Archives: 01/2008

Radical Economic Reform in Georgia

The nations of the former Soviet Union include some of the world’s most interesting free-market reformers. Estonia is famous for its laissez-faire approach, but Georgia deserves attention as well - and not just because I went to the University of Georgia (a different Georgia, I’ll admit, but let’s not get bogged down in details).  A few years ago, it implemented a 12 percent flat tax. But it still had a problem of a very high 20 percent payroll tax rate, so Alvin Rabushka reports that Georgia has lowered the combined 32 percent flat tax/payroll tax rate to 25 percent this year. But why stop there? According to the Wall Street Journal, Georgia now plans to lower the 25 percent tax rate to 15 percent over the next five years and also abolish the capital gains tax:

Newly re-elected Georgian President Mikheil Saakashvili wants to slash taxes, speed privatization, ease foreign-investment rules and tap international capital markets as part of a radical plan to shake up the economy of the Black Sea country, his prime minister said in an interview. “The state will basically do everything to support business and investments instead of standing in the way of it,” said Prime Minister Lado Gurgenidze… The government last week signed off on a proposal that would cut average income taxes to 15% from 25% over the next five years. Capital-gains taxes, currently at 20%, would be abolished altogether.

A Thought Experiment Gone Terribly Wrong

On Tuesday, Adam Schaeffer began to tackle an article by Manhattan Institute Senior Fellow Sol Stern, a long-time school choice supporter who, in the latest edition of the Institute’s City Journal, declares that school choice is not the cure for what ails American education, and joins some well-known neoconservatives in declaring that standards and accountability imposed by government is the key to fixing our broken schools.

Anyone, of course, is welcome to reexamine their beliefs and change their opinions. Indeed, if we don’t challenge what we believe, we cannot grow in our understanding of the world. Unfortunately, while Stern certainly changed his opinion on school choice, his article suggests that in challenging his old beliefs he made very little effort to actually defend them.

Adam has already addressed one of the first flaws in Stern’s thinking, or at least in what he wrote. Stern begins his choice critique by pointing out that choice hasn’t spread nearly as quickly as he would have liked. It’s a good point: Choice has grown slowly, largely due to massive opposition from powerful groups that benefit directly from the public schooling monopoly, and many Americans who truly believe that government-run schools are the best way to provide education. But as Adam has pointed out, as slow as progress has been, it’s not been nearly as glacial as Stern suggests.

Unfortunately, Stern displays a seeming inability to discern reality not just when it comes to how much choice currently exists. The inability lies at the very heart of his loss of enthusiasm for choice, and he’s not alone. A failure to acknowledge political reality plagues neoconservative, especially those Stern credits for bringing him around to the “instructionist” view of reform, a view that focuses on using government to impose strong standards and accountability on schools. Stern relates a pivotal moment in his conversion, when leading instructionist and education historian Diane Ravitch offered a “thought experiment” in a debate against school choice supporters:

Say that one school system features market incentives and unlimited choices for parents and students, but no standard curriculum. Then posit another system, with no choice allowed, but in which the educational leadership enforces a rich curriculum and favors effective instructional approaches. In the market system, Ravitch predicted, “most schools will reflect the dominant ideas of the schools of education, where most teachers get their training, so most schools will adopt programs of whole language and fuzzy math… . Most students under a pure choice regime will know very little about history or literature or science.” The system with the first-rate curriculum and effective pedagogy, Ravitch argued, would produce better education outcomes.

What convinced Stern that “rich” curricula and “effective instructional approaches” imposed by centralized “educational leadership” will produce outstanding results, while free choice will render students helpless victims of progressive educators? Largely, that currently schools of education are dominated by progressive ideas despite the fact that prospective teachers have over a thousand ed schools from which to choose:

Unlike the government-run K-12 schools, the country’s 1,500 ed schools represent an almost perfect system of choice, markets, and competition. Anyone interested in becoming a teacher is completely free to apply to any ed school that he or she wants. The ed schools, in turn, compete for students by offering competitive prices and-theoretically-attractive educational “products” (curricula and courses). Yet the schools are uniformly awful, the products the same dreary progressive claptrap.

Now, forget for a moment that we live in a free society and many people find value in progressive ideas. Does it follow, based on how the public schooling system works, that teacher education is really a free market? Of course not! As Andrew Coulson notes, most people attending education schools are there to become public school teachers, and that requires achieving certification controlled by government, certification that is most easily attained by completing a degree at a progressive school of education.

But what of alternate routes to certification that, theoretically, let prospective teachers bypass education schools altogether? As the neoconservative Fordham Foundation made clear in a recent report, such programs are typically onerous to go through and often force students right into the education schools they wanted to avoid.

How about letting prospective teachers skip all education programs, as some reformers might like, by passing a test demonstrating that they can teach? No-go there, either: Most of the tests now used to assess teachers-the ones for which ed schools prepare their students, by the way-require knowledge of progressive pedagogy. As Fordham Foundation president Chester Finn wrote in 2003:

Praxis and many state-specific tests are heavy on pedagogy, thin on content, and generally hostile to the view that teachers possess knowledge and skills that children need to learn. In other words, they embrace the usual “progressive” assumptions about children as wild flowers (who bloom when and where they’re ready, so one mustn’t expect to cultivate them) and teachers as “guides on the side.”

Clearly, it’s not the market that’s keeping progressivism dominant in teacher education, as Stern argues, but government.

Sadly, Stern’s reality-blind analysis of the education school problem is just a microcosm of the overall absurdity of Ravitch’s thought experiment.

Look at the assertion that in a system based on choice kids will learn nothing. It’s a baseless conclusion, and Stern himself points to a real-life example that disproves it:

Starting in the 1980s, major empirical studies by sociologist James Coleman and other scholars showed that urban Catholic schools were better than public schools at educating the poor, despite spending far less per student. Among the reasons for this superiority: most Catholic educators still believed in a coherent, content-based curriculum, and they enforced order in the classroom.

That’s right-Roman Catholic schools kept rigorous curricula alive for decades after the public schools had gone whole-hog progressive. Of course, as Stern points out, Catholic school enrollment is shrinking rapidly, but that’s not because choice doesn’t work. A number of factors are at play, but one of the biggest is that Catholic schools have to compete with taxpayer-supported, tuition-free public schools, and that’s simply too expensive an obstacle for most Catholic schools to overcome. And the decline of Catholic schooling does nothing to disprove the reality that Ravitch and Stern utterly ignore when reaching their conclusions about school choice: Far from abandoning a traditional curriculum, Catholic schools, chosen by parents, embrace it.

Next, let’s dissect Ravitch’s conclusion that a choice-free, dictator-imposed system featuring a “rich curriculum” and “effective instructional approaches” would produce high-quality education. If one were to ignore the loss of freedom, or that when push comes to shove very few people agree on what’s “rich” or “effective,” one could argue that Ravitch’s utopia would be great. But, of course, it would still be a utopia, an ideal state that does not now, nor ever will, exist.

In contrast to utopianism, political reality has proven time and again that no matter how much neoconservatives want to ignore it, government control of education means special interest and progressive control.

Ravitch’s own historical research makes abundantly clear that centralized education governance enabled progressives to establish their dominion over schooling. As she writes in Left Back: A Century of Battles Over School Reform-which Stern calls a “landmark” book-“progressive reformers created centralized school bureaucracies and civil service systems in urban districts that minimized lay participation in education policy.” The main weapon against progressive hegemony, conversely, was decentralized, local control of education, which allowed communities to hold out against progressive dictators. Ultimately, though, the force of centralized government was overwhelming:

Progressive reformers pressured high schools to serve as custodial institutions that met miscellaneous socio-personal needs, kept idle youth off the streets, provided a range of nonacademic curricula, and deemphasized the importance of the academic curriculum for all but the college-bound….

The strong allegiance of parents and teachers to the academic curriculum slowed the implementation of radical changes even after superintendents announced them. Teachers knew that they had to go along, join study groups, and give outward signs of compliance to their supervisors. But they could always close the classroom door and teach the subject they knew best. What they could not do, however, was to revive subjects that were dropped from the curriculum altogether.

So centralized governance ultimately separated children from the academic curricula their parents would have chosen for them. Reality, again, is the opposite of what Ravitch concluded in her experiment.

Despite this, neoconservatives, and now Stern, call ever-more loudly to give more power to government. They’re convinced that if they just try hard enough, they can take over the system that’s frozen them out for over a century and achieve the Shangri-La promised by Ravitch’s experiment.

To defend this proposition, Stern points to Massachusetts, writing that:

Those in the school reform movement seeking a case of truly spectacular academic improvement should look to Massachusetts, where something close to an education miracle has occurred. In the past several years, Massachusetts has improved more than almost every other state on the NAEP tests….

The improvement had nothing to do with market incentives. Massachusetts has no vouchers, no tuition tax credits, very few charter schools, and no market incentives for principals and teachers. The state owes its amazing improvement in student performance to a few key former education leaders….Starting a decade ago, these instructionists pushed the state’s board of education to mandate a rigorous curriculum for all grades, created demanding tests linked to the curriculum standards, and insisted that all high school graduates pass a comprehensive exit exam.

Unfortunately, just as he did nationwide, Stern downplays how much choice is actually at work in the Bay State. According to the Center for Education Reform, Massachusetts has 62 charter schools enrolling nearly 23,000 students-not a huge presence, but bigger than many states-and a charter law that’s among the best in the nation. In addition, Boston has 20 charter-like “pilot” schools enrolling about 6,400 students. And Massachusetts has much smaller, more localized districts than many states. Using Census data and the Digest of Education Statistics, we see that the average Massachusetts district serves a population of only about 18,000, compared to nearly 37,000 in California, and over 50,000 in South Carolina. Add to its small districts the fact that the people in Massachusetts tend to be among the nation’s wealthiest, and it’s clear that in addition to charters and pilots, Massachusetts offers more Tiebout choice-people choose where they live based on what municipalities offer, forcing schools to compete-than almost any other state.

Even with all that, Stern is almost certainly right that choice doesn’t explain Massachusetts’ academic improvement over the last decade or so, at least not all of it. Much of the growth could indeed be linked to the Bay State having higher standards than other states. But that makes Massachusetts the exception, not the crummy-standards rule, and we need go no further than the Fordham Foundation’s recent assessment of state standards to see it. As Chester Finn wrote in 2005:

We asked independent experts to update earlier reviews of state K-12 school standards in math and English. They found that only Massachusetts, California, and Indiana merited “A” grades in both core subjects, even as three other states…earned “F’s” for both. Mediocrity was the norm.

So Massachusetts is just one of three states with decent standards. Should we really make the public school monopoly’s stranglehold even tighter based on only six percent of states having acceptable standards? Would you play Russian Roulette if you only had a six-percent chance of getting the unloaded chamber?

Even if all the political stars align and a state is able to implement “good” standards, there’s another problem: stars keep moving, and their alignment is often a once-in-a-century phenomenon. Indeed, with the election of Governor Deval Patrick in 2006, forces started moving to weaken the system neocons love so much in Massachusetts.

“Frustrated teachers, students, and school officials, buoyed by Governor Deval Patrick’s pledge to improve the MCAS tests, urged lawmakers yesterday to stop denying high school students a diploma based solely on high-stakes tests,” reported the Boston Globe in June 2007. “ ‘The political reality is different now,’ Representative Carl M. Sciortino, Jr., a Medford Democrat and bill cosponsor, said in an interview.”

Perhaps the most notable standards and accountability “achievement” has been the No Child Left Behind Act, which supposedly forces states to have and meet high standards. But again, as documented by the very neoconservatives who championed the law, NCLB has proven an utter failure because those people who don’t want to be held to high standards control the public schools and sabotage rigor at every turn. As Finn and Fordham vice president Michael Petrilli have admitted:

Consider the states’ reaction to NCLB. Evidence is mounting that they are responding by lowering their standards, making their tests easier, and shielding their schools from accountability….One sign of this quiet rebellion is the growing disparity between student performance on state exams and on the National Assessment of Educational Progress (NAEP)….from 2003 to 2005 at least 20 states posted gains on their own 8th-grade reading exams, yet none of these showed progress at the “proficient” level on NAEP. While there could be explanations for this discrepancy, one must suspect that states are finding subtle ways to make their own tests easier.

So, in the face of overwhelming evidence that government-control of education simply does not work, what do neoconservatives do? Pull their blinders up a little further and declare that we must have national standards! The only way to beat stagnation caused by centralized, government control is to have more centralized, government control. Finn again:

[M]ost states continue to muck up the standards-setting process-and we see no end to it. The time has come to revisit the contentious but powerful alternative known as national standards and tests….Yes, national standards face similar perils as state standards. If written by committee, or turned over to K-12 interest groups, they could turn out to be vague, politically correct, encyclopedic, and/or fuzzy. If linked with real consequences for schools, they could be pressured downward. They could even wind up doing more harm than good.

Done right, however, they could put the whole country on the sturdy path to standards-based reform. And if great standards can be written in Sacramento or Indianapolis or Boston, perhaps they could be created in Washington, D.C.

And so, the thought experiment reaches its ultimate conclusion, ending with the same absurdity with which it began, the same absurdity that Stern, for some reason, found so compelling: Despite the overwhelming evidence that choice and decentralized control are the strongest bulwarks against progressive education, and that big government has been progressivism’s most powerful ally, we are told that we should ignore reality and pin our hopes not on more school choice, but greater government control.

Neoconservatives, and now Sol Stern, need to take good, hard looks at reality-reality that they themselves have helped bring to light-before they pooh-pooh school choice again, or declare top-down standards and accountability the solution to our educational woes. If they do that-if they really absorb reality-they will almost certainly see just how terribly wrong their experiments have gone.

The Case for Realism

There’s been a fair amount of wailing and gnashing of teeth within the liberal blogosphere over the New York Times’ decision to hire William Kristol as a weekly columnist. The liberals’ dismay was, in turn, gleefully noted by conservative bloggers, generating still more grist for countless mills.

For my part, I thought this Tom Tomorrow cartoon captured quite nicely the crux of Mr. Kristol’s unsuitability for the job.

But just when I thought that the subject had pretty much been beaten to death, Harvard’s Stephen M. Walt offered up an incisive critique of the Times’ decision. In particular, Walt’s suggestion that the Times (or any major American newspaper for that matter) should provide space for foreign policy realists deserves serious consideration.

As Walt notes, realism has a long and proud tradition in American foreign policy, is the dominant point of view within the academy today, especially among international relations scholars, and yet it is seriously under-represented in the pages of major newspapers.

The best case to be made, however, is that, as Walt writes “realism’s track record as a guide to foreign policy is quite impressive, especially when compared to the neocons’ catalog of blunders.” He continues:

[Hans J.] Morgenthau, [Kenneth] Waltz and [George] Kennan were among the first to recognize that the Vietnam War was a foolish diversion of American power, and Waltz was one of the few foreign policy experts who understood the Soviet Union was a Potemkin colossus with feet of clay. When assorted hawks were sounding frantic alarms about Soviet dominance in the late 1970s, Waltz was writing that the real issue was whether the Soviets could hope to keep up with the far wealthier and more powerful United States. The 1980s proved they couldn’t, and that Waltz and his fellow realists had been essentially correct.


Most important, realists were among the most visible opponents to America’s more recent misadventure in Iraq. In September 2002, for example, 33 international security scholars paid for an ad in the New York Timesdeclaring “War With Iraq Is Not in the U.S. National Interest.” About half of the signatories were prominent realists, and several others wrote articles before the war explaining why it was unnecessary and unwise. By contrast, it was the neocons who conceived and promoted the Iraq war, while many prominent liberals endorsed it. Surely Americans deserve to hear from a perspective that has been an accurate guide to recent events, instead of relying on pundits who have been consistently wrong.

Walt makes a very compelling case. Of course, as a realist myself, I didn’t need much convincing. The bigger question remains: Which of the leading newspapers will be the first to take up his suggestion?

DHS: Require REAL ID for Prescriptions

C|Net News reports that DHS Assistant Secretary for Policy Stewart Baker called today for national ID checks when Americans buy prescription drugs. This is yet another in a growing list of activities that federal authorities would bring within their control should the national ID system created by the REAL ID Act be implemented.

The eminently savvy Baker was unintentionally ironic when he reportedly said he “doesn’t ‘understand’ the civil liberties objections to the plan.”

A Refreshing Dose of Antidumping Heresy

Arguably the most sacred text in U.S. trade policy scripture is the antidumping law. Over the years, congressional support for a tough antidumping regime has been broad, bipartisan, and nearly absolute. Any member tempted to challenge the sanctity of the antidumping status quo and question whether it wasn’t too rigid, too unfair, too offensive, or too anachronistic would be advised to veil his weakness lest he be emblazoned with a scarlet “H” (for heretic).

That is why a recent letter from ranking Republicans on Ways and Means and its trade subcommittee (Jim McCrery of Louisiana and Wally Herger of California, respectively) to USTR Susan Schwab is more than first meets the eye. It may constitute a welcome schism in the Church of the Holy Trade Remedy Law.

While the letter is generally about the Doha Round, offering the congressmen’s opinions about the vital components of a final Doha agreement (should one ever come to fruition), it breaks new ground in the way it links the U.S. negotiating positions on agriculture, NAMA (non-agricultural market access – or industrial tariff liberalization), services liberalization, and rules (the most prominent topic of which is antidumping). For the first time in public—to my recollection, at least—members of the congressional committee with oversight of trade policy acknowledge that the (strident, unrelenting, congressionally-mandated) U.S. position on antidumping might be too costly.

Since July 2004, U.S. exporters have faced more AD cases abroad than U.S. domestic industries have brought against imports here, so any final result on [the] [R]ules [negotiations] must address the needs of our companies injured by dumping or subsidization but cannot hamstring our vulnerable exporters. A balanced rules outcome would ensure that the United States is not required to sacrifice ambitious market access provisions in agriculture, NAMA, and services.

By “balanced rules outcome,” the congressmen mean one that takes into account the interests of U.S. exporters that are subject or could be subject to foreign antidumping actions, as well as U.S. import-users (55% of U.S. imports in 2006 were “intermediate goods” – inputs used by U.S. manufacturers in their own production processes), who are hurt by antidumping restrictions. And, also, by “balanced rules outcome,” they mean that the cost of a defensive agenda with respect to antidumping reform is necessarily limiting progress on the offensive agenda of opening foreign markets to U.S. exporters.

This is a linkage we have been making for quite some time. It is a positive sign that members of Congress are connecting the same dots. Perhaps this thesis should be nailed to a wall in the Capitol Building.

Stern Shouldn’t Be Taking any Bows…

In an essay to be released later today by the City Journal, Manhattan Institute senior fellow and school voucher supporter Sol Stern argues that recent free market reforms have failed to transform American education, and suggests that choice advocates should refocus on curriculum standards.

The central problem with Stern’s argument is that there have been no recent free market reforms in American education.

As economist John Merrifield, myself, and others have been at pains to point out over the past decade, contemporary U.S. “school choice” reforms lack some or all of the essential characteristics of free markets, and as such cannot be expected to perform like markets. Stern fails to realize this because of a demonstrably poor understanding of what a market is.

Stern’s mistaken notions about markets are starkly revealed when he declares that: “the country’s 1,500 ed schools represent an almost perfect system of choice, markets, and competition.” In reality, ed schools exist to serve the artificial and legally mandated requirement for public school job applicants with state accredited teachers’ college degrees. In the vast majority of states, even states with so-called “alternative certification” programs, anyone who teaches in a public school must have (or be pursuing) a government-approved degree in education. But because the public school system is protected from competition by its monopoly on $13,000 of tax funding per pupil per year, it has no systemic incentive to hire people with skills proven to accelerate learning. Ed school professors know that, and so fill their students’ heads with whatever philosophical, political, and pedagogical views they find most agreeable.

Furthermore, as Marie Gryphon pointed out in Giving Kids the Chaff: How to Find and Keep the Teachers We Need, public school systems often hire less qualified applicants over more qualified applicants. All this is why, as Stern acknowledges, the instruction offered in ed schools is so roundly derided. To mistake this massively distorted, monopoly-driven labor market as “an almost perfect [market] system” reveals a remarkably poor grasp of markets.

Among other things, markets require: prices determined by supply and demand, private ownership of businesses, low or no barriers to the creation of new businesses, few or no barriers to workers entering the profession, minimal regulation, the ability of owners and investors to profit from their efforts, unfettered consumer choice, and payment by consumers rather than a third party. Furthermore, to see any significant market forces, there must be large scale demand – millions of potential customers.

Apple would not have invested millions of dollars developing the first iPod, or dramatically increasing its capacity in recent years, if its customer base had been capped at 22,500 people – as Milwaukee’s voucher program is capped. To expect results such as we see in our vast market economy from tiny and hobbled existing school choice programs is like expecting an electric train set to match the power of a diesel locomotive. And abandoning real market reforms because these toy trains have failed to match some people’s unrealistic expectations is foolish on its face and disastrous public policy.

We will see dramatic progress in the field of education that matches the progress in the rest of our economy only when our school system enjoys all the essential features of that economy. For that to happen, existing school choice programs will have to be dramatically expanded and liberalized, or new programs, such as Cato’s own Public Education Tax Credit plan, will have to be implemented.

As Milton used to say, “there’s no such thing as a free lunch.” Want market results? Make a market.