The lesser of two evils

9th January 1998 at 00:00
In the developing world, the profit motive is a vital incentive for entrepreneurs willing to step in where governments have failed, writes James Tooley

For-profit education is not an oxymoron. Profit enhances education. It ensures standards are high, so that customers are attracted. It provides incentives for educational entrepreneurs to take risks, to the benefit of "risky" customers.

This goes much against the received wisdom. For two consecutive weeks, The TES has run views contrary to this - from Peter Wilby's column stating that "business culture, even at its best, is simply incompatible with educational culture" (December 12) to the condescending news analysis, "Like bees around the honeypot" (December 19), where Professor Ted Wragg is quoted as saying that the connection between education and profit is "scandalous". Whenever I give papers defending markets in education, this is the foremost objection that I encounter.

I want to take Wilby and Wragg, and all those who agree with them, on a journey, following the one I have been making during the course of the past year to half-a-dozen "developing countries". It has been humbling to discover the extent to which we can learn from the private for-profit education sectors in these countries.

In Asia, Africa and Latin America you will find the supply-side ready to step in where state education is perceived to be failing. One example of the willingness and versatility of educational entrepreneurs comes from India, where state university computer education is in dire straits. Graduates are churned out who have learned only Fortran and Pascal, unemployable in today's computing industries. Indigenous private enterprise in the form of the National Institute for Information Technology provides parallel courses for these undergraduates, teaching them, for a reasonable price, current technology and providing them with valuable work placements; it also provides loans for students who are too poor to pay the fees themselves.

Interestingly, Wilby's key observation is that business and education are different because, unlike schools, business seeks to expand - "there is no such thing as a perpetual small business". Try telling that to anyone in one of the 400 NIIT campuses around India, or in any of the 18 other countries into which it is expanding, including China, Botswana and, wait for it, the USA. Interestingly, NIIT has two research departments, one of which has 15 full-time researchers who are employed solely to do academic research in education. Their "performance indicators" are papers published in journals and conferences attended, and they are the envy of Indian government universities. All, you'll understand, in the name of profit.

However, perhaps this argument is misplaced: perhaps it is schools, not high-quality computer education, with which the critics are concerned? Then visit Brazil, and witness the seven or eight large chains of for-profit private schools - several of which also run universities and two educational television stations. The largest, Objetivo, based in Sio Paulo, has 450,000 students across Brazil. All are convinced that, in order to stay ahead of their competitors, they have to invest in quality improvements and innovation in the classroom.

Perhaps the most dramatic example of this is with the unfortunately named COC chain of schools. For fees the equivalent of about Pounds 3,000 per annum - with bursaries again for those who are too poor to afford these - this provides each student with a desk with a fold-away computer terminal, networked to CD-Rom and the Internet, and to the teacher's "smart-board" - which for the uninitiated, as I was before I went to Brazil, means that the student can take home a copy of all the teacher's whiteboard notes on a floppy-disc. All again, in the name of profit, and its concomitant, huge reinvestment in education.

A common statement of the difference between education and other business is that the latter needs brand labels, which are eschewed by the former. But what this objection fails to see is that in Brazil and other developing countries, these well-established educational brand-names - which, make no mistake about it, the companies are very keen to promote on billboards and newspaper, radio and television advertising - are important because they help parents and students overcome the "information" problem. How does anyone know whether they can trust the local entrepreneur who has set up a school? Because he or she is a franchisee for an established educational brand-name whose quality control procedures are known and respected.

But won't this militate against the school's "first duty", as Peter Wilby puts it, "to give children something of real and lasting value"? No. What the brand-name conveys to parents is precisely that the school is doing this, and at a reasonable price, and that's why they are happy to send their children there. But, of course, we needn't go as far as Latin America to find analogous activity. Has the critic never bought a book published by a "brand-name", or from a "brand-name" bookstore? Cassell and Routledge, Dillons and Blackwell's all stand, in the consumer's mind, for "something of real and lasting value".

The "evil" profit motive has another key attribute, which is particularly valuable to those in difficulty in the developing world. Who set up the first technical education college in the black townships of Rhodesia? It certainly wasn't the government, which didn't want to enhance the employable skills of the Africans. It could have been philanthropy and the churches. True, these followed behind. But, in fact, it was a businessman, whose motive was profit. In the townships he saw an untapped market, and had a lonely struggle with government to get the requisite permits before being able to open up shop. The college is still going - part of the Speciss College chain - highly successful in Zimbabwe and seeking to expand elsewhere.

Similar stories can be told from all over the developing world, where the profit motive provides the incentive for entrepreneurs to take risks and move into untapped markets - to the benefit of those whose needs have been neglected by governments.

Of course, business has imperfections. But to ignore the imperfections of governments is odd. Citizens of developing countries are less sanguine; if someone is needed to get education right, the lesser of two evils is usually not government but business. I am not convinced that the same sentiment shouldn't apply here, too.

Dr James Tooley is director of the education unit at the Institute of Economic Affairs and research fellow at the School of Education, University of Manchester. He is the director of an International Finance Corporation-funded project looking at private investment opportunities in developing countries. He writes in a personal capacity

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