2

An Economic View of the

Effectiveness of Public and Private
Schools
David Beers and Jerry Ellig

Recent years have seen an outpouring of public concern over the quality of
primary and secondary education in the United States. A steady stream of reports
from the nation's schools has documented a 25 percent national high school
dropout rate, high proportions of high school graduates who are functionally
illiterate, and three decades of falling test scores. Parents and community leaders
have voiced outrage that the public schools are not only failing in their
educational mission, but are increasingly becoming breeding grounds for drug
abuse, violence, and crime. Many in the business world see the decline of
primary and secondary education as a major factor behind the nation's eroding
productive capacity and faltering competitive position in the world.

Education officials at all levels have been accused of responding slowly

at best to what many call a national crisis. During the decade since a landmark
report by the Commission on Excellence in Education described American
education as a "rising tide of mediocrity," few signs of improvement and
many signs of further decline have materialized. Accusations notwithstand
ing, public school leaders have overseen the implementation of many of the
most persistently called-for proposals for school reform. The ever-present
call for more funding has been met by tripling real per-pupil expenditures
from their 1960 levels. The demand for greater teacher professionalism has
motivated a 50 percent increase in average teacher salaries since 1960,
adjusted for inflation. Class sizes have fallen by a third since the mid-1960s,
and most states have continued to raise graduation requirements ( Myers
1990, 2). If the declining quality of public education continues, it is not
wholly for lack of reform efforts.

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5
Public Schools by Contract: An
Alternative to Privatization
Paul T. Hill

John Chubb and Terry Moe's critique ( 1990) of public education has caught on:
even people who cannot accept their vision of a school system run by private
entrepreneurs and funded by public vouchers agree that the problems they set
out to solve--public schools' preoccupation with rule-following and tolerance
of low performance--are real. Despite widespread agreement about what is
wrong with public education, it is proving extremely hard to create a critical
mass of support behind privatization or any other method of reform.

Despite over ten years of ferment at federal, state, and local levels, the public
school system continues as before, as a bureaucracy that tolerates innovation
on the margins but isolates and destroys any changes in its fundamental ways
of doing business. Recent experience validates the old political adage, "You
can't beat something with nothing." Chubb and Moe are the only people to have
proposed an alternative whole-systems concept, showing how large numbers
of schools serving the whole public school population could be established,
staffed, managed, evaluated, and improved, all without a large public service
bureaucracy. Other current reform proposals, such as national standards and
tests and radical new designs for individual schools, accept the principle of a
bureaucratically run public education system. Even the charter schools concept,
which would let groups of students and teachers "opt out" from the public
school system, creates exceptions rather than reforming the system as a whole.

In its purest form, privatization of schools means total private ownership and
supervision. Private organizations would design and manage schools and be
funded only through tuition paid by parents. Government would have no
relationship with schools, except to provide vouchers or other forms of subsi

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Positive aspects of privatisation

PRIVATE UNIVERSITIES, although new to India, exist in the U.S. from hundreds of years.
Almost half of the 3,500 U.S. universities are private. They are managed and maintained either
by the church, industry, or philanthropic organisations. The standard of education in them and the
quality of research out-put vis-a-vis that of the state controlled universities is superior. The best
universities (like MIT, Boston) are private. The U.S. has progressed well, and due share of credit
goes to private universities. Many important inventions and innovations have taken place in
them. Today, a larger proportion of patents and IPR are earned by private universities. The
human civilisation would not have progressed so much, if there were no private universities in
the world. All universities in India are state funded, and hence state controlled. Their
performance is however far below the expectation. Neither the students nor the employers are
happy. They are overcentralised, bureaucratic and monopolistic, thwarting the impending ideas
of students and professors. They care only for their bosses, ignoring the needs of students and
industry. They are far too behind their counterparts in the developed world. The organisational
innovation like research parks, innovation centres, incubators, campus companies etc., which
exist from almost 25 years in universities in advanced countries have not yet reached the Indian
universities, which offer only irrelevant courses. Consequently, the educated unemployed are
growing. They are six lakhs in Maharashtra alone. The competition in the Indian economy,
although increasing is far too low, mainly because of mediocrity in State Universities. The
students are still required to go to the U.S. and UK for higher studies. How long will they have to
keep going? The answer lies in setting up private universities, and bringing competition to the
state controlled universities.

To cater for the rising demands in terms of quality and quantity in higher education, State
Universities need to be supplemented by private universities. In the newly emerging knowledge
society, the need and importance of efficiency in higher education needs no emphasis. The
proportion of students taking to higher education in India was only 6 per cent but it is rising fast
at the rate of 12 per cent per year. In the U.S. this proportion is 50 per cent, Korea has 38 per cent
and Thailand 16 per cent. In this fast-paced globalisation, if India has to compete, the only option
is to augment its private universities. This is the only way to get a competitive advantage. State
universities are subordinate to the Government. They often play the tune of political masters,
who keep changing. The case of astrology course being introduced in universities in an example.

The Government which is elected for a short period, does not pay the required attention to higher
education, which essentially demands long-range planning. Most of the times, the vice-
chancellors are appointed on political considerations. They bring politics in universities and the
scholarship is driven out. Research is given a back seat. Private universities, if installed, will
break the monopoly of the present universities, which is so essential for progress.

Who will provide remedies to remove the weaknesses in state universities? Only private
universities can come to its rescue. They can bring improved methods of work and capital
investment from the world over especially from the NRI's. Any delay in such timely intervention
would take away our huge education market to foreign universities. Autonomy to colleges is
prescribed by the National Education Policy way back in 1986. But the recommendation is not
yet implemented. The Government is not willing to part with the powers and pass them to
colleges.

In private universities, there is no scope for political intervention. They keep pushing forward
their academic missions and visions regardless of the political party that comes to power. The
vice-chancellor is not appointed by the Government but by the university board. With a
humanisticaim, they admit meritorious students from anywhere in the world. They bring about a
cultural exchange between the nations and enrich the human civilisation. Most of the private
universities abroad are reported to be making more productive utilisation of resources. They get
donations, so much so that every year they start new research projects and new courses. Almost
50 per cent of the University's budget is met with donation and the remaining out of student fee.

The fee prescribed by private universities in the U.S. is much higher. It is because they maintain
a high standard of laboratories, library and education. They do not get financial aid from the
Government. The students take loans from banks and get scholarships from philanthropic
organisations. In India too, loans are now available for which the Government has allotted a said
amount in its budget with the stipulated rules.

In India, there are private self-finance colleges affiliated to state controlled universities. This is a
case of partial privatisation, the final responsibility of quality rests with the university. Colleges,
many times, tend to play mischief and follow unethical means to encourage students to copy in
examinations and even buying degrees like the episode of the Nagpur university. This cannot
happen in a private university, as it may stand the risk of closure.

However, a fear prevails that the private universities may indulge in malpractice and sale of
degrees. This has not happened in the U.S. or any where else. The system of controlling
academic standards of the university, world over, has now changed to the scientific method of
accreditation adopted nationally and internationally, besides ISO.

As per the Bush commissions report (1945) ``Science - The Endless Frontier'' U.S. universities
have been strengthened for research. They are primarily knowledge generation centres, where
students learn best by researching. In this system quality of education is found to be the best, so
also the research aspect. Cost wise, research subsidises education and education subsidises
research. Institutions are granted status of university only if they have a proven ability of
knowledge generation and not merely teaching. India will have to install such systems for
innovation. There are associated risks, like in any good project, but the gains are tremendous.

There are greater risks in not starting private universities. The private university bill was
presented in Parliament in August 1995. It was passed by the Lok Sabha but unfortunately
rejected by the Rajya Sabha. The Supreme Court has already given the green signal, and it is
time to reintroduce the bill. To win in the global competition and to fulfil the rising aspirations of
the people, India cannot afford to ignore the proven model of private universities.