The Death and Life of the Great American School System

November 12, 2012

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Diane Ravitch. The Death and Life of the Great American School System: How Testing and Choice Are Undermining Education (Basic Books, 2011)

If there’s one thing that Americans agree on, despite their division into opposing camps on so many social issues, it’s the importance of education. A well-educated population is believed to be essential to national prosperity and a high quality of life. The decline in the number of jobs that used to pay pretty well but didn’t require much education, such as many manufacturing jobs, has given new urgency to this issue. Everyone agrees that today’s job-seekers need a good education to compete for high-paying positions, and that a country needs an educated workforce to compete for a good slice of the global economic pie. (At the same time, one should not jump to the conclusion that more education is sufficient for either individual or national success. The country must also invest in the kinds of work that require education, and organize work to produce high-quality products as opposed to merely cheap ones.)

Americans also generally agree that American students are lagging behind students of many other nations in academic achievement, and that the nation’s school system is in need of serious reform. What kind of reform, however, is hotly contested. Diane Ravitch’s book analyzes the wave of “market-based” reform that has swept through public education since the 1990s, especially the “No Child Left Behind” mandates signed into law by George W. Bush in 2002. Ravitch, who served as Assistant Secretary of Education in the first Bush administration, supported this approach to reform until 2006, when she concluded that it was mostly a failure.

To get an initial sense of what market-based reform is all about, think of a school as a business. Its product is an educated child. Its consumers are the families with children to educate. Its administration is management, and its teachers are labor. Quality control is accomplished by testing. Market competition exists if families are free to send their children to more than one school, and schools and their teachers are allowed to succeed or fail on their merits. Assume that education consists of a few well-defined skills that children must acquire. Assume that pedagogical techniques for instilling those skills are available, and that the quality of teaching determines whether or not children acquire them. Assume that standardized tests can accurately assess student progress, and that good test scores reflect good teaching. Assume that the quality of education will improve if management is free to reward and promote good teachers, defined as those whose students test well, and terminate or withhold rewards from bad teachers. Quality will also improve if educational entrepreneurs are free to start new schools, children are free to switch to better schools, and new teachers can easily enter the profession to replace those who are more experienced but less effective.

This market-based or business model of education has broad appeal, and it has set the agenda for most of the educational reforms of the past quarter century: frequent standardized testing to measure progress and hold teachers accountable, teacher compensation based on “merit” instead of credentials or seniority, efforts to weaken unions and abolish tenure to make it easier to fire teachers, school choice to give families alternatives to failing schools, and privatization to free school managers from the constraints of public bureaucracies. Conservatives have embraced this agenda most enthusiastically because of their belief in free-market solutions. The movement reflected the “government-is-the-problem; the market-is-the-solution” mood of the Reagan-Bush era. Many liberals have embraced it as well, in the hope that such reforms can expand educational opportunity and close the achievement gaps between rich and poor, white and minority children. In theory, such reforms might create both a freer educational marketplace and a more democratic society.

Ravitch begins her story with the “standards movement” called for by the National Commission on Excellence in Education in its 1983 report, A Nation at Risk. The report documented the poor performance of American students on national and international assessments and attributed much of it to weaknesses in curriculum content. The main solution was to set higher standards for both students and teachers. Some efforts to define national curricular standards followed, but the movement foundered when the attempt to set national standards for the teaching of history got caught up in the culture wars. Liberals proposed a more critical approach to American history emphasizing the struggles of disadvantaged groups for social justice, while conservatives preferred a more celebratory approach featuring the accomplishments of great (white) men. Ravitch feels that the advocates of national content standards gave up too easily when Congress and the media roundly rejected the proposed standards. What we got instead was a narrow focus on reading and math skills, with little regard for any substantive curriculum whatsoever.

In the 1990s, a particular New York City school district, District 2 covering part of Manhattan, got a national reputation for effectiveness in raising reading scores. The district superintendent, Anthony Alvarado, mandated a specific reading program, “Balanced Literacy,” which he implemented with intensive teacher training, close monitoring of instruction, and heavy commitments of class time. The San Diego school system then brought Alvarado in as chancellor for instruction and implemented a similar program citywide, concentrating on both reading and math. This was done from the top down, with heavy-handed tactics by top administrators, demotions and firings for uncooperative principles, and high attrition of teachers. The San Diego experiment in turn became a model for the New York City reform effort launched by Mayor Michael Bloomberg and Chancellor Joel Klein. “They reorganized the management of the schools, battled the teachers’ union, granted large pay increases to teachers and principals, pressed for merit pay, opened scores of charter schools, broke up large high schools into small ones, emphasized frequent practice for state tests, gave every school a letter grade, closed dozens of low-performing schools, and institutionalized the ideas of choice and competition.”

According to Ravitch, none of these experiments was as clearly successful as its proponents claimed. Rising test scores can mean improved instruction, but they can also mean changes in the tests themselves or their scoring, or demographic changes in the students taking the test. District 2 “was one of the most affluent districts in the city and became even more so during Alvarado’s tenure,” with a rising proportion of white and Asian students. At the time when San Diego’s scores were rising, they were rising just as much or even more in other areas of the state without the same reforms. And in New York City, test scores were “hugely inflated by the state’s secret decision to lower the points needed to advance on state tests.” When students were tested on the more objective National Assessement of Educational Progress, most tests showed no improvement, and the achievement gap among racial groups remained just as wide. Nevertheless, favorable media attention and strong financial backing from private foundations (especially those controlled by Bill & Melinda Gates, the Walton family, and Eli Broad) helped turn this approach to educational reform into a national movement. The centerpiece of that movement was No Child Left Behind.

Continued

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How to Call the Presidential Election

November 2, 2012

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On election night, the media will no doubt provide us with a blizzard of numbers and instant interpretations. What I’ll be trying to do is ignore a lot of the trivia and focus on the most significant information. If I hear that Romney has won Kentucky, I’ll pay little attention, but if I hear that Obama has won North Carolina, I’ll declare him the winner and go to bed.

Some news organizations, such as CBS News, have continued to declare the race a dead heat. And it’s true that the national polls have been very close, with some favoring Obama and some favoring Romney by small margins. But statistical analysts who incorporate more information into their models, including state polls and economic indicators, give the President a 75-85% chance of winning. I’ll be relying heavily on Nate Silver’s model as a guide to what to look for on election night, but other models are saying essentially the same thing.

Silver sees Obama with a solid core of 237 electoral votes from states that the model gives him at least a 90% chance of winning. These include several states that are sometimes mentioned as being still in play, especially Pennsylvania, Michigan and Minnesota. One very plausible path to victory is for Obama to pick up Ohio, Wisconsin and Nevada for a total of 271, one more than the 270 electoral votes needed to win. That’s not Obama’s only winning path, but I’ll use it as a baseline scenario to compare with what actually happens election night.

So here’s my strategy for keeping score: Start from 271 Obama votes. Add the votes for any of the following states that go blue: Colorado (9), Florida (29), Iowa (6), New Hampshire (4), North Carolina (15), and Virginia (13). Subtract the votes for any of the following states that go red: Nevada (6), Ohio (18), and Wisconsin (10). As long as the additions are greater than or equal to the subtractions, project Obama the winner. If the subtractions are greater than the additions, project Romney the winner. Obviously, the projection will become more realistic as more returns from these swing states come in.

If at some point, the additions are greater than the remaining possible subtractions, Obama will almost certainly have won. I say “almost” because Romney could theoretically still win by cutting into Obama’s core of 237 votes. But that’s a long shot; if Romney can’t win in the swing states listed above, he’s even less likely to win in bluer states in Obama’s core. If at some point, the subtractions are greater than the remaining possible additions, then Romney will prevail.

So have fun, impress your friends by calling the race early, and have a good night’s sleep!

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Stockman Critique of Bain Capital

October 18, 2012

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This week’s Newsweek contains an excerpt from David Stockman’s forthcoming book, The Great Deformation: How Crony Capitalism Corrupts Free Markets and Democracy. Stockman is no leftist; he was Ronald Reagan’s budget director and remains an advocate for free-market capitalism. He has worked in private equity firms himself for many years. That makes his critique of Bain Capital all the more powerful. His article is available online at The Daily Beast.

The centerpiece of Mitt Romney’s presidential campaign is his assertion that he knows how to create jobs because of his experience as CEO of Bain Capital. Stockman is hardly the first to question whether Bain’s private equity investments had very much to do with job creation, but his conclusion is especially blunt:

Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way–out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale–the faster the better.

In a leveraged buyout, a private equity firm such as Bain Capital buys a company by putting up some of its own capital and borrowing the rest. The ratio of debt to equity can be very high, often 90/10 or more. The assets of the acquired company become collateral for the debt, and debt payments are made from the company’s cash flow. This arrangement limits the potential losses of the private equity firm, since it can only lose the equity it put in. But the potential gains are much larger, since any appreciation of company value goes to the new owner, not to the lenders, in the same way that appreciation on your home goes to you when you sell, not to the bank that lent you the money to buy. Acquire a $100 million company using only $10 million of your own money, and if it appreciates by 10% your gain is 100% of your investment–that’s leverage!

In theory, a leveraged buyout can result in a win-win. Ideally, the new owners come in and turn the company around, increasing its assets and cash flow and creating new jobs. When they eventually sell, perhaps taking it public with an IPO, they make a profit. The lenders get all their money back with interest. If that’s what happened most of the time, LBOs wouldn’t come in for so much criticism. But often, the private equity business is more like flipping real estate than building new companies. In what’s called a “buy, strip and flip” operation, the new owners don’t keep the company long enough to make real improvements in its long-term profitability. They just weigh it down with debt payments, extract as much cash as they can by cutting costs and selling off assets, maybe use an accounting trick or two to spruce up the balance sheet, and then unload it before its true financial condition becomes obvious. Stockman argues that government policies such as low tax rates on capital gains and the loose monetary policy of the Federal Reserve under Alan Greenspan enabled this corrupted form of capitalism. Flipping assets is most profitable when borrowed capital is readily available, capital gains are lightly taxed, and enough investors are playing the game to create asset bubbles with steadily rising prices.

Stockman places Bain capital squarely in that context:

Bain Capital is a product of the Great Deformation. It has garnered fabulous winnings through leveraged speculation in financial markets that have been perverted and deformed by decades of money printing and Wall Street coddling by the Fed. So Bain’s billions of profits were not rewards for capitalist creation; they were mainly windfalls collected from gambling in markets that were rigged to rise.

Romney’s time at Bain Capital coincided with “the first great Greenspan bubble, which crested at the turn of the century and ended in the thundering stock-market crash of 2000-02.” During that time, most of Bain’s deals earned a lower return than an investor could earn in an S & P 500 index fund. But the company’s ten best deals returned a profit of $1.8 billion on an investment of only $250 million. Four of those ten best deals ended in bankruptcy for the acquired company, indicating that Bain’s success did not depend on the success of its acquisitions. For example, Bain bought a lot of department stores and clothing chains that were threatened by the expansion of big-box stores like Wal-Mart. It had one of its acquisitions, Stage Stores Inc., in turn acquire another endangered chain, C.R. Anthony. Bain then touted the combined operation as a successful, expanding company, and quickly sold its stake at a $175 million profit (18 times what it invested) as soon as the stock went up. When the company, heavily laden with debt and still facing with the same competitive pressures, went bankrupt, about 5,000 jobs were lost.

Bain invested in more successful companies as well, but it rarely made as much on the deal. It provided $5 million in seed money for Staples, from which it made a $15 million profit. Staples went on to become the retail giant of the office-supply business, with a workforce of 90,000. Stockman notes, however, that this mainly represented a transfer of jobs from smaller stationery and office-supply stores that Staples either acquired or put out of business. (He also notes that about 45% of the jobs at Staples are now part-time.) Stockman’s point is not to blame Bain for the transition from small retail stores to big-box stores, which has produced economies of scale and lower prices for consumers. The point is that the Bain business model was indifferent to job creation. Bain could “buy, strip and flip” the losers or invest in the winners, making money either way. Knowing how to play this speculative game for short-term profit is not at all the same as knowing how to create new jobs in a competitive global economy.

Liberals will probably feel that Stockman places too much of the blame for deforming capitalism on government monetary and tax policy, and not enough on corporations’ own tendencies to pursue private profit at the expense of public good. But both liberals and conservatives may agree with Stockman’s main contention, that experience with this peculiar kind of capitalism isn’t a very good qualification for the presidency:

In short, this is a record about a dangerous form of leveraged gambling that has been enabled by the failed central banking and taxing policies of the state. That it should be offered as evidence that Mitt Romney is a deeply experienced capitalist entrepreneur and job creator is surely a testament to the financial deformations of our times.

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Twilight of the Elites (part 3)

October 17, 2012

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Having described in some detail how meritocracies degenerate into self-serving oligarchies, Chris Hayes ends his book with a brief discussion of what might be done about it. Although his subtitle, America After Meritocracy, suggests that he wants to destroy meritocracy, he explains that he wants only to reform it. “At its most basic, the logic of ‘meritocracy’ is ironclad: putting the most qualified, best equipped people into the positions of greatest responsibility and import. It would be foolhardy to toss this principle out in its entirety.” This sounds almost like the collison of an irresistible force and an immovable object; we have both the “ironclad logic” of meritocracy in principle and the “iron law” of its corruption in practice! So what’s to be done? Resist the corruption by keeping inequality from getting out of hand:

If you don’t concern yourself at all with equality of outcomes, you will, over time, produce a system with horrendous inequality of opportunity. This is the paradox of meritocracy: It can only truly come to flower in a society that starts out with a relatively high degree of equality. So if you want meritocracy, work for equality. Because it is only in a society which values equality of actual outcomes, one that promotes the commonweal and social solidarity, that equal opportunity and earned mobility can flourish.

Hayes makes clear that he is speaking primarily of economic equality. Although he acknowledges other sources of power besides money–political office, platform (being in a position to address a large audience), social networks–he sees these as highly correlated. For example, candidates who run for office usually need to have a lot of money of their own as well as the social connections to raise it from other wealthy people. And the wealthy generally have their way: Research in political science finds that actual policy outcomes correlate highly with the desires of the wealthy and hardly at all with the desires of middle-income or poorer voters. Hayes regards the “1%” and the “governing class” as nearly the same group.

Hayes then endorses the classic liberal goal of economic redistribution through government taxing and spending. “As a general rule, the more taxation, the more redistribution; the more redistribution, the more equality.” He brings this ostensibly radical idea into the mainstream by citing surveys showing that Americans want wealth to be distributed far more evenly than it is, and that they favor raising taxes on the wealthy. He acknowledges how difficult this is to accomplish: “People and institutions who benefit most from extreme inequality have outsize power they can use to protect their gains from egalitarian incursions.” But he hopes that mobilizing the power of the majority can shift the political balance. He pins his hopes especially on a “newly radicalized upper middle class,” since their prospects for getting ahead have also been diminished by the self-serving policies that favor the 1%.

One thing that struck me about the book was how much politics and how little economics it contains. The author seems to see the world primarily as a struggle of social classes for control of the government, one class using it to consolidate their privileges and others to expand equality. That may be true, but it’s not the whole truth. America also faces a struggle to maintain and expand the wealth of the whole country. Having just read Arne Kalleberg’s Good Jobs, Bad Jobs, I’m interested in the question of how the United States is going to compete in the global economy. Will we join a race to the bottom, creating as many low-wage jobs as possible, or find a way to create better jobs for well-educated, highly trained workers? Government policies in areas like human capital development and investment in new industries may have implications both for reducing inequality and increasing national wealth and competitiveness. If so, framing the issue as redistribution for redistribution’s sake may be unnecessarily narrow and divisive. Hayes mentions the postwar era in which economic growth and increasing equality went hand in hand. Many leaders of that era realized that it was good for the economy for workers to earn enough to join the middle class. Similarly, we may all benefit if the nation develops the talents of all its citizens and the new industries to employ them. The result may be a society that is not only fairer, but more prosperous.

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Twilight of the Elites (part 2)

October 16, 2012

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In my last post, I described Chris Hayes’s “Iron Law of Meritocracy,” the idea that meritocracies eventually produce so much inequality that they undermine equal opportunity and degenerate into self-serving oligarchies. Here I’ll describe some of the ways that he elaborates on his basic argument.

Meritocracies need social norms defining the meritorious behaviors to be rewarded. But “it’s rather difficult to design a competitive system that heavily rewards performance and doesn’t also reward cheating.” The greater the inequality of outcomes between winners and losers, the higher the stakes and the greater the “moral hazard.” Once a few people start cheating, those who don’t join in are placed at a competitive disadvantage, further weakening the social norms. Bad behavior starts to drive out good behavior, just as bad money drives out good money according to Gresham’s Law. During the housing bubble, financial firms that were willing to make shaky loans based on bogus appraisals and sell them off to unsuspecting investors expanded their businesses at the expense of more traditional, cautious bankers. Once a culture of cheating develops, its participants develop some pride in their own slickness and some contempt for the suckers who don’t understand how the game is really played. Those who are supposed to enforce the rules may be overwhelmed by the volume of cheating or corrupted by its benefits. One reason why Major League Baseball tolerated steroids for so long was that all the power-hitting brought in fans and revenue. Economists who endorsed the newfangled financial instruments that turned out to be toxic were rewarded will lucrative consulting deals.

Meritocracies depend on a relationship between knowledge and trust. Ordinary people place their trust in authorities, since they can’t know everything themselves; but they must know enough to have some basis for that trust. Our enriched information environment gives us more information, but also more opportunities for some to have information that they keep secret from others. The Bush administration used carefully controlled leaks to make the case that Iraq had weapons of mass destruction, while not revealing that CIA analysts had serious doubts about that case. The professional journalists we expect to tell us what’s going on can fall victim to the same deceptions, either because they too are misled or because they learn to see the world through the eyes of the elites they cover (“cognitive capture”). “Without some central institutions that have the inclination, resources, and reputational capital to patrol the boundaries of truth, we really do risk a kind of Hobbesian chaos, in which truth is overtaken by sheer will-to-power.” The term “post-truth” politics was already being applied to this situation before the 2012 presidential campaign, in which the absence of trusted authorities who could set the record straight made lying a more viable strategy.

Critics of social inequality usually focus on how steep hierarchies hurt the people at the lower end of the social pyramid. Hayes prefers to focus on the destructive effects closer to the top: “As American society grows more elitist, it produces a worse caliber of elites.” The winners of the meritocratic competition are, not surprisingly, the truest believers in the meritocracy. The system allows them to claim that they succeeded because they were smarter and harder working than their competition, an idea that inspires egomania and disregard for the worth of others. The “fractal” reward structure (many levels of smaller hierarchies within larger ones) encourages a great deal of insecurity, since there’s usually an even higher echelon of success with an even smaller inner circle beyond the level one has already achieved. So the status-seeker looks upward, toward the next rung on the ladder, the next group of higher-ups to please, the next expectation that must be met to get ahead, whether it’s good for society or not. Hayes cites psychological research showing that status-conscious, self-preoccupied, insecure people usually lack empathy for others, especially others lower than themseleves in the social hierarchy. Since the book’s publication, former private equity CEO Mitt Romney provided a perfect example, dismissing the 47% of the population not subject to income taxes as freeloaders unwilling to take responsibility. (In actuality, most either have legitimate reasons for not working, such as age or disability, or they work in low-wage jobs subject to payroll taxes but not income taxes.)

If a meritocracy is to work for the benefit of all, the authorities must be able to receive and act upon honest feedback from people at all levels of society. But extreme inequality creates excessive social distance between the top and the bottom. Elites can call for war without worrying that their sons and daughters will need to enlist in order to get a job or an education. Political authorities can call for an evacuation of a city like New Orleans without thinking very much about the people without cars or money to travel. Catholic Bishops can be “the very archetype of a cosseted elite, remote and diffident and hermetically sealed,” so that their loyalty is “first to their institution, followed by compassion for their brother priests, with very little left over for their actual flock,”even those victimized by sexual molestation. During the housing boom, many people in the neighborhoods most affected by predatory lending knew that something was amiss, but the Wall Street high-rollers who were making the most profits were too insulated to know or care. Hayes uses the metaphor of a sinking ship:

The ship sprung a leak down in the lower decks, flooding the servants’ quarters, and no one up top realized that it would bring down the whole thing. The cocktails continued to flow, the band continued to play, and the party rollicked on Wall Street throughout the housing bubble, even as subprime borrowers drowned, as their lives and wealth and homes were destroyed.

My final post about Twilight of the Elites will deal with Hayes’s discussion of the prospects for reform.

(Continued)

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