Sunday, December 18, 2011
What Happens When The Edu-Bubble Bursts?
Heard the term "edu-bubble" yet? Chances are you will soon.
No doubt you've heard of the "dot-com bubble." And if you're like millions of Americans, you may be currently experiencing the ravages of the "housing bubble." But the edu-bubble?
During the dot-com bubble, from 1990-2000, speculative capital drove up the wildly inflated prospects of internet-based businesses. The speculation was driven to a great extent by venture capitalists and MBA-types who argued persuasively that the amount of "eye-balls" attracted to an internet site could be "flipped" into a revenue stream by "monetizing" the passing fancy of people searching the world wide web for just about everything other than haircuts.
But not every business could make the flip. While gambling and porn did fine, selling real goods like healthcare advice, groceries, and pet supplies didn't always do so well, and the whole market came crashing down, and millions lost their jobs and retirement funds.
Some successful businesses -- Cisco, SAS, Dell -- were "forged in the cauldron of the dot-com market," so to speak. And we all got iPhones. So business leaders and policy makers went blithely on their way to the next capitalist wet dream.
The housing bubble followed much the same trajectory as the dot-com forebearer. To a great extent, the wild speculation on real estate that inflated home prices was driven, again, by nefarious "flippers." First, banks and finance firms figured out that worthless mortgages could be monetized into derivative investments on Wall Street, which drove the market for low down-payments and sub-prime mortgages. Then, unbridled real estate investors of all kinds looked to flip the low-down-payment-subprime-loan properties into quick cash.
Again, the whole bubble burst, but this time the consequences were far more severe than the dot-com fallout. Compared to the dot-com bubble, millions more not only lost their jobs and retirement funds but are now in danger of being kicked out of their homes, and jobless rates in the US remain stubbornly high.
Much like the aftermath of the dot-com implosion, the few who benefited the most from the housing bubble are left to go merrily on their way while business leaders and policy makers make excuses and blame the masses for being "irresponsible." And in the meantime, the bubble cycle is pumping up all over again.
According to The Wall Street Journal nonfinancial corporations alone are sitting on over $2 trillion in liquid assets. And it's simply got to have some place to go.
Behold the next victim of capitalism's game of Russian roulette: education.
Furthermore, with most of the funding of education controlled by state governments that are now predominantly in the hands of Republicans intent on cutting education, there's a lot of excess demand to be had.
If you doubt at all the edu-bubble is something really happening, then you need to read a recent series of articles from the Miami Herald that report on the $400 million a year charter school industry in South Florida. Driven by real estate developers and politicians, the charter school sector has gotten so big that it now operates as a "parallel system" to traditional public schools, only these schools can collect taxpayer dollars while avoiding much of the oversight that typical public school have to operate under. So they get away with things like shackling schools to exorbitant lease payments, charging students fees, withholding supplies like textbooks, or blatantly under-serving students who happen to be black, poor, or disabled.
Or you should read the article in this week's New York Times reporting on the explosive growth of for-profit online schools. The largest of these enterprises, K-12, Inc., has been a hot item on the stock market despite offering a sub-standard education to school kids because, as the article states, "kids mean money."
How did this happen?
Partially at fault are federal government mandates that force school districts into hiring consultants and developing elaborate and expensive data systems. Many school systems that win federal grants from Race to the Top and School Improvement Grant contests end up spending the bulk of those outlays on outside vendors and services.
But there's a much bigger system at work here.
The first essential step to hyping up the edu-bubble was to find something new to monetize -- something that could be flipped from a public value into a private commodity that could be bought and sold. Except for small-time scandals and dishonest public officials, education had been walled-off, mostly, from large profiteers. So speculators had no proven business models for how to ramp up public education into a private money making machine.
For sure, the "value" on education has long been calculated in terms of what it means to a child's earnings as an adult and how this benefits the economy in the future. But speculators needed something that could pay out in the here and now.
Most of the money in education is tied-up in just two areas -- physical plant and personnel. Those two expenditures alone account for well over 80 percent of what a typical school spends. But with no "revenue" to show in the other side of the balance sheet, venture capitalists were at a loss for how to make schools a matter of financial speculation.
Case in point, one notable edu-venture was Edison Schools which lost millions of dollars every year, showing a profit in just one quarter of the 10 years it was publically traded.
Then education reform advocates -- either unwittingly or intentionally (does it matter?) --gave the venture crowd a huge gift by decreeing that student scores on standardized tests would define the learning "output" that schools would be accountable for. And all of a sudden everything monetarily related to schools -- operations budgets, teacher salaries, classroom costs, government funds, grant money -- could be related to a test score output.
This in effect turned student learning -- and by extension, the students themselves -- into a commodity that could be speculated on. Now that edu-venturists had something they could put on the other side of the balance sheet, they could now "flip" student test scores into a speculative market. And all sorts of "reform" schemes and start-ups -- from starting charter schools to lowering teacher salaries to closing schools -- could be rationalized on the basis of test scores.
In a recent op-ed in the education trade publication Education Week, history teacher Jonathan Keiler explained how this works, at least in relationship of linking test scores to teacher salaries. Once teacher evaluations are tied to test scores, Keiler points out, there is a "system that turns student scores into a market and, as such, creates cheating, disreputable practices, and dislocations."
Of course, much like the "eyeballs" from the dot-com bubble and the mortgage derivatives of the housing bubble, test scores driving the edu-bubble are of marginal value.Phillip Harris, Bruce M. Smith and Joan Harris explain that standardized tests are less objective than many people believe, they don’t adequately measure student achievement, they don't tell you which schools and teachers are more "effective," and they “inadvertently” lead young people to become “superficial thinkers."
It's true that test scores can give individual teachers insights about their students that can then lead to instructional decisions. And using tests in a diagnostic way to draw conclusions from random samples of students can be very helpful. But making systemic decisions based wholesale on mass testing is an idea that's yet to produce much evidence of being beneficial to students.
Nevertheless, standardized test scores are now the "currency" of education that enables all sorts of resource swaps that would have been unthinkable 20 years ago, including charter schools for traditional public schools, online learning for race-to-face teaching, and experienced, tenured teachers for Teach for America amateurs.
It must be noted that many of the fascinations of the reformists don't actually yield the same test score results as traditional approaches. But as long as a reformist can point to at least one, he can crow about "knowing what works."
So what's wrong with all this?
To begin with, an edu-bubble driven by test scores is most likely to produce schools that are, back to Keiler, "little more than test-preparation institutes, ignoring subjects and skills that are not assessed, with faculty members who resent and distrust one another."
And whereas the dot-com bubble ruined Silicon Valley, and the housing bubble ruined the American economy, the edu-bubble will destroy our nation's future. Our children's education has such profound consequences on what their adulthood will be like. And when the edu-bubble bursts, as it most certainly will, there's apt to be a whole generation that will have been robbed of its potential well-being. Do you think having iPhones will compensate for that?