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The Debate Over the Role of Private Enterprise in Education

12/31/2013 02:03 pm ET | Updated Mar 02, 2014

This year, the Thunderbird School of Global Management, based in Glendale, Arizona, became the subject of a long and intense debate after it announced a controversial joint venture with for-profit education services company Laureate, which owns 72 colleges around the world.

In the deal, Laureate would gain control over Thunderbird's online programs, as well as buying the Thunderbird campus for $52 million and gain seats on the University board. The deal is central to Thunderbird's efforts to regain its long-term competitiveness in a global education market facing massive transitions. It helps repair some of Thunderbird's finances, and will allow the school to open new campuses abroad on Laureate's properties in Latin America, Europe and elsewhere.

But it also generated intense blowback from some of the school's leaders, students and alumni, as well as others interested in the trajectory of private education. Some trustees and donors withdrew their support -- and their funds -- from Thunderbird in protest.

Miguel Porrua, originally from Spain, is one such alumni. He is a firm believer in the role of government assuring access to education to those with limited resources and was originally opposed to the deal. He joined a number of the groups organized to protest Laureate's investment. But Porrua's eventual change of heart illustrates the divided nature of the debate over private involvement in education. As he says, "I don't see too many alternatives to remain globally competitive"

What makes these debates over education particularly strident? Indeed, we hardly witness such intensity in debates over any other sector deal-making. In our current culture, many are unconvinced that the private sector, and especially the for-profit one, has any role to play in education. This is particularly intriguing when poll after poll shows the distrust for politicians. Why, then, do the same people react so intensely against giving those same politicians less power over the schools?

Companies partner with governments, for instance, in providing healthcare services, research and development efforts, defense-related technology and the provision of food and shelter for the most needy. But when it comes to education, highly charged ideological confrontations inevitably result. Alex Hernandez, a partner at the non-profit Charter School Growth Fund, argues that these conflicts stem from the tension between "incumbents versus non-incumbents, which explains many of the logical inconsistencies of the current debate."

These contradictions raises a number of questions that have yet to be resolved -- much less fully addressed in a non-partisan, research based approach. Education experts Rick Hess and Michael Horn, in their recent book, Private Enterprise and Public Education, try to do just that.

Hess and Horn begin by pointing out that the private sector, broadly defined -- both for and non-profit -- has been involved in education from the very beginning. Indeed, the first education had no overarching government participation. Parents taught their own children, and small communities organized themselves into individual schools. And even today, in the era of mass public education, private entities are closely involved: private schools, private companies that provide classroom materials and infrastructure, private teacher trainings and many others. More recently, the private sector has been getting involved through equity investment, with new startups working to bring innovation to the market.

In their words, a "productive dialogue" is needed that would "include how best to harness for-profits, and what kinds of incentives and accountability measures will ensure a dynamic and performance-oriented marketplace while policing against undesirable behaviors." Their suggestion for threading this needle is not for policies that restrict private provision of education, but rather for governments to define clear regulations to hold all participants in the education sector accountable.

The controversy over these efforts is not limited to the U.S.. Countries throughout Latin America, as well, wrestle with the same issues. In Chile, for instance, there has been, much as in the U.S., a sustained outcry over private sector involvement in education, with opponents arguing that the goal is to underhandedly "privatize" the sector. President-elect Michelle Bachelet ran her campaign on a platform of banning all for-profit activity from the higher education sector. Interestingly, Chile is arguably the Latin American country most open to private capital, as well as the highest regional performer in international educational assessment tests.

But the case of Chile and other developing countries shows that, above all, demand for quality education will continue to rise as better skills become increasingly critical in order to compete in a globalized economy. And with tighter public budget constraints and frustration over poor services, especially for low-income communities, the need for the kind of public-private dialogue and partnership that Hess and Horn advocate for has never been greater.

And this goes both ways -- the new education entrepreneurs must, in their enthusiasm to take advantage of the enormous opportunities and challenges of the sector, be open to this dialogue in order to better understand the needs of the education sector, which is to say, the needs of students.

Hess and Horn perhaps put it best, concluding that "the advantages of for profits include their ability to move more nimbly, to more readily attract capital and talent... The flip side is that for profits may be less rooted in community institutions, less stable and more willing to cut services or personnel."