The ideology of privatization has descended on the debate about public service "like a low-flying fog," to use Hardin's metaphor (1989). In particular, there is growing interest in the application of privatization to education. The breakdown of the public monopoly that has defined tax-funded education over the last century in favor of more market-sensitive views of schools—the "new consumerism"—will be one of the major changes in schooling in the 21st century.
Nonetheless, much of the discussion about privatization in education and other public sectors is not well-informed. To bring greater clarity to the discussion, we first need a grasp of the array of privatization strategies.
Kinds of Privatization
Privatization strategies are classified by a variety of criteria, including, most commonly: (1) the extent of privatization; (2) the domain of activity—usually financing and production; and (3) where in the delivery of the service privatization takes root—policy, administration, or provision.
- Load-shedding. This kind of privatization occurs when a government unit stops providing a service. Load-shedding is the oldest notion of privatization. It is also the most radical, one of the most controversial, and the most likely to garner significant cost savings. Examples at the local level include the City of Knoxville, Tennessee's, withdrawal from the commercial trash collection business and Wichita, Kansas's, abandonment of municipal solid- waste collection services. Examples in education include the elimination of transportation services, advanced language classes, summer school programs, and co-curricular activities.
- Asset sales. In asset divestiture, the public sector sells an asset, such as land holdings, to the private sector to generate revenue or spur private sector development. While asset sales is probably the most controversial of the privatization arrangements, as well as the most popular in much of the world, it is the least active form in the United States. This is primarily because many of the services being privatized in other countries (for example, communications and banking) are already located in the private sector in this country. In education, the sale of an unused school facility to a corporation or volunteer agency would be an asset sale.
- Volunteerism. Here, government-like services are financed and delivered privately but without the use of traditional market mechanisms. As a privatization strategy, volunteerism refers to the recruitment of individuals to work for government without pay, thereby reducing the government's tax-supported involvement in creating public services. Examples in education are legion and include everything from room parents to unpaid volunteer instructors.
- Self-help. A critical difference between self-help and voluntary forms of privatization is that with self-help strategies, those who provide the services are the direct beneficiaries (for example, home-schoolers). The privatization literature is full of examples of self-help initiatives in which functions generally provided by the public sector, such as managing public housing projects and caring for public facilities and lands, have been shifted to neighborhood development organizations. In education, self-help includes more moderate activities, such as parents taking their children to school, as well as more radical ideas such as home-schooling.
- User fees. This strategy involves the imposition of user charges to privately fund public services. It thereby encourages the financing of public services by the direct beneficiaries rather than by the taxpayers in general. User fees in education are rare, but examples are the levying of charges for co-curricular activities and certain science laboratory classes.
- Contracting. Here, the public sector remains the financier but delegates production or provision to the private sector. This is the best known and most commonly promoted form of privatization in the United States. In education, contracting historically has focused on support services such as transportation or maintenance. More recently, however, examples that involve the core functions of schooling are beginning to surface. One of the most important of these is the Wilkinsburg, Pennsylvania, School District's decision to contract out the operation of Turneri Elementary School—teaching and administration included. As a result, the district laid off 24 of the school's 30 teachers, of whom only 6 were rehired by the contractor.
- Franchises. Franchising can be distinguished from contracting by the means of payment to the provider. In contracting, the government assumes responsibility for compensating the provider. With franchises, providers charge and are paid by consumers directly. Because franchising can only be used when identifiable individuals receive the services, it has not been used extensively. An example in education is exclusive agreements to provide class rings or caps and gowns to prospective high school graduates.
- Vouchers. In voucher programs, certain consumers are authorized to buy targeted goods or services from the private market. The government determines who is eligible to buy the services and who is permitted to offer them. Thus financing remains in the public sector while purchasing power is distributed to eligible consumers. Anyone issued a voucher can use it as a form of currency or script to purchase supplies, goods, or services in the open market. Vouchers are an infrequently used privatization strategy despite such well-known examples as food stamps and the G.I. Bill, and despite the fact that other uses, most notably for K–12 education and housing, have long been suggested. One voucher program in education is the Milwaukee initiative to provide funds to low-income parents to send their children to schools of their choice.
- Subsidies. Under this approach, the government offers financial or in-kind contributions to private firms to encourage them to provide a service. The goal is to make the private sector more responsive to public goals; or, stated more concretely, to encourage private companies to offer a service at reduced costs to users. A variety of measures find a home under this broad concept, including direct cash payments; low-cost loans; tax abatement; in-kind contributions; and use of materials, equipment, land, and facilities. A tax program that encourages corporations to donate materials, supplies, and equipment to schools is a good example of privatization via a subsidy.
- Deregulation. Unlike many other countries, the United States has not nationalized much of its industry. Alternatively, we have relied on widespread government regulation of private sector industries. Thus the deregulation movement in this country has been a home-grown version of what in other nations has taken the form of outright divestiture of government properties. As with subsidies, the goal of deregulation is to foster the private provision of activities historically housed in the public sector. A good example of deregulation in education is the recent debate in Pennsylvania to allow school districts to purchase teaching and management services from outside sources.
What's Fueling Privatization?
The major forces promoting privatization fall into two broad categories: (1) those growing out of the rising tide of discontent with public provision of goods and services (reflecting both a declining confidence in government and fiscal stress); and (2) those informed by an alternative philosophy about the proper role of government in society (reflecting the country's changing political culture and economic climate).
1. Discontent with the public sector. According to many analysts, a powerful alliance of ideological and commercial interests has turned its guns on the public provision of services, maintaining that government in the United States is troubled and becoming more so. They point to polls revealing widespread dissatisfaction with government. Other chroniclers of this unrest speak of a mounting sense of skepticism—about public enterprises in general and government's ability to implement social goals in particular. Still others discern a deeper and much more dangerous cynicism toward or distrust of government and government workers—a concern among Americans that government does not work well. As a result, say these observers, the consent of the governed is being withdrawn to a significant degree. This is partly a reaction to government growth and intrusiveness, partly in response to stories and data about the performance of government workers, and partly a reflection of spreading dissatisfaction with the government's role in transferring wealth.
A second key factor contributing to the popularity of privatization has unquestionably been the growing cost-revenue squeeze on government. A number of dynamics are at work here. Public expectations of government services have been heightened considerably over the last 30 years. At the same time, government agencies are being hit by expanding requirements for services from Congress and from the executive branch of the federal government, as well as from federal and state courts. Yet tax revenues have decreased and federal aid is less generous than in the past.
Fiscal pressures have triggered a wake-up call to public agencies, many of which must reconsider how they undertake their missions. Many reformers are searching for new ways of funding traditional services and turning to the private marketplace for provision of public goods and services.
2. Alternative philosophies of government. What can we safely say about the changing political environment? The short answer is that dominant ideologies change over time, and we appear to be in the midst of one of these fundamental shifts. Indeed, a number of analysts argue that the resurgence of conservatism and free-market ideas may signal the dismantling of the liberal democratic state that has grown up over the last 75 years.
The political agenda, reflecting a general shift to the right, is fusing with an "economic theology" undergoing "a return to fundamentalism" (Thayer 1987). The evolving economic and political context is defined in some ways by an emerging populist distaste for big government and for collective public endeavors. This sentiment is grounded in an analysis of several developments: interest group government and excessive interest group politics; distant and unresponsive agencies, bureaucrats, and civil servants who meddle in people's lives; certain groups using the political system to gain privileges at the expense of the general population; and programs that have mainly benefited bureaucratic and professional service producers.
This is the negative case for dismantling the liberal democratic state. It is balanced on the positive side by the growing belief that free-market economics is the key to a more prosperous future. The economic fabric of the nation is being rewoven in important ways. There is a new spirit of enterprise in the air—a renewed interest in private-market values.
Analysts are quick to point out the fallacy of this emerging belief in the infallibility of private business, but it is anchored firmly in a belief in the superiority of free-market forms of social organization over those of the Keynesian welfare state society. This expanding reliance on the market moves individuals to exercise choice as consumers rather than as citizens.
Implications for Education
So what does all of this mean for education? Most important, educators must realize that privatization is not simply some sidebar reform movement. I agree with the President's Commission on Privatization (1988) that the trend "may well be seen by future historians as one of the most important developments in American political and economic life of the late 20th century." Most educators simply do not want to believe this. This is not an intelligent response.
The goal should be to find those forms of marketization that benefit society and to minimize those that may harm youngsters and those who are responsible for their education. So, too, must we gain a better understanding of the implications of privatization for the educational industry as we know it—for our portrait of schooling. For example, professional staff are likely to act differently in entrepreneurial schools. When teachers work for private, for-profit corporations under contract to boards of education rather than for public school districts, one can imagine that teachers unions, schools of education, and state education agencies will look very different from the way they look today—that is, assuming they continue to exist at all.
