternative.

We should be clear: private companies are the most significant generators of wealth and prosperity in liberal capitalist societies, but they are simply not good at providing public goods such as education. Foolishly, the recent arguments for privatising education are based on the orthodoxy that has contributed to significant increases in inequality and general failures in the United States.

It is important to focus on the US model, especially because this is the model the proponents of privatising higher education and transforming universities into corporate bodies are peddling in South Africa.

Consider first the intellectual basis of the privatisation movement. The US is probably the most advanced capitalist country in the world. Capitalism has developed in many ways in the US over a long period. The most recent incarnation started in the late 1970s under Ronald Reagan's presidency and has been reproduced by every successive president.

But it lies in tatters. The old cliché, "regulation is the problem, deregulation is the solution", has been found wanting.

Oversight and government reform
For instance, in October 2008 former US treasury secretary Alan Greenspan was questioned by the House of Representatives committee on oversight and government reform about his role in the economic crisis that resulted in bank closures and defaults and contributed to tipping the US into a recession that is, by some measures, worse than the depression of the 1930s.

"You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others," said representative Henry Waxman of California, who chaired the committee. "Do you feel that your ideology pushed you to make decisions that you wish you had not made?"

Greenspan conceded: "Yes, I've found a flaw. I don't know how significant or permanent it is. But I've been very distressed by that fact."

That same year the chairperson of the House financial services committee, Barney Frank, said: "We are in a worldwide crisis now because of excessive deregulation … we let investment banks get into a much wider range of activities without regulation" — which helped to create the subprime mortgage crisis and the cascading calamity in banking in the US.

Inequality and unemployment are at historic highs in the US and there are more and more people relying on food stamps. Debt, both private and sovereign, has eroded confidence in the country's economy.

These facts are well known, but they are conveniently ignored by those who cling to discredited and ossified ideological beliefs in the "American model" that have dominated political economic policymaking since the Reagan presidency.

Although the current crisis in the US political economy is tied to the subprime crisis of 2007-2008, the problems in education can be traced back, in part, to the privatisation of especially higher learning.

Among academics, excluding the so-called "beltway academics" — that is, those with umbilical links to the department of defence, which remains a growth industry in the US — there is growing concern about the rising influence of "free-market business practices" and "­corporate models [that are] destructive to higher education", according to James Andrews of the American Association of University Professors.

"Corporate models for operating colleges and universities value short-term profits over long-term investment in education," Andrews wrote in 2006.

Cherry-picking students
Among the several iniquitous practices highlighted by scholars and thinkers in the US is that private institutions generally reserve the right to cherry-pick students. In that country, where an estimated 20% of schoolchildren have some form of learning or behavioural disability, or both, they are necessarily restricted from access to higher learning when public funding is withheld, according to Emanuele Corso, emeritus professor of the University of Wisconsin-Madison's department of educational policy studies.

Empirical evidence provides some support for the concern over the iniquitous results of strictly corporatised for-profit educational institutions. A report by the US's Government Accountability Office, published late last year, stated that "for-profit institutions performed worse than public and private colleges on most measures of quality, even when student demographics are taken into account".

In December last year, the Chronicle of Higher Learning noted that the report "also reviewed passage rates on licensing examinations in 10 professions [including law] and found that graduates of for-profit colleges had lower pass rates on nine of the exams".

Although the picture is not absolutely clear and there are some successes in private educational institutions, evidence suggests that the barriers to entry and pass rates make it exceedingly difficult for poor communities to educate their children in corporatised educational institutions.  

Data produced by the Education Sector, a Washington research institution, shows that more students enrolled in fully privatised for-profit institutions end up with high levels of debt and fail to graduate than in state-funded institutions. Students who borrow to pay for a four-year degree at a for-profit college are more than twice as likely to drop out than student borrowers at public institutions, according to this research.

The Education Sector showed that the rates of failure and indebtedness have risen in tandem with the growth of for-profit institutions since 2000. The for-profit model has come under increased scrutiny over the past two or three years, not least because, as the Pew Charitable Trusts has reported, 44% of debt defaulters are students who attended for-profit institutions.

Evidence shows that when poorer students are given the opportunity to compete in "the market", they have to take out loans to pay for their education and in many instances either drop out early because of economic or peer pressure, or end up defaulting on their debt. The result is a "disastrous and long-lasting financial problem" that ruins a person's credit and makes them ineligible for assistance from the state, the Pew Charitable Trusts concludes.

Copying this model is not an option
Replicating this model in South Africa would be foolish. The proponents of completely privatising higher learning seem to be driven more by deep ideological biases and preferences than a need to address South Africa's education failures purposefully and directly.

The plain truth is that the vast majority of South Africans have limited access to funds. And, given the horrible failures in primary and high school education, chances are that poor students, whom past policies and current failures seem to have abandoned, would not be cherry-picked by corporatised institutions of higher learning. Only those students whose privileges and achievements (vertically segmented as they typically are) readily match corporate requirements and are able to meet "the bottom line" of privatised bodies would be likely to be admitted.

What the proponents of privatisation fail to include in their arguments is that Finland, the country with some of the best outcomes in education, according to the Organisation for Economic Co-operation and Development, places a higher value on equality than on excellence. In the US, where educational outcomes — from instruction to research output — is in decline, Finland's success is ignored. Writing last year in the Atlantic — hardly a socialist, social democratic or even European-type liberal journal — Finnish journalist Anu Partanen said: "Only a small number of independent schools exist in Finland and even they are all publicly financed. None is allowed to charge tuition fees. There are no private universities either. This means that every person in Finland attends public school, whether for [preschool] or a PhD."

The obsession with deregulation and privatisation, especially of higher learning, seems to be a ­hankering for an ideal time when markets were absolutely free — something the political economist Karl Polanyi uncovered as something of a myth.

In liberal capitalist societies such as South Africa, private corporations are the main job creators and generators of wealth. There is little evidence to suggest that they have an interest in providing public goods with returns that may or may not accrue after more than a decade. That is not how capitalism works.

Given South Africa's history, publicly funded education is both a political and a moral obligation. The problem lies less in policies than in implementation, such as actual instruction and the state's role in ensuring that teachers teach. If we exclude the poor from educational opportunities through the market mechanism, the privatisation of higher learning will simply contribute to the criminalisation of poverty, something at which we appear to have become too adept.

Ismail Lagardien was trained at the London School of Economics, holds a DPhil from the University of Wales, Aberystwyth, and taught political economy and international affairs in the United States for six years. He works in the secretariat of the national planning commission. The views in this article, the second in his three-part series on the crisis in higher education, are his own