[The Montana Professor 14.1, Fall 2003 <http://mtprof.msun.edu>]

Privatization Revisited: A Review of Forms and Criticisms

Clarence E. Burns
Health and Human Performance
UM-Missoula

Montana is discussing privatization. Several recent publications have provided insightful perspectives on what is the most significant educational movement since desegregation. In his description of the changing nature of higher education, University of Montana President George M. Dennison skillfully reveals the recent shift of financial support from the state to the student, with an accompanying change in the rationale for public higher education (Dennison, 2002). John Snider, an English professor from Montana State University-Northern, firmly states his position by suggesting "the true university should stand separate and apart from the community, offering its idealism as an alternative to the self-interested practicality of the commercial world" (Snider, 2002, p. B4). Snider further argues that the measure of success in higher education cannot be rooted in its commercial value. Similarly, Gordon G. Brittan, a Montana State University-Bozeman philosophy professor, questioned privatization in the form of "ability to pay," whereby the notion of public good is distorted and democracy is threatened. Brittan offers a meaningful dissection of the three crucial roles of a university and, in his final analysis, advocates that a university is genuinely a public good and all citizens, in support of the democratic way, should be afforded the opportunity to realize themselves as completely as possible (Brittan, 2003).

Privatization has been elevated to the forefront of dialogue because state support for higher education is eroding (Dennison, 2002; Potter, 2003; Turk, 2001). Public colleges and universities are offsetting the loss of state support by implementing cutbacks and significant tuition and fee increases (Breneman, 1997; Hebel, 2002). Our state lawmakers and higher education officials are debating which are the best strategies for confronting fiscal fallout. Though the topic of privatization has been bantered around for several decades, current discussions are just now beginning to examine the different forms of privatization and the potential philosophical and fiscal paradigm shifts that may result if privatization becomes the predominant premise for future funding models.

Privatization is more than just a conceptual possibility. According to a review published in The American Enterprise ("Privatization on a Roll," 1997), after beginning with a trickle of experiments in the 1980s, privatization has grown into a major global movement. The article indicates that shifting the responsibility for producing public services from government bureaucrats to private managers is the rule, not the exception. There seems to be no end of activities that can be privatized--welfare programs, zoos, prisons, airports, emergency services, immigration centers, roads, and motor vehicle departments--to name a few (Jansen, 1996).

Educational institutions have also experienced their share of privatization, as many school districts hire private companies to provide non-instructional services such as building cleanliness, student transportation, school meals, building maintenance, and other services (Cirasuolo, 2000). Instructional services, however, are not exempt from privatization, as evidenced by the nation's biggest experiment in school privatization, the Edison Project. In 1997, Edison Schools Inc., the nation's largest private operator of public schools, managed 25 schools in eight states and 13 cities (Pipho, 1997). Most recently, Edison Schools Inc. assumed private management of an additional 45 schools in Philadelphia, Pennsylvania ("Philadelphia Schools," 2002, p. A4). The private contractor employs its own teachers and administrators (non-union), and provides curricular services to minorities and children from disadvantaged families, often with substandard performance records or learning disabilities. Most critics are withholding judgment on the Edison Project until the results provide discernible data and longitudinal perspective.

Many universities and colleges have privatized non-instructional services as a method of saving money since the early 1990s (Eddy, Murphy, & Douglas, 1996). Colleges and universities have been reluctant, however, to privatize instructional services, with the exception of marketing complete courses on CD-ROMs or expanding distance education to the point of offering degrees on-line (Eddy & Buchanon, 1996). As reported in Change ("Looking Back," 1999), for all types of public institutions, spending on instruction declined relative to other expenditures. In contrast, spending on non-instructional activities increased between 1975 and 1995. Though the article does not directly identify privatization as a factor in spending patterns between non-instructional and instructional services, one would surmise, based on the literature, that increases in non-instructional services may be attributed to privatization efforts whereas decreases in instructional services might reflect fiscal officers' apprehension about abandoning traditional funding models (state appropriations, tuition). According to this interpretation, with the exception of the Edison Project and growing support for charter schools, privatization is a prevailing force in the provision of public education's non-instructional services, but not for instructional services.

Herein lies the problem. The literature clearly delineates the growing dominance of privatization, but applications and definitions differ from publication to publication. For the privatization examples presented hitherto, the operational definition is "the outsourcing of services." As such, privatization occurs when public services are contracted out to the private sector. Yet, when discussions turn to the privatization of educational services, particularly higher education services, definitions become as distinct and different as faces in a crowd. By some accounts, for example, the definition of privatization is manifested in the trend of shifting the cost of public higher education from the state to the students and their families (Dennison, 2002; Zemsky, Wegner, & Iannozzi, 1997). According to this perspective, public higher education has become state-assisted rather than state-supported. To accommodate the loss of state support, policy makers have countered with steady and significant tuition and fee increases (Dennison, 2002; Hebel, 2002; Potter, 2003). The burden is transferred to students and families (private sector)--thus, privatization. The underlying question here is what is the fundamental purpose of higher education? More importantly, will this form of privatization alter this purpose?

The prevailing argument supporting exorbitant tuition increases is grounded in an answer to the question "who benefits?" The logic states that students should pay more for their educational experiences because they will, in the final analysis, reap the benefits through a lifetime of substantially enhanced earnings (Quddus, 2000). Education, according to this perspective, becomes less a social investment than an individual investment. Central to this rationale is the attempt to transform public education from a public good, benefiting all students, to a private good designed to expand the profits of investors (Giroux, 1999). This form of privatization will undoubtedly jeopardize the long-standing belief that a democratic culture cannot survive unless public education serves the greater good. Furthermore, education for the public good has always been lauded as an indispensable foundation of democracy. The following excerpt is offered as rebuttal to the notion of justifying tuition increases based on potential for individual gain:

...universities would be creating elite graduates, where their elitism is based not on merit but on their parents' wealth. This would defeat the historical role of higher education as a force in economic and social equality. Doors to these institutions would be closed to poor, albeit bright, students. Thus it would make the distribution of income worse than it is now, as the graduates from these schools, already from wealthy families, would get the best jobs.... (Quudus, 2000, p. 498)

Privatization in the form of shifting the burden of cost from state to student would eventually force an accompanying change in the rationale for public education (Dennison, 2002). But, for the many critics of this type of privatization who argue that the basic purpose and principles of higher education are at risk, be advised it only represents a miniscule version of what is on the horizon.

Tuition and fee increases and the outsourcing of non-instructional services are distinctively passive compared to other forms of privatization. "True 'privatization' means selling or otherwise transferring a public asset to private owners who henceforth bear sole responsibility for its existence and are accountable to no one save the stockholders" (Finn & Ravitch, 1995, p. 27). With the unyielding expansion of computing and communication services coupled with the corporate-backed thrust toward globalization, the private sector is demanding access to higher education. The primary reason multi-national corporations are seeking to develop partnerships with education is that the latter represents a $600 billion market (Buchen, 1999; Giroux, 1999). The discussion to follow, then, will focus on how privatization is merely a gentler description of what is actually occurring--the corporatization or commercialization of higher education.

Funding cuts and rollbacks make universities vulnerable to corporate enticements. Shrewd entrepreneurs are always looking for ways to gain an advantage in their respective markets. A host of corporations--Channel One, Nike, Coca-Cola, Pepsi, Campbell Soup Company, McDonald's, Verizon, Adidas, to name a few--have invaded college campuses offering lucrative commercial contracts (Giroux, 1999; Pipho, 1997). University administrators make light of these business transactions as if no detrimental consequences are possible. Fiscal officers praise the contracts as innovative ways to buffer themselves from legislative cuts. Perhaps school officials are too distracted by fiscal dilemmas, thus ignoring the principled underpinnings of higher learning. What is the role of educational institutions?

The commercial logic behind financial enticements is simple--under the guise of philanthropy and goodwill, corporations are identifying specific customer groups for exclusive distribution of their products and are promoting a culture of consumerism that will be instilled for years to follow. With no obvious link between corporate advertising contracts and educational outcomes, it seems as though our fiscal officers are comfortable with serving as billboards for multi-nationals and validating their campuses as training grounds for consumerism. This market culture undermines the traditional notion that college campuses are the purveyors of democracy, character, citizenship, and truth. Corporate encroachment has little to do with competency, cultural ethics, or critical thinking, but more with shaping students' identities as commercial patrons. Ralph Nader, when asked about his opinion regarding this issue erupted with, "Any culture that surrenders its vision and its self-sustaining human values to the narrow judgment of commerce does serious damage to the substance of democracy...if not to its form (Jacobsen & Mazur, 1995, p.3)."

Enormous attention has been given to commercial contracts whereby corporations provide college campuses with much needed funding for exclusive distribution and advertising rights, but increased apprehension surrounds those commerce relationships that threaten the backbone of higher learning--autonomy and academic freedom. Secret and undisclosed donations, for example, often come with strings attached. At the University of Toronto, administration officials accepted $29.4 million from three different corporations in support of the faculty of Management Studies, the Centre for International Studies, and the Nortel Institute for Telecommunications. In return, the corporations received unprecedented influence over the direction of those programs (Turk, 2001).

Eyal Press and Jennifer Washburn (2000) argue that corporations are providing more funding for academic research while expecting returns for their investments. The authors postulate that commercially sponsored research is endangering the paramount value of higher education--disinterested inquiry. Even more alarming, the authors argue, universities themselves are behaving more and more like for-profit companies. The article cites several high-profile cases representing blatant illustrations of the corporate threat to academic freedom and integrity. As the research agendas of universities and corporations merge, the authors warn of two dangers: 1) market criteria dictating the paths of scientific inquiry; and 2) universities ceasing to serve as places where independent critical thought is nurtured.

Research partnerships are being forged between universities and corporations with the help of state lawmakers who are providing funds to procure external dollars. Even during times of recession and cutbacks to other aspects of university operations, state lawmakers are encouraging universities to commercialize their research to promote local economic development. Congress and many states have passed or amended laws to make it easier for universities to collaborate with business, including generous tax breaks for corporations willing to invest in academic research, thus contributing to economic development (Press & Washburn, 2000; Schmidt, 2002). Corporate underwriting of research at the state level is, in at least 13 cases in 2000, being funded by public treasuries in the form of financing partnership programs whereby the programs match private investments in research with state funds (Schmidt, 2002).

Concern over increased public-private research partnerships is growing. Virginia A. Sharpe, Director of the Integrity in Science Project at the Center for Science in Public Interest, whose organization monitors potential conflicts of interest in university research, states that public universities will be tempted to neglect research that benefits the public in favor of research intended to help particular companies (Schmidt, 2002). While state lawmakers make its easer to forge public-private research collaborations, campus conflict-of-interest policies and standards do not protect the integrity of university-related research, especially in those cases where researchers simultaneously serve as paid consultants for companies and professors' disclosures are kept private (Blumenstyk, 1998). Since corporations often dictate the terms of research agreements and researchers often own stock in the companies funding their work, is not the image of objective truth-seekers being tarnished? The lack of disclosure is more significant when universities accept industry funding to research topics of public concern--pollution, gambling, health care, urban growth. Does this mark the beginning of the end for research ideas that carry no commercial value?

In her thoughtful analysis of the increasing shift of education from public to the private sector, Laurence Kalaftides (2001) posited that increasing corporate involvement in education may de-emphasize fields of study that have no direct link to commercial or economic interests. More importantly, Kalaftides addresses one of the most significant, yet relatively unknown pieces in the trend toward privatization--the role of the World Trade Organization (WTO) and the terms of the General Agreement on Trade in Services (GATS).

According to Kalaftides, multi-national corporations are demanding the right to operate wherever and however they like. On the pretext of regulating trade, the WTO, under the terms of GATS, is extending its powers into service areas previously thought to be exempt because of their public and governmental status. GATS was established in 1995 as a legal framework for countries engaged in trade negotiations in a broad range of service sectors, including higher education. The goals are to expand free trade in services, open markets, and facilitate economic growth (Foster, 2002; ACE, 2003a; Sexton, 2001). Under the GATS negotiation schedule for services, the following events have already occurred, or will soon:

• Negotiations began in 2000.

• December 2000, U.S. officials submitted a proposal to include higher education under GATS.

• National proposals and comments were due by June 30, 2002.

• Three countries in addition to the United States have submitted proposals. Along with the United States, New Zealand, Japan, and Australia emphasized the critical role of government control over education policy, but argued to remove international trade barriers to higher education.

• By March 31, 2003, countries presented offers to open their markets.

• The current phase of negotiations is to be completed by January 1, 2005.

Though much of the work related to GATS could be facilitated through national and local higher education bodies, it is the federal government that controls negotiations. The two proposals submitted by the United States were done with the full support of the Bush Administration, but the original proposal to include higher education under GATS was never seen by the major representatives of the higher-education community, according to a spokesperson for the American Council on Education and the Council for Higher Education Accreditation (Foster, 2002).

The thrust to include higher education as a regulated trade is a reflection of the technological advances in distance learning that make it possible for educational institutions to reach students far beyond their geographical boundaries. At stake is the integrity and substance of commercialized course offerings with no corresponding rationale other than market shares and maximizing profits. If educational services are offered under the GATS model, the doors will open wide for a form of privatization that might imitate fiction.

Complementing the possible commercialization of education under GATS is the highly controversial Higher Education Reauthorization Act. In short, the law was amended in 1992 to declare that an institution cannot be considered an "institution of higher education" for the purpose of the Act if the institution enrolls more than 50 percent of its students in correspondence courses. Similarly, the 1992 changes included clarification of conditions whereby students enrolled in courses offered electronically or via telecommunication devices would not be considered enrolled in a correspondence course, unless the amount of electronic or telecommunications courses at the institution equals or exceeds 50 percent of such courses (NEA, 1998).

Since 1992, technology advances have ignited discussions among university officials, with encouragement from the private sector, regarding the proliferation of new markets via distance education, which include complete degree programs. Advocates of electronic markets argue that distance learning is just as effective as traditional methods and, therefore, are seeking to eliminate the 50 percent rule (NEA, 1998). The Higher Education Act expires this year. Reauthorization proceedings are focusing on possible amendments to the 50 percent rule, but 49 prominent education associations, councils, and consortiums banded together to send their collective recommendation to the Department of Education, which supports the limitations provided by the current law (ACE, 2003b).

If reauthorization proceedings allow for a change in the 50 percent rule and/or the aforementioned amendments under GATS are approved, one might surmise that greater penetration and control of higher education by multi-national corporations will result in a metamorphosis of educational purpose and accountability. The traditions, values, experiences, and importance of higher learning will be reduced to a "commodity."

It looks like a long jump from tuition and fee increases to full-blown privatization--transferring a public asset to private owners--but in reality it may be just a short step. Desperate times can lead to taking desperate measures. As educational funding erodes and tuition increases surpass the citizenry's ability to afford, higher education officials may further relax their inhibitions about accepting corporate enticements for commercial contracts, program development, public-private research partnerships, commodity trading, and ultimately end up restructuring a vital cultural imperative.

Robert A. Duringer, University of Montana-Missoula Vice President for Administration and Finance, for example, announced at the October 2002 Faculty Senate meeting that because of money constraints, it is time to look at a "quasi-public" model. This strategy, he explained, will allow for smarter business practices. When asked if the "quasi-private" strategy model was beyond the talk stage, Duringer replied that President George Dennison may be inquiring behind the scenes, but a transitional change such as this would require an official act of the Legislature (Faculty Senate Minutes, 2002). The announcement, however, does illustrate administrative concern over financial problems and the need to seek alternative funding models that may be nontraditional and dependent on private-sector strategies.

According to Henry Giroux, an outspoken critic of privatization, mitigating the encroachment of corporate power becomes essential if democracy is to remain a defining principle of education and everyday life. Furthermore, he argues, privatization celebrates competitive, self-interested individuals attempting to further their own needs and aspirations. Privatization takes place within a discourse of cultural decline--a jeremiad against public life--and in doing so actually undermines the role that public schools might play in keeping the experiences, hopes, and dreams of a democracy alive for each successive generation of students (Giroux, 1999).

When any form of privatization is offered as an answer to the problems of higher education, a series of well-designed questions should follow: Will this path prepare students to be responsible, ethical, and engaged citizens, or just unthinking consumers? Will this reform bring about unity or division among our populace? Will it promote equality, or inequity? Will it protect, or destroy, autonomy and academic freedom? Will a public right be replaced by an individual privilege? Will private authority replace public control? Will private sector interests overshadow the interests of public welfare? Given the many political, social, and economic troubles of contemporary life, will it become part of the solution, or part of the problem?

Higher education administrators and faculty should evaluate commercial partnerships on their ability to reaffirm the vision of those who wanted to form a perfect Union--the framers of the United States Constitution. What role does higher education play in establishing justice, insuring domestic tranquility, providing for the common defense, promoting the general welfare, and securing the blessings of liberty to ourselves and our posterity?

It seems unlikely that any of the privatization designs presented herein will stand up to the rigorous probing suggested above. Administrators and faculty, then, need take seriously the importance of defending higher education as an institution of civic culture and active citizenship. We must act as gatekeepers and protect the traditions of nonproprietary inquiry and freedom of expression.

It is imperative to vocalize our objections to the despotism of corporate intervention and all imposing, for-profit privatization models. Rather than consider private sector solutions to contemporary ills, higher education officials and faculty should focus their undivided energies advocating public-spiritedness and unfeigned and infallible investiture in people, culture, democracy, and the public good. Furthermore, administrators and faculty must embrace their roles as public servants and relentlessly argue for educational accessibility and affordability in support of the common good.

Work Cited

[The Montana Professor 14.1, Fall 2003 <http://mtprof.msun.edu>]