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The Education Industry: The Corporate Takeover of Public Schools

by Julie LightCorpWatch
July 8th, 1998

If you want to get a sense of how pervasive corporate influence in U.S. education is, just take a tour of your neighborhood school. Enter the cafeteria and you'll probably find wrappers from Taco Bell, Arby's and Subway, fast food chains that provide school lunches. The third grade class may be learning math by counting tootsie rolls. Science curricula might well come from Dow Chemical, Proctor and Gamble, Dupont or Exxon.

If you live in Jefferson County, Colorado, Pepsi donated $2 million to build a school football stadium-in exchange for exclusive rights to sell soft drinks in all 140 district schools and to advertise in school gymnasiums and athletic fields. That deal is estimated to earn the company $7.3 million over seven years. If your local high school is like 40 percent of secondary schools in the U.S., students get their current events from Channel One, a twelve-minute television news program with two minutes of commercials. One Texas school even rented its roof as advertising space aimed at airplanes flying overhead.

It doesn't end there. Education in the U.S. has become big business. The "education industry," a term coined by EduVentures, an investment banking firm, is estimated to be worth between $630 and $680 billion in the United States. The stock value of 30 publicly traded educational companies is growing twice as fast as the Dow Jones Average. Brokerage firms like Lehman Brothers and Montgomery Securities have specialists seeking out venture capital for the 'education industry.'

"The timing for entry into the education and training market has never been better," glows a Montgomery Securities report. "The problems with American education have elevated education reform to a high political priority and technology is demanding and enabling a transformation in the delivery of education."

Analysts at the conservative think tanks, like the Heritage Foundation, Hudson and Pioneer Institutes, tell us that the problems in education stem from inefficient, bloated school bureaucracies. Conservatives talk about "school choice," referring to vouchers and other public/private schemes. Free marketeers strike a chord with many parents when they point out that families do not have the choices they deserve, especially in urban school districts.

However, according to progressive school activists, the problems in education have their roots in decades of unequal school funding. They say that as long as school districts are financed through property taxes, kids in poor, urban districts will never receive an equal education with suburban schoolkids. Wide disparities in school resources open the door for corporations to fill the gap (and their pockets), especially in inner city schools.

Real choice, progressive school reformers argue, would mean that all schools were good. Classroom innovation, computer technology, small classes and actively involved parents would be the hallmark not only of a handful of the best public schools, but of the entire education system. While conservatives and their corporate partners would have us leave schoolchildren to the whims of the market, progressives advocate creating a more equitable tax structure that would make corporations pay their fair share towards education. Access to quality education should be a social issue for educators, parents and activists. Instead, policy makers are increasingly framing the issue in terms market ideology.

The education industry has some heavy hitters on its side. Conservative economist Milton Friedman, who first proposed school vouchers as early as 1955, argues that public education needs to be radically overhauled to accommodate the free market. In a 1995 opinion piece in the Washington Post, Friedman suggests that "Such reconstruction can be achieved only by privatizing a major segment of the educational system-i.e. by enabling a private for-profit industry to develop that will offer effective competition to public schools." For Friedman, school vouchers, which allow parents to take tax dollars out of local school budgets and spend them in private schools, are a critical step in dismantling what he describes as the "public monopoly" on education.

The relationship between free enterprise and public education is certainly nothing new. For over 100 years, education has been shaped to fit the needs of business. During the industrial revolution, public education was designed to produce a factory ready, disciplined, workforce. However, since then, public education has become a battleground between elite business interests, and those school reformers who see it as an equalizing force in society. Radical school activists in the 1960's tried to bring about innovations that would tackle institutional racism and make public schools more democratic. More recently, however, free market advocates seem to be winning out. With the new "knowledge-based" economy this means some kids will inevitably be left out; and they are almost sure to be low-income children of color in poor school districts.

According to Libero Della Piana, Senior Research Associate at the Applied Research Center, three tiers in U.S. education have emerged over the last decade. One tier prepares an elite group of students for jobs in the high-tech, information economy, while another prepares students for low-wage, service sector jobs. "What corporate educational reform is about is retooling education to meet the needs of the new industrial revolution," notes Della Piana, in a CorpWatch interview: Race and Classroom. Della Piana further points out that at the bottom there is a third tier: kids who will never work, but rather go straight from school to jail.

Since the beginning of the 1990's several companies, dubbed "Educational Maintenance Organizations" by Wall Street, have emerged. These for-profit companies, like Channel One founder Chris Whittle's Edison Project, contract with school districts around the country, using taxpayer funds and some venture capital to run public schools. Often it is poor school districts, where parents and school boards are the most desperate, that turn to private companies. "The Edison project is brilliant at marketing," observes Lindsay Hershenhorn, a first grade teacher at a troubled San Francisco school that recently voted to contract with the Edison Project. "They play on parents' and teachers' frustration with the lack of money for education," adds Hershenhorn who refuses to teach in a school run by the Edison Project.

Some teachers and parents fear that, just as HMOs have made the financial bottom line the standard for health care delivery, EMOs will be more accountable to investors than to students. So far, EMO experiments have survived in less than one hundred schools. In fact, these companies are not interested in running the entire school system. Providing a universal service for all schoolchildren would not be profitable, and many of these young companies have yet to pay dividends to their investors. However, they are bringing profit oriented interests to bear on the educational system.

"The public benefit and the profitability (of EMOs) are two very different things," Alex Molnar, author of Giving Kids the Business, told CorpWatch. "A market by definition can't address issues of equity," adds Molnar, Director of the Center for the Analysis of Commercialism in Education. While the EMOs say they have invested millions in curriculum development, critics charge that they are "cookie cutter schools," whose lesson plans are developed out of a central office. They worry that just as HMOs have depersonalized health care, EMOs will provide one-size-fits-all education. And they say that many of the teaching innovations promoted by the EMOs are already in use in some public schools.

The defunding of public education is also part of a worldwide trend. In many countries it is often a component of neo-liberal economic reform or structural adjustment mandated by the World Bank or IMF. One of the first governments in the world to experiment with school vouchers in the 1980's was Chile's military dictatorship. As Martin Carnoy points out in the Global Perspectives section of this feature, while the Chilean experiment did little for poor schoolchildren, it was part of a broad trend towards privatization that included defunding other parts of the social safety net, including social security. Some of the proposals tested by U.S. policy advisors in Chile are now coming home to roost as legislation being debated in the U.S. Congress and state houses across the country. Some Republicans have even proposed abolishing the Department of Education.

"Privatizing public education is the center piece, the grand prize, of the right wing's overall agenda to dismantle social entitlements and government responsibility for social needs," explains education consultant Ann Bastian, in a piece entitled "Lessons from the Voucher War" which is reproduced in this feature.

For more than a decade conservatives have been organizing around school reform, tapping into parents' and teachers' real concern with the lack of educational options. Corporations have seized on the opening provided by educators' and families' frustration with the lack of school resources. Parents, teachers and students can roll back the corporate take over of education, but only if they offer an alternative vision. One in which corporations pay taxes instead of getting free advertising and tax write-offs for donated promotional materials; one in which school systems do not abandon students to for-profit companies, and one in which educational choice is a basic right for all families, not just a few.

-- Julie Light, for the CorpWatch Editorial Board