Notes on a Theory…

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Markets, Efficiency and Choice: Wall Street and the School House Part III

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This is the last of three posts on Karen Ho’s Liquidated: An Ethnography of Wall Street and education reform. See also Part I and Part II.

Ho traces the rise of shareholder value beginning in the 1980s as the dominant ethos for business. It became “the central explanation and rationale for corporate restructuring, changing concepts of wealth and inequality, and the state of the America economy.” (122) She argues that the phrase was uttered constantly by her informants, and that “it shaped how they used their ‘smartness’ and explained the purpose of their hard work.” (123)

Shareholder value was premised on the notion that financial analysts knew more about what these firms needed than those with expertise and experience. And it also meant dismissing any concerns for stakeholders other than shareholders. Any money spent on others—whether that was employees or the communities that depended on these businesses—was seen as a waste. This stance justified and encouraged “hyperexploitive labor practices.” (146) The destruction such practices inflict are justified by the idea that it brings about “efficiency.” As one analyst said:

If I’m an employee, then there may be some temporary dislocations in the economy, but long-term, with a higher employment rate because at the end of the day, the most efficient, the most imperative industry should survive. The best operation should survive. (157)

But ‘efficiency’ in this context simply means “the number and size of deals and transactions which create short-term stock prices,” or the practices that bring about such increases. (163) This is obviously in tension with the claim that shareholder value is the chief concern. And tellingly, their pay isn’t connected to delivering for their clients—rather it is tied to the size of the deal, which is also what brings money into the firm. Ho argues that these ideas which have been infused into corporate America by Wall Street’s influence also “legitimated the dismantling of welfare capitalism,” a shift that has hit the poor and people of color particularly hard (167)

Ho argues that we must challenge the idea of “the market” in order to make sense of these changes in Wall Street and the economy. Even critiques of the market often assume it is an abstraction, an external force operating on the rest of society.  It is treated as a black box, which matters in ways that aren’t necessarily understood or understandable. But for Ho, the market is about power relations, and the specific cultural practices she studied. It is about the power wielded by some—like Wall Street analysts—who can call on the market to justify their own actions, actions which enrich themselves at the expense of others.

Market talk is a major part of corporate education reform, but the issue where it is perhaps the most central is charters.  One of the most important polices proposed by the reformers has been charter schools. Originally envisioned as a way for teachers to innovate ways to educate students who had dropped out, the idea of the charter school has grown into something quite different. Charters have been out forward as a policy solution to ‘fix’ public education.  Free marketeers like Milton Friedman expressly envisioned vouchers as a way to ultimately end public education, but they had difficulty getting the policy adopted and getting parents to use them. Next they turned to charters, schools which would take public schools students and the tax dollars that came with them but were privately run.  Neoliberals, who are skeptical about public institutions and value ‘choice’ and ‘markets’ have also embraced charters. Democratic-leaning reformers often point to support for vouchers as something that separates them from conservative reformers. But it is not necessarily true, as ed reform star Cory Booker, former chair of the board of the Wall Street funded Democrats for Education Reform (DFER), is a voucher supporter. And more to the point, it’s unclear how one can make the case for charters while opposing vouchers in principle. If choice is the overriding value, why draw the line there?

A massive expansion of the charter school sector has been a way for reformers of all stripes to advance goals like challenging unions, replacing experienced educators with a rotating group of less experienced teachers (like TFA members), and running schools subject to fewer regulations (i.e. less democratic accountability).1 The central idea justifying both vouchers and charters is ‘choice’: the idea that allowing parents a range of options to choose from will better serve them as customers, and that market competition that resulted would improve education across the board.2 This is a substitute for the idea that professionals, guided by experience and expertise, should have a major role in guiding public education.3

Charters have also been justified as instructional laboratories. High achieving teachers, operating without the constraints of unions or professionalism, properly incentivized (i.e. via money), would develop innovative instructional techniques. This would improve achievement generally and close “the achievement gap,” meaning differences in average test scores for students by race and class. Instead of treating standardized tests as a limited, flawed, yet nonetheless important measure of some of the things that matter, increasingly they are treated as the sole goal of education. Or if treated as a means, tests are seen as a way of ensuring Americans can ‘compete’ globally. And with the high stakes that are attached to the results, teachers, administrators and parents have little choice but to place great emphasis on them. Or rather, schools with less advantaged students must. High test scores are treated as proof that a school is successful, poor test scores are treated as a sign the school is failing. Scores here function like shareholder value as a single metric used to the exclusion of other considerations, while focusing on the perceived interests of parents as individuals (rather than community members) mirrors the focus on shareholders.

Relatedly, reformers tend to pit the concerns of parents against those of teachers, while ignoring the concerns of the community. Public school advocates tend to argue that teachers’ interests are aligned with parents, students, and the community, as well as emphasizing citizenship over economic outcomes. Or put somewhat differently, they have emphasized a much broader group of stakeholders in education. This is especially true in cities like Chicago that have been at the forefront of union and community partnerships in challenging corporate ed reform.

I discussed part of the problem with charters as a policy solution recently: pitting charters against public schools and each other to compete for students, and therefore dollars, is inconsistent with their role as laboratories. Why share your cutting edge techniques with you competitors? There is also the problem that students who attend charters are often different from those who remain in public schools, and that those who cause problems or test poorly can be sent back to the public schools, something the latter cannot do. (Or, as public schools become extinct in cities, to worse charter schools). And as I’ve said before, I’m skeptical that we don’t already know what works: wrap around services to address the problems associated with poverty, a curriculum and school environment that is culturally relevant and welcoming for everyone, small class sizes, and well-resourced schools. The entire reform project seems to be thrashing about to find ways to improve education without doing the obvious things.

The effects of the continuing expansion of charters are even more pernicious, suggesting Friedman’s goal of ending public education is a real possibility. In cities like Chicago, Washington, DC and Philadelphia, there has been massive expansion of the charter sector at the same time there has been mass school closing, and the mass teacher layoffs that come with this. Public schools in places like this are already underfunded, and may lack libraries, school counselors, nurses, textbooks and air conditioners. These conditions illustrate the slogan from teachers that “our working conditions are your children’s learning conditions.” Money spent on charter expansion is money drained away from existing schools. While many parents are fighting to save schools, the mantra of choice doesn’t apply—only certain options are included in “choice” and well-funded public schools is not on the list. New Orleans, transformed in the wake of the tragedy of Hurricane Katrina, recently completed its shift entirely to charter schools, closing its last few public schools this week. Despite protests from parents and students, New Orleans is being watched as a potential model for other localities, although they may find it more difficult to achieve absent a natural disaster to reduce community resistance.

But even for those who seek to enroll their children at charter schools, choice is an illusion. For the most part it involves parents maneuvering their way through a complex process to get into lotteries to place their children in their chosen school, suggestion school chance would be a better term. Of course, these difficulties advantage the most advantaged parents. It’s also important to note that ‘choice’ policies have been imported back into the public school systems in some urban areas.


I don’t claim that if you understand Wall Street, you will understand everything about corporate ed reform. There are issues I haven’t even touched on. Besides that, there are other analogies worth exploring. Sarah Jaffe suggested Silicon Valley.  Regardless, there are times when discussions about education get cut off from more general progressive circles, and too often progressives that don’t focus on education don’t know anything about it at all. Hopefully thinking about the connections discussed in this series can help with this.


1 Of course, there’s more to it than this. There are rules that public schools need to follow that are misguided or foolish and that need to be repealed. But the solution to that isn’t just to create an entire new school system, it’s to get rid of those rules. And the same legislators and administrators who are pushing to charter expansion could change such rules. It’s almost as if such rules are useful for those that want to beat up on public schools. Some of those rules involve protections for teachers, but I’m less convinced that due process is really a problem for education or that giving administrators unchecked power to fire teachers will solve anything.

2The left offers a different view, one that places a good deal less emphasis on choice. In fact, it is one that sees the oppressiveness of neoliberal choice, as Corey Robin has explained.

3This doesn’t mean teachers are beyond criticism, or that they and only they should get a say in education policy. It is to say that their voice and participation is essential. Indeed, teachers engaging in critiquing themselves and each other is essential if we take seriously the idea of teaching as a profession. And that means being willing to have difficult conversions about things like racism and inequality. Definitely check out Jose Vilson on this point.


Written by David Kaib

June 9, 2014 at 5:34 pm

2 Responses

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  1. […] It’s normal to hear critics of “education reform” or “the accountability movement”, speak of “corporate ed reform,” and highlight the role of finance in pushing it. But it’s not always clear what this means.  Reformers certainly praise choice and markets, and rail against unions and public institutions. But is there more to it than that? I think there is. When I read Karen Ho’s Liquidated: An Ethnography of Wall Street, I found the connections between her findings and the ed reformers striking. Attending to these connections, I would argue, helps us make sense of both of these world’s better. This post is the first of three posts discussing the link between Wall Street and education reform. (You can read part II here and part III here.) […]

  2. […] Honorable mention: The final post in my Wall Street and education series didn’t get as much attention as the first two, but it deals with some important issues that have resonance beyond the education field–Markets, Efficiency and Choice: Wall Street and the School House Part III. […]

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