The Swindle of Innovative Educational Finance

The appropriate role for the private sector in the financing and provision of education is highly contested on both theoretical and empirical grounds. In The Swindle of Innovative Educational Finance, Kenneth J. Saltman argues that while education privatization is often promoted on the grounds of efficiency, improved service quality, and cost savings, it ultimately results in “an upward redistribution of wealth at the expense of the public” (p. 103). Throughout the book, he discusses four areas of education privatization, which he ultimately concludes are swindles based on lies.

Saltman begins by describing the conditions that have allowed privatization to flourish in education. Specifically, he points to the focus on data and data-driven decisions coupled with a general disregard for the context and conditions through which these data are created. Ultimately, this leads to a situation where schools focus on accountability and knowledge acquisition rather than serving as sites of class and cultural struggle where students are taught to envision and enact a better and more just society.

The first area of privatization Saltman explores is pay for performance. In this “scheme,” private investors fund public programs under an agreement that they will be repaid or even receive a bonus if these programs prove successful. Proponents of pay for performance financing argue that it can overcome a lack of political will for public service expansion, transfers the risk of investment from the public to private investors, provides more accountability than government-run programs, and produces cost savings. Saltman attempts to debunk each of these claims. He points to polls showing widespread support for increased public spending and argues that pay for performance programs actually carry very little risk because firms only invest in projects that they anticipate will be successful. He also questions the claim of accountability, highlighting the considerable value judgment that goes into determining the metrics of program success, which can be gamed by investors. Finally, he argues that rather than saving money, pay for success programs often end up costing more because they require hiring third-party evaluators and managers. He concludes that under pay for performance, the public pays more and has less control over public services.

Saltman next turns to student income loans, which provide students with tuition in exchange for a percentage of future income. Since there is no collateral protecting private lenders from default in the case of student loans, many seek to limit risks using a variety of mechanisms such as restricting loans to students with majors in high-return fields. Saltman likens these loans to a form of class warfare, which allow for an upward redistribution of wealth as higher education is defunded and the costs are passed down to students rather than a broader pool of taxpayers. Saltman contends that by restricting loans to students pursuing particular fields, student income loans have vocational tendencies and lead to a further gutting of areas such as the humanities that provide students with the skills to engage with society and intervene in public problems. He also opposes this form of lending on the grounds that student income loans are a form of indentured servitude where the rich are allowed to own the labor of students as they repay their loans.

The third “scheme” Saltman addresses is philanthrocapitalism, focusing on the case of Facebook and the Chan Zuckerberg Initiative (CZI). In philanthrocapitalism, for-profit corporations are established to do philanthropic work. The problem with such an arrangement, as Saltman points out, is that there is no transparency or public accounting required of these charitable corporations. Thus, while they may be founded with a mission to promote public welfare, money taken by such corporations can be used for any number of activities without the public’s knowledge and/or without recourse. A further concern with charitable corporations is that they can engage in political lobbying, allowing rich donors to influence public policies and the direction of education reform. An example of this is personalized learning, which is championed by CZI. While personalized learning is marketed as being tailored to students’ interests, Saltman describes a system where teachers are replaced by machines, control over knowledge is shifted from teachers to private companies, and students are sorted and sifted based on test performance.

Finally, Saltman explores real estate and the role of celebrities in charter schools. A serious concern with charter school real estate is that real estate investors can find themselves in a relationship with or on the board of charter schools. As a consequence, real estate investors are the recipients of public dollars as they pay themselves rent and/or charge inflated rents to charter schools. The concern Saltman raises about the role of celebrities in charter schools is that they rarely have a background in education. In addition, celebrities are often drawn to charter school models that are divorced from the needs of the community and tend to prepare students for low-pay, low-skill work, thus perpetuating income inequality.

Throughout the book, Saltman raises important questions and issues about the role of the private sector in education. In particular, this book outlines policies and practices that most people are probably not aware of, such as the phenomenon of charitable corporations or the ways in which individuals can capitalize on current charter school policies to profit from real estate investments. These and other issues raised by Saltman are legitimate concerns that policy-makers should seek to address, particularly since some level of education privatization is likely to continue for at least the near future.

However, if Saltman’s goal is to convince an undecided audience about the ills of privatization, then he is unlikely to accomplish his goal. In many instances, Saltman’s use of evidence is one-sided and his arguments are not compelling. For example, most of the chapters rely heavily on the use of cases to illustrate Saltman’s arguments without any discussion as to the applicability of these arguments to the wider education space. In addition, Saltman tends to cite articles from the popular press rather than drawing on the extant academic literature, particularly when evaluating the success of reforms. Overall, his argument for pushing back against privatization would be strengthened if he painted a more balanced picture of the motivations and consequences of the various “schemes” he discusses.

This book is worth reading for those with a strong interest in education reform and policy, but does not require a background or previous understanding of education finance as the title might suggest. Most clearly it will appeal to an audience with strong views against privatization, but this work is also worth reading for those who favor privatization as it highlights a number of areas where improvements could be made in order to better promote the public good.