Remora

Privatization is as much an ideological as a business proposition. Operating on the level of railroads or power, its ideological use is as a lever against regulation: a way of extracting things from the State. The idea that engrossing, macro projects can magically summon up the investment to make a profit in the far off future on selling to customers who have to 1. accustom themselves to the technology, and 2. justify the early adopter costs has been severely hit by the telecom meltdown -- Gilder's telecosm, like a middle aged man's orgasm, proved to be a spike of ecstatic sensation followed by the sag of deflation, and a heavy post-coital headache.

In today's NYT, there's an item by DIANA B. HENRIQUES and JACQUES STEINBERG
about the much vaunted Edison School project. Headed by Charles Whittle, the Tennessee money goon who contrived Channel One (that odious tv corporate brainwash that swept through the school systems (especially of the South) in the early 90s), Edison schools were supposed to show that education is best left to people who can grind a nice return on investment out of it. Ah, but it turns out that even if you put your tax dollars into these supposedly cost cuttin' ventures, the ventures can't make money on it. In fact, they never will, except on a scale that would, ironically, nationalize education:

"Analysts have estimated that Edison needs to raise as much as $40 million before next fall to fulfill the Philadelphia contract and to sustain the schools it already runs, which educate 75,000 children in 22 states.

The recent decline in Edison's share price from more than $20 a share in January to $2.66 at the close of the stock market yesterday makes the sale of fresh shares unlikely.Borrowing remains an option, but an expensive one. Edison had to pledge $61 million in assets last fall as collateral for a loan of only $20 million. It has paid as much as 20 percent interest on other loans, equivalent to credit card rates. It could still seek an infusion from private investors, help from government or aid from private foundations that look favorably on its mission. "

When you are borrowing at 20 percent, you are pretty much doomed. According to the article, the company's cumulative losses so far have reached 200 million dollars. And there are some questions about the revenue generated by Edison's schools -- appparently, costs are cut partly by using private donations. In other words, this for profit outfit is depending on non-profit charity.

Help might be on the way for Edison. As Mother Jones notes,, one of Edison's chief financial backers is John W. Childs. And Mr. Childs has a soft spot for the GOP:

"A graduate of Yale and Columbia universities, Childs first worked with leveraged buyouts at Prudential Insurance during the 1970s, and later moved on to manage the Boston-based buyout firm of Thomas H. Lee (No. 190, $256,800). There he helped negotiate the buyouts of Snapple Beverages and Ghirardelli Chocolate, among others. In 1995, Childs split from Lee, who remains a prominent Democratic donor, to start his own firm. Childs has since earned a reputation as a veritable ATM machine for the GOP. According to a recent study by the State Net Capitol Journal, Childs' contributions in Massachusetts accounted for 25 percent of total receipts to the national Republican Party between 1997 and 1999.

"One of Childs' most politically sensitive companies is Edison Schools, the country's largest for-profit operator of public schools. Childs and his buyout firm control 14 percent of Edison's common stock. President Bush's proposal to subsidize $3 billion in federal loans to establish new charter schools and issue private school vouchers to students in low-performing schools would certainly encourage Edison's business. As a recent Edison filing with the Securities and Exchange Commission noted: "If this business model fails to gain acceptance among the general public, educators, politicians, and school boards, we may be unable to grow our business."

One of the great myths of thrown around by Republican types is that there is a grassroots hunger for private schools in the ghetto ("in the ghetto" -- to be sung in an Elvis like tone). Now, on the one hand, that must be true -- just as there is a great hunger for any prestige item. If Andover plunks down in South Chicago and opens its doors, you can bet there'd be a line forming.

Unfortunately, most private schools aren't prestige factories. Andover isn't going to South Chicago, and if it did, it would either destroy its prestige (which depends heavily on it being the school of choice for wealthy parents), or select the same elite children.

The Philadelphia News has, of course, a more keen interest in Edison Schools than the NYT. This is a story about a request, filed by Republican Senator Arlen Spector and Dem congressman Chaka Fattah, for a good comparison of the record of Edison schools to the record of public schools. Although you can't bump into a conservative column on this subject without reading that these comparisons have already been made, and Edison come out the winner; in actual fact, Edison seems to be engaging in Enron accounting on more than one level:


"Benno C. Schmidt Jr., chairman of Edison's board of directors, who also testified, said Edison's schools overall have improved test scores by 5 or 6 percent a year, depending on the measure. He acknowledged that a small percentage of schools have slid backward."Look at it the way you would look at the record of Mike Schmidt as a third baseman," he said, referring to the former Phillies slugger. "It's not a matter of whether he struck out on occasion. It's a matter of the whole record."

One more time, for those slower readers who don't see LI's point: the conservative contradiction, here, is between ideology and mechanism. Ideologically, the grassroots right have fought to maintain local control of schools whereever they have fought. However, in the conservative dialectic, the libertarian moment is that in which public enterprises are released into private hands. What this means for schools is that, inevitably, control is wrested from the neighborhoods. As a pseudo-Marxist, I'm not sure what I think about this. I suspect a nationalized school system would accord children a more equal education. And I suspect that, to advance that kind of project, the initial takeover of local schools by a national private business would have to be the first step. Since the national private business will inevitably stumble -- according to the laws of the marketplace, and any study you want to make of the Fortune 400 companies over the last fifty years -- these schools would have to be rescued by the govenment. That, in turn, would creat a mosaic of governmentally controlled schools. And if those schools performed adequately, it would be hard to turn them back over to private enterprise.

There is a parallel here to agriculture. The Republican party included, as its most stalwart members, small farmers for most of the twentieth century. Yet the iron law of capitalism applied to those small farmers as well as to any other enterprise. The iron law, of course, was propped up, when drooping, by Congressional handouts, and a socialized water policy that benefited the wealthiest. So that today, the small farmer is as much an anachronism in the USA as he was in the former USSR. There is more than one way to collectivize, my brothers and sister.