EDDi Extra

January 2020 (Extra II)

Dear subscribers

This week, something a little different again - a ‘long read’ EDDi Extra.

The piece, by Dr Denry Machin, examines for-profit schooling. What difference does it make whether a school is for-profit or not-for-profit? Is one form of education ‘better’ than the other? If so, by what measure and on what moral basis?

These are pertinent questions; some 80% of the world’s international schools now operate for-profit. As do an increasing number of US and UK schools and universities.

As this is a long read, we have reinstated the PDF for this edition. You can read online below, but we recommend the PDF.

Any thoughts or comments, let us know. Thanks for reading.

EDDi

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PRIVATE SCHOOLS AND THE MORALITY OF PROFIT

To profit or not to profit, that is the question

Photo by rupixen.com on Unsplash

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What difference does it make whether a school is for-profit or not-for-profit?

Why is it perfectly palatable for a company to profit from the building of a school,

but not the company providing the education which goes on in those buildings?

Whilst it matters how profit is earned (the sale of Aspirin, for example, versus the

sale of cocaine) does it matter who makes that profit?

Profit (whether given that title or hidden behind the veil of ‘surplus’) is simply a

transfer, an exchange, between buyer and seller. Teachers ‘profit’ from the sale of

their services to schools; parents receive ‘profit’ from the long-term earnings

potential of their children; society ‘profits’ from a better educated community and

the related increases in standards of living (Takahiro, 2009).

In these terms, profit is easily defined. Morality, however, is much more slippery.

Morality is subjective and relative. At risk of drastic oversimplification, it might be

considered as ‘goodness’ or ‘rightness’ (terms which, admittedly, also escape easy

definition). Morality concerns the distinction between right and wrong, between

good and bad.

If schools run for-profit could be shown to produce more ‘goodness’ at a lower

cost – especially for the less well off – would the claim to immorality remain? Is, as

Stanfield asks, ‘the profit motive so [morally] obnoxious that it should not be

allowed to prevail for those whose priority is simply a high-quality education?’

(Stanfield, 2012:31).

Is profit morally wrong and making a profit from education somehow inherently bad?

These are a pertinent and emotive questions.

But they are not new questions, and nor do they apply only to schools.

Writing in 1948, the US economist Henry Hazlitt stated that:

“[t]he indignation shown by many people today at the

mention of the very word profit indicates how little

understanding there is of the vital function that profits

play in our economy.” (Hazlitt, 1948:5 in Stanfield,

2012:29)

Similarly, Joseph Schumpeter commented that people seem to exhibit an

‘ineradicable prejudice that every action intended to serve the profit interest must

be anti-social by this fact alone’ (Schumpeter, 1954:234 in Stanfield, 2012:29).

Profit, it seems, is one of the most maligned subjects in economics. All the more so

in education where state management is being ‘rolled-back’ and polices that

enthusiastically encourage private-sector involvement ‘rolled- out’ (Peck and

Tickell 2002). For many contemporary schools, the pursuit of profit is not an alien

and unfamiliar concept, it is a central, if not the central, purpose for organisational

existence.

On the one hand, supporters of privat(ised) educational provision argue that

market dynamics foster competition between providers, spur choice, encourage

delivery at a lower cost and, above all, improve quality (Ball, 2012; 2013). On the

other hand, profit is seen to work in opposition to doing ‘the right thing’, leaving

students at the mercy of investors with motivations other than education.

Acknowledging that contentions about the morality of profit (and its underpinning

neo-liberal dogma) are rarely rationale – opposition usually being based on

ideology not evidence – this article is a (possibly risky) attempt to offer some

research-backed reflection.

THE ARGUMENTS AGAINST

The most often cited argument against for-profit schooling is the perceived conflict

between profit and the interests of students.

The profit motive, or so the argument goes, works in opposition to doing ‘the right

thing’, leaving students at the mercy of investors with motivations other than

education. Hence, ‘fast buck’ acquisitions (Coughlan, 2012) and assertions that

‘profit making schools undermine the moral purpose of education’ (Morris, 2012).

Taking international schools as a case study (of which the vast majority are forprofit),

even the briefest conversation with students, teachers and parents reveals

flaws in the for-profit argument. Despite exposure to ‘the invisible hand’, in many

markets the strength of that hand is so benign (with excess demand so great) that

market forces fail to operate effectively; sub-optimal schools remain in operation

with markets failing to achieve equilibrium – an imbalance that negates the central

‘competition equals quality’ tenant of neo-liberal canon.

Moreover, promises of educational equity are rarely realised beyond those able to

afford a fee-based education. Exceptions exist, of course, but the argument stands

– for profit schooling increases the illusion of choice but, for many families, offers

no choice at all.

Critics also point to the tendency for market-solutions to be ad hoc and nonsystemic,

they hypothesise an inequitable world where students are constructed,

structured and practiced in commercial terms, becoming increasingly materialistic

and inert to the dominance of corporations – ‘the ethical standing of educators

compromised, the orientation of schooling shifted towards miseducative

experiences’ (Molnar, 2005:86) and the ‘genuinely public values’ (Yeatman, 1996 in Ball, 2012) of education displaced by commercial relationships between

educator and client.

As Hallinger and Snidvongs note:

“While other goals such as social responsibility and

provision of good jobs to the community are considered

important by [for-profit] firms, they seldom compete with

profit-making in the organisation’s hierarchy of

purposes.” (2008:24)

Indeed, in US-based research, greater levels of corporate profit were associated

with social harm and for-profit organisations seen as less socially valuable than

non-profit organisations (Bhattacharjee et al., 2011). Where the issue gets further

blurred is when education companies try to hide their profit motive behind the

framework of charitable status - a clear breach of morality.

There is, it seems, a deeply held sense that education should be free from the

corrupting pressures of profit (Stanfield, 2012). Value for money and

responsiveness to customer (parental and student) needs are welcomed, profit

though (and particularly any sense of profiteering) is resisted and resented.

Case closed?

ARGUING FOR FOR-PROFIT

Since the time of Adam Smith, economists have contended that self-interest (of

which the profit motive is an example) can lead to social benefits (Arnold, 2013).

Non-profits without the for-profit motive, economic theory argues, can never fully

realise these same social benefits.

Questioning the morality of profit ignores, therefore, the fact that profit-seeking

behaviour can, and often does, translate into positive social outcomes. Moreover,

while it might be thought that not-for-profit organisations are more inclined to

invest their surpluses in expansion and improvements, and the for-profits more

inclined to pay dividends, this does not seem to be borne out by research (Tooley,

1999). Non-profit advocates may demand the moral high ground, but that,

economists would have it, is a tenuous claim.

For example, in quantitative studies undertaken on the impact of the profit motive

on pupil attainment in the US, relating to Charter schools, and in Chile and

Sweden, where for-profit schools participate within both countries’ universal

voucher systems, all but one study found that the type of school - whether for profit

or not – made no difference to educational outcomes (Croft, 2010).

The one exception? That study found statistically significant evidence that students

did better by attending a for-profit school.

Similarly, James Tooley, researching poor schools in Africa and India found that in

every region he studied, for-profit schools were outscoring their government-sector counterparts – a finding all the more significant given its focus on low-cost

for-profit schooling, with fees often less than a few dollars per day (Tooley, 1999).

In other research, Bohlmark and Lindahl (2012) found no difference between

Swedish municipal schools (non-profit) and between free schools (with greater

operational latitude) in terms of their ability to raise achievement.

With debate still raging in the UK, the weight of evidence has shown little ‘positive

effect of marketisation on attainment’ (Allen and Burgess, 2010). Instead, UKbased

research seems to suggest that while middle-class parents are more likely to

benefit from for-profit provision (and the choice it implies), poorer children are

less likely to enjoy the luxury of travel out of their area to better schools (Johnston

et al, 2006). The result, the evidence suggests, is greater social segregation (Allen,

2007).

On this basis, the inherent moral conflict between the profit motive and

educational quality seems flawed. Any institution that does not provide a ‘quality’

product will either need to react swiftly to Smith’s ‘invisible hand’ (Smith, 1776) or

will find itself out of business (Lupton, 2011). If profit-seeking behavior encourages

sellers to adapt to market signals and supply more of what consumers’ demand, if

we assume that what is demanded is a quality education (however defined), then

surely that is to everyone’s benefit: supplier, consumer, and wider society.

At the same time, it can be argued that nation state education provision is not

moral either, at least when it is vulnerable to corrupt practices or the imposition of

ideology. Perhaps one good reason why increasing numbers of parents seek the

'cleaner' for-profit school sector.

Profit acts as an incentive: an incentive to continually keep costs down and to

continually look for more efficient ways of operating; an incentive for schools to

employ and retain talented teachers; an incentive to specialise in aspects of

education demanded by the market (arts, sports, music and so on); an incentive, in

short, to offer a ‘quality’ product.

Despite emotive rhetoric to the contrary, ‘evidence from history and the present

day…clearly shows that there is no conflict between the profit motive and the

provision of good-quality learning and education of all forms’ (Stanfield, 2012:39).

A CONCLUSION?

The reader is left, on the basis of the arguments above, to make his/her own

judgement. The moral position taken here is neutral.

Perhaps more relevant than any conclusive answer is the fact that all schools,

whether for-profit or not-for-profit, exist within an economic context. Like all

organisations, schools incur expenses, generate revenues, and require financial

management. Regardless of whether a school’s context is for-profit or not-for profit,

the words of Schoppert provide an important perspective:

”a school is, of course, a business, but the bottom line is

more than dollars and cents and its paradoxes a reality

for many international school leaders” (2001:164).

One possible solution to these paradoxes is the adoption of ‘triple bottom-line’

framework (MacDonald, 2009) – recognition that profit is only one of a school’s

aims, and perhaps not the most important one. For MacDonald, the three bottom

lines are ‘academic’, ‘financial’ and the ‘intangible core’, a framework which likely

suits most schools but, equally, could be adapted to context.

If nothing else, in encapsulating the multiple motivations of education, the triple

bottom-line framework addresses the morality of profit by balancing it against

more palatable notions of educational outcome and in doing so provides a less

emotive lexicon. This shift in focus might also usefully move the debate away from

generalisations about the (potential) immorality of profit towards the specifics of

context – profit is neutral, neither moral nor immoral, what matters most are the

actions and means by which it is generated.

It is those actions which should be judged, individually and in context. In other

words, profit is not the issue, what is the issue are the ways in which people seek

to acquire profit.

A for-profit school may indeed make immoral decisions from which they profit,

but, so too might a not-for-profit school. And both, of course, might make entirely

moral decisions, profit (or surplus) being the result.

Is profit immoral? The theory offers a view, but it cannot provide an answer.

Thus, we leave you, the reader, to ponder your own politics.

What is your moral code?

Is your school/institution, whatever its status, generating profit (or surplus)

through moral or immoral means? And are you comfortable with it?

That is the real question.

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