To profit or not to profit, that is the question…


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Where do you stand: should school be for-profit or not?

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 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 by for-profit companies could be shown to produce more ‘goodness’ at a lower cost — especially for the less well off — would the claim to immorality remain? Is ‘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:

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 of education is being ‘rolled-back’ and polices that enthusiastically encourage private-sector involvement ‘rolled- out’ (Peck and Tickell, 2002).

On the one hand, supporters of privat(ised) educational provision argue that market dynamics fosters 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.

While much of education is in a different position to the corporate world, 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.

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).

Despite exposure to ‘the invisible hand’, critics note that the strength of that hand is so often benign 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 access to fee-based education. Exceptions exist, of course, but the argument stands — for profit schooling increases the illusion (and rhetoric) 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 non-systemic, 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) leads to social benefits (Arnold, 2013). Without the for-profit motive, economic theory argues, non-profits 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, all but one study found that the type of school — whether for-profit or not-for-profit — 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 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, UK 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 quickly 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, the mic drop retort is that:

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, these words provide perspective:

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 ‘financial,’ ‘academic’ 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, I 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 means? And are you comfortable with it? That is the real question.

References for this article are here.

Educationalist. Writer. Sharing (hopefully wise) words on school leadership and management.

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