California's Berlin Wall

Michael Rothschild

On November 2, Californians will vote on whether to revolutionize their public schools by replacing the traditional government monopoly with a system based on market competition. No one disputes the pathetic condition of California's (or for that matter, America's) public education. In the nation's largest state, 60% of students either drop out or graduate with skills below the 7th grade level. In an age of cut-throat global competition, companies are hard-pressed to find workers who can read and write, much less add and subtract.

U.S. technology companies are being forced to spend scarce resources to redo the job that the schools should have done. Motorola, for example, is spending $120 million a year--3.6% of payroll--sending its workers to remedial classes. As low-skill jobs disappear, under pressure from automation and offshore competition, America's schools annually dump millions more semi-literates onto the labor market.

A decade of "reforms" and spending increases has yielded no measurable performance improvement by America's public schools. But now, under the proposed amendment to California's constitution, genuine reform may at last be coming. Known as Proposition 174, the plan would grant every K-12 student who wants one an annual scholarship worth at least 50% of the $5200 that state and local governments spend per student. These $2600 scholarships may be supplemented by grants for students with disabilities or special transportation needs.

Though California's elite private academies often charge tuitions over $7000, the average private school costs less than the projected scholarship amount. Under Prop 174, if the scholarship exceeds the tuition, the surplus will be held in a trust account for that student's future costs at any California school or university.

A novel feature of the plan allows public schools, as well as private and parochial schools, to convert themselves into "scholarship-redeeming schools." Such schools must enroll at least 25 students and conform to the legal requirements presently governing California's private schools. They cannot teach unlawful behavior or hate against any group, and cannot discriminate on the basis of race, ethnicity, color, or national origin. But they can select students on the basis of gender, religion, or ability.

The latter provision is not discriminatory but would create a proliferation of schools--each tailored to the special needs of its students. For example, many educators have observed that separating girls and boys, particularly in their adolescent years, fosters a better learning environment for both. Parents who desire a school that teaches "Christian" values could so choose. Other schools might cater to dyslexic children or those with special aptitude in music or math. To assure parents have enough basic information to evaluate school performance, every school must administer and publish class-by-class results on nationally recognized achievement tests.

Remarkably, every feature of Prop 174 is voluntary and supplemental to the existing system. No student will be forced to take a scholarship, and no school will be required to redeem them. Successful public and private schools will be funded and will continue operating just as they do now. Only the lousy schools are threatened.

So then, why the big election battle over Prop 174? That brings us back to Berlin. Why did the Soviets put up the Berlin Wall in the first place? To keep people from running away. Monopolies--public or private--are inherently inefficient. In time, they become corrupt. Without external competitors to threaten the monopoly's revenue stream, even the best manager has no chance of creating a lean, innovative, high-performance organization. Everyone in the organization knows that as long as the monopoly remains intact, his or her job is virtually guaranteed, regardless of job performance. Any challenge to the monopoly is treated as an economic death threat.

Under the Soviet system, where every important aspect of life was part of a megamonopoly, corruption, waste, poverty, technological backwardness, and hopelessness drove those seeking a better future to take their chances and run the gauntlet of guard dogs, barbed wire, and AK-47s. To sustain their power and perquisites, members of the nomenklatura, the bureaucrat class that ran the system, had to maintain the Berlin Wall. If people were allowed to "vote with their feet," the monopoly's collapse would soon follow. And, of course, it did.

Taking these history lessons to heart, school bureaucrats and teachers' union officials in the nomenklatura running America's public school monopoly fear precisely the same result if California passes Prop 174. Across the country, they know full well that Prop 174 would breach their own Berlin Wall. Like the irresistible market reforms that toppled the nomenklatura across Eastern Europe, one state after another would likely switch to school choice if California leads the way.

But despite polls showing that over 70% of Californians believe parents should have the right to choose their kids' schools, any hard-eyed realist has to predict defeat for school choice advocates. Similarly high levels of pre-election support for parental school choice evaporated during previous contests in Oregon and Colorado, after the education nomenklatura launched its last-minute TV advertising attacks. With a reported $20 million war chest, raised largely by special union dues, the California Teacher's Association is sure to choke October's airwaves with a ferocious assault. Supporters of Proposition 174 will be lucky to raise enough money to get on TV at all.

Though the only real issue is monopoly power and its devastating effect on educational quality and cost, this campaign will be fought on the specifics. Here are the main lines of attack and the responses:

• School choice will help the rich by subsidizing their private school tuitions.
  The rich, and the upper middle class, already have school choice. They exercise it by moving to expensive suburbs that the middle class and poor cannot afford or by paying private school tuition on top of their school taxes. Prop 174 empowers every family with the cash needed to be taken seriously as a consumer of education. The elite schools patronized by the rich have shown no interest in qualifying as scholarship-redeeming schools.
  
• The proposal will take desperately needed funds away from the public schools.
  The only schools that will lose any funding are those which students want to leave. That's good. In fact, that's the whole idea. Furthermore, for every student who leaves the public schools with a $2600 scholarship, another $2600 is left behind. So on a per student basis, funding will rise.
  
• $2600 isn't enough to pay the costs of a year's education.
  Only about 40% of the tax money spent by the public school system (about $2200) actually trickles down through the nomenklatura and into the classroom to pay for teachers, books, and supplies. In Los Angeles, 31% of all school spending goes to central office expenses alone. Setting aside the bureaucratic overhead, many public schools are operating on less than $2600 right now.
  
• School choice violates the separation of church and state. After World War II, millions of veterans used GI Bill "vouchers" to pay their costs at public, private, and parochial colleges. The GI Bill worked because it put decision-making power in the hands of individuals and forced education providers into open competition. Prop 174 extends the same principle to elementary and secondary education.
  
• Public schools are essential to our "melting pot" society. If families are allowed to choose their own schools, American society will ultimately fragment. With "white flight," today's public schools are more, not less, segregated than private schools. Most parents care more about a school's educational quality than its complexion. If they can find quality in an integrated environment, a great many would choose to do so. Besides, the basis of a civil society is an educated population.
  
• Minority children will be left behind in the worst public schools, while others flee.
  The strongest supporters of school choice are in poor minority communities. Unlike those able to move to the suburbs to escape the most violent schools, the worst teachers, and the most unresponsive bureaucrats, the poor know what it's like to be under the monopoly's thumb. Most new schools will spring up in the inner cities where the public schools are awful. The competition to attract inner city students (and their scholarships) will be intense. Why would people want to start schools in the relatively well-served suburbs? The best opportunities will be in the ghettos.
  
• Competition won't improve the schools, because many kids don't have parents who care enough to choose a good school.
  Unless a competitor can attract business from a reasonable percentage of those customers who do comparison shopping, it can't generate enough volume to stay in business. This is how markets spontaneously weed out weak organizations. Try finding a filthy, high-priced supermarket with lousy selection. They don't exist. Once the market takes hold, the only schools left to choose from will range from competent to excellent, as in every other aspects of market life.

The arguments go on and on, but none get to the heart of the matter. For a century, mainstream social and economic thinking has held that a better society can be planned by politicians and managed by bureaucrats. Instead, we got an illiterate "permanent underclass" whose desperation intermittently erupts in riots like those in South Central LA. Around the world, real reform means giving people the freedom to make their own choices. California's Berlin Wall may or may not fall this November, but it's time is coming.