April 11, 2003
by Peter Brimelow
And Ed Rubenstein, who was with Hudson for so long, was a great help to me in researching this book, as he has been on a number of things I have done over the years. And of course, it’s particularly nice to be Indianapolis because it’s the center of the great voucher conspiracy—
—led by the Friedman Institute. Chester Finn, who was with Hudson for a long time, said in his review of The Worm in the Apple—it was generally a nice review and I’m too modest to quote all the nice things he said—but he did say, “This volume is about as subtle as a two-by-four applied forcefully to the reader’s skull.”
Now, in journalism we regard that as a compliment.
But I will pursue that in that spirit. I can tell you now essentially what I’m going to say tonight. There are two critical points which are worth, I think, bringing away from this dinner. One is, cost matters. It’s not enough to look at education results, whether or not the kids are doing well on the NEAP, the Novell Education Academic Partners, and so on. It matters how much it costs to get them there. It matters independently of how well they do it and how much it costs. Cost matters. And the second point is that the legal framework matters. There’s a legal framework to education and, above all, there’s a legal framework to the activities of the teachers union, which is simply not studied enough, because it has profound effects on how the union works in general and how the education system works also. So costs matter and laws matter. In some respects, what I wrote here was not a book about education at all, but a book about law and economics.
I got started in the education debate, I’m sorry to say now, twenty years ago. There you are, Laura. Laura Swatley was only five or six at that time, when A Nation at Risk came out. You remember (Inaudible) Reagan Administration (Inaudible) which basically chronicled—and it was right, by the way, to do this—there had been a serious decline in scores in the government school output in the 1970’s, something education writers sometimes refer to as the “great decline.” It was the first serious public relations defeat that the teachers unions ever suffered. For the first time, they had an independent source of information which was saying that there was something wrong with the school system, something that the unions had always denied. Well, at that time I was with Fortune magazine. Fortune magazine is kind of a theory-esque organization, it’s a top-down organization, so the editor one day came to me and said, or I think I went to him actually, and he said, “You have to write about K-through-12 education because of this report out and it’s causing a lot of trouble and we have to cover this subject.” So I said this was a very bad idea because I hadn’t been to an American school, obviously, and at that stage we didn’t have children, so I had no firsthand experience, and finally it was summer and all the schools were closed. They replied, “This will make you objective.”
And guess what? They were right. I just went out and looked at the education industry as any other industry I would study as a financial journalist, and the critical question was not pedagogy, it was a question of input versus output. What did you have to put in for what you are getting out? It’s simply a question of financial analysis. And so I approached the education industry like I would approach the baked bean industry. It doesn’t actually matter how they get the beans into the can, the question is how much does it cost. And I’m not going to pontificate about how they should get the beans into the can, I just look at the financial results.
Now, if you look at the case of the government school system—I call it the government school system, as you all know, because Milton Friedman has told us to call it the government school system, and for various reasons which I explore in The Worm in the Apple, he’s right—since A Nation at Risk came out in 1983, you can argue about the results. The results are basically flat. There’s no serious improvement as a result of the Nation at Risk reforms. In fact, for various technical reasons, I think there’s been a decline. But what you can’t argue about is the cost. The costs have increased astronomically. In fact, over 40 percent over 20 years. So what that means is that there has been a productivity catastrophe in the government school system. Per pupil spending is now about $7,500 a year in real terms. It was then maybe $4,000 in real terms. And this is unique in the American economy. There’s no other sector of the American economy where you see continuous productivity declines. There are never any productivity increases in education in spite of typewriters, in spite of computers, in spite of telephones, in spite of Xerox machines, in spite of videos—which children spend a lot more time watching in public school than you would like to think—there are never any productivity increases. So that is what got me really focused on the education industry and it started a series of articles which continued for a very long time. I did them at Forbes with Ed, looking into the productivity of the system.
Now, this is completely alien to the way educrats think. They’re not interested in cost. Their position is that education spending is good, more education spending is better. Isn’t that right, Santa?
And it’s also true for education writers. I was having lunch with Laura Swatley and we were discussing this and she was saying that you can’t talk to education writers and they have their own association and everything. There’s a whole sub-culture out there. You can’t talk to them about costs because they think this is “cold-hearted,” I think was the term you used. They think it’s cold-hearted to talk about costs. They think you should be talking about pedagogy, education techniques. This is a weakness for them, though, because the fact is that the education system is fantastically expensive in this country. Close to half of local government spending in this country tends to be education costs. And of that nearly three-quarters is teachers’ salaries. So when you’re looking at any budget crisis anywhere in the country, you’re looking at teachers’ salaries. In New Milford, that little town I live near in the Connecticut Berkshires, they couldn’t get the native peasants to pass the budget. We have votes in Connecticut on these things and they had a lot of trouble getting the budget through. It failed three times. The teachers took to picketing the commuters and they held up big signs that said, “It’s about the children.” Well, it’s not about the children, it’s about the teachers’ salaries, that’s what it’s about.
Anyway, if you look at education from an economic standpoint, you see immediately that this is a classic example of a socialist industry and it shows certain classic symptoms. One of them is the politicized allocation of resources. They don’t make decisions as to what they should spend on a market basis, they make them on the basis of a political process. The classic example of this is the treatment of handicapped children. They are now mainstream because somebody got the idea that (Inaudible) was discrimination and discrimination is a bad thing and so we shouldn’t have it, so we mainstream the children. And this is fantastically expensive, it’s probably responsible for about a third of the increasing costs alone, all by itself, in the last twenty years, and it’s not clear it’s a good thing.
A second symptom of socialism is the endlessly proliferating bureaucratic overhead. Thirty years ago, there were maybe three teachers to every other adult, every other administrator or secretary or whatever in the government school system nationwide. Now it’s close to one-to-one. There’s nearly as many adults outside the classroom as there are inside the classroom. That’s just happened over the last thirty years. Teachers are very aware of this, by the way. I write stuff about the education system. You get (Inaudible) teacher, but if you criticize the administration, they’re acutely aware of it. The teachers by and large can’t stand the administrators, so that’s a contradiction in the system.
A third symptom of socialism is the chronic mismatching of supply and demand. In the Soviet Union this took the form of, you know, the left boot factory will produce more than the right boot factory. In the education industry it takes the form of sometimes there’s a glut of mathematicians and sometimes there’s an enormous shortage of something else. For a long time they were supposedly short of teachers. There is apparently now a glut of teachers. The constant movement from glut to shortage is very typical of socialist systems because they can’t match supply and demand closely.
The fourth symptom, which in some ways is the most important for people at Hudson, is the susceptibility to top-down panaceas. They’re always looking for some kind of magic bullet to solve the problems. In the Soviet farm system, it used to be things like plowing the virgin lands or getting more chemical fertilizer with western loans, if possible. In the teachers system, it’s usually some pedagogical method—open classrooms, closed classrooms, half-ajar classrooms, just open classrooms—
—all this sort of thing, and these are exactly the kinds of things which I refuse to write about as a journalist. That, it seems to me, should be solved by the market process in the debate between the parents, the consumers, and the teachers that supply it on the other hand.
And finally, this constant problem of qualitative and quantitative collapse that you see in socialist systems, which in this example means the endlessly proliferating costs and poor scores, no sign that scores are improving. In fact, there is evidence of deterioration.
That’s what I call the “apple,” the government school system. It has problems all of its own, apart from the teachers union. You know, I don’t regard breaking the teachers union—busting the teacher trust, as I put it—as a panacea. It’s not a panacea, it will not solve all the problems while we have a government school system, but it is a prerequisite because you can’t move to reform while the unions control the system, as it in fact is. The system has been captured by a rent-seeking parasite, a parasite that is constantly at the business of extorting monies out of the taxpayer by political pressure. That’s its game, that’s what it does, and it has captured the school system.
Now, I sort of analogize The Worm in the Apple to a famous book which was written in the late 19th Century by Ida Tarbell about the history of Standard Oil. You know, people didn’t realize in the late 19th Century that these big national corporations were coming into existence, particularly Standard Oil because there were a lot of local presences. So what the muckrakers did, this whole school of journalism, was they pointed out these trusts, these (Inaudible) that had come into existence and something ought to be done about them, and that’s the tradition in which I think I’m writing now. I think we’re dealing with what I call the teacher trust, the NEA and the AFT together, comprising a monopolistic agency that’s extorting rents out of the system.
Now, in the course of the great debate on trusts at the end of the 19th Century, the head of the sugar trust said a very interesting thing. He said, “The tariff is the mother of trusts.” What he meant by that was that if you freely import goods, you would undermine domestic monopolies because you would face them with competition. Now, in this same sense, I would say that the government school system is the mother of the teacher trust. The government school system is a politicized bureaucracy and the only way of dealing with it is by political action, which is frankly too time-consuming for most people to get involved in, as André was saying earlier. I mean it’s not what you want to do with your life. But it’s what the teachers union wants to do with its life. That’s what it’s organized to do. It’s designed to exert political pressure and it works because it has a suitable target, the government school system.
I think there are four points that I’d like to make about the teachers trust, the NEA and the AFT together. The National Education Association has maybe three million members. The American Federation of Teachers has somewhere over a million members, but about half of them are in New York City, so it’s not really a national player in the way that the National Education Association is. The first is that the teachers trust is a new phenomenon. The NEA, the National Education Association, has been around forever. It’s been around since the Civil War. But it didn’t become a union until the 1970’s. It was a professional association. It became a union because it was allowed to become a union. Laws were changed and regulations were changed to allow public employees to unionize. Now, in the past, prior to that, even strong union men like Franklin D. Roosevelt and George Meany of the AFL-CIO, took it for granted that you couldn’t have unionization in the public sector. It was obvious to them that if you have a public sector union, it’s a monopoly supplier of labor to a monopoly industry. It’s just too powerful. Its leverage is too great. Actually, the education system is a third level of monopoly because there are compulsory education laws, so the consumers are actually compelled to consume. So they felt it was obvious you couldn’t have public sector unions. And guess what? They were right. The unions were created because of changes that came about in the 1960’s led by President Kennedy making the promise to allow unions in the federal public sector, and this created a Frankenstein monster which has enormous amounts of power. But it’s unstable. It’s unstable because, frankly, most people haven’t realized this has happened.
America has a very fluid economy, but it’s structured, there are laws, and every once in a while you get a situation where because of some glitch, some institutional glitch, some group or other is able to extort monies, rents, out of the system. An example of that was most prominent when I was first in financial journalism. Is anybody in the room a stock broker? Well, you remember you negotiated commission rates. It used to be the case that you couldn’t negotiate commission rates, so if you were an institution and you sold a big block of stock, you had to pay the retail commission rates and this was absolutely great for institutional stock brokers, wasn’t it? They got very rich. Eventually, it dawned on people that this was going on and it was stopped. Another example, I would say, is the tort crisis. I mean the combination of the relaxation of liability or tort law on the one hand, and contingent fees on the other. It meant that a lot of trial lawyers have been getting very rich. Some of them have been earning hundreds of millions of dollars in some of these big settlements. But the result of this is that it’s dawned on people that this is going on, partly because we wrote articles about it in Forbes and other places, and so there’s tort reform on the horizon. Of course, the tort lawyers are going to fight this like mad, but still they will ultimately lose, something will be done about it. And that’s what, I would say, was the case with the teachers unions. It’s an institutional glitch that happened about thirty years ago and it will ultimately be corrected.
If you poll teachers, you find that quite large numbers of them don’t even realize they belong to a union. In Alabama just before Christmas, there was a poll taken that showed five percent of the members of the Alabama Education Association, which is an NEA affiliate, didn’t realize it was a union. That was up from two percent a year earlier, so we’re obviously making progress.
Some years ago, after I started writing about this in Forbes, I was approached by a producer for 60 Minutes who wanted to pick my brain. This is something that often happens if you’re in print journalism, television is always trying to pick your brain. They wanted to do a story on the National Education Association and after some months went by and nothing further happened and eventually I, for some reason, was talking to them about something else, I said, “What happened?” and he said, “Well, you know, we looked at it and it turned out there wasn’t a National Education Association. There were all these little unions.” The reason he thinks that is because the NEA locally presents as the Indiana State Teachers Association which in turn presents as the Indianapolis Education Association, or whatever it is. But in fact, they are all united, and people just don’t realize this. But they will eventually realize it.
The third point I’d make about unionization is that it wasn’t inevitable. As it happened, at exactly the point when teachers were going to an industrial union model, driven largely by teachers from Michigan, by the way, who were influenced by the great success of the UAW, the union movement in the country was going through an absolutely catastrophic decline. The union membership had been falling like a stone for the last thirty years. It’s very, very hard for the unions now. One of their numerous problems is they can’t convince young teachers that they should really belong to a union because they’re not used to thinking in that way. They’re too independent, they don’t expect to teach forever, there’s a whole bunch of reasons. They don’t have the Depression mentality which teachers had thirty years ago. There are many other ways of handling negotiations if you’re a teacher. One of the proposals I make in Worm is that in Europe there’s a competing union model, you can have more than one union in the same school district or the same company, and that provides competition which is a good thing. But in Texas, there’s a thing that actually looks like a teachers union and if you go on its website, it pretends to be a teachers union, but it’s actually a private company. It’s a profit-making company run by a very enterprising teacher who has set up what is essentially an agency. He negotiates for teachers like a literary agent or a lawyer, and strikes deals with them and it doesn’t have to be a union model at all. He can do that because of the legal framework that exists in Texas. We don’t have to have this union model. There’s nothing inevitable about it.
This brings me to my final point which is that the union as it exists right now in each individual state is a creature of legal privilege. The most (Inaudible) for example, obviously allowing teachers to unite at all took was a legal privilege which was granted to them over a period of about fifteen years from the 1960’s onward. The single most important privilege is the collective bargaining law (Inaudible) monopoly bargaining which varies from state to state, but about 30-odd states have it. You have it here in Indiana. What it means is that if you get to a critical mass of teachers in a school district, they can compel the school board to deal with them. And once they deal with that union, the school board can’t deal with anybody else. So it excludes all possible negotiations and all negotiators. The teachers union has an exclusive right to deal with the school board and this is a big problem. Jan is here somewhere. This is a big problem for the independent teachers associations which exist. If you have collective bargaining laws in a state, it’s very hard for the independent teachers associations which compete in unions, to get going. And where you don’t have them, the union is always pressing for them. The NEA is always pressing for them because it wants to get into a knock-down, drag-out fight with all the other possible competitors and kill them. The best example of that right now is Missouri. In Missouri, there is an independent union which came into existence because they didn’t like the unification of the NEA that took place in the 1970’s. It used to be an NEA affiliate, but it seceded. Well, the NEA is determined to get this affiliate, and from time to time they try to move toward a collective bargaining law in Missouri because they want to get into a situation where they can be one-on-one with the Missouri union and fight it out and establish who’s going to be the single bargainer. And they know the resources that they can bring to bear. It might mean that they would win. Up to now, Missouri has resisted that.
Another legal privilege I know you’ve dealt with in this state is the question of agency fee, whether or not the union can force teachers who don’t belong to the union to pay some kind of fair share. But there’s a whole range of other things that could be done, and we’ll only make about twenty-five proposals. There is the question of whether union operatives should have their pension paid by the school board, which was the case in Indiana until the mid-1990’s when that was ended. There are a lot of legal things of that framework that the union exists in which we’ve got to be careful if you’re going to dismantle because that can be done. There’s no reason this is not reversible. When I was a kid in England, we had a nationalized coal industry, we had nationalized railways, everything was nationalized inside because of the activities of the Labour government after the Second World War, and we just took this for granted. It never occurred to us it could change, but Mrs. Thatcher changed it
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