An “Invisible Hand” Up

August 6, 2007 • Commentary
This article appeared in Philanthropy Magazine on August 6, 2007.

During a London conference in 2003, James Tooley chats with Nigeria’s former chief education inspector, and explains that he wants to study private schools in the country’s slums and villages. “There are no private schools for the poor,” the inspector responds. “In Nigeria, private schools are only for the elite.” But Tooley is not easily dissuaded.

A week later, he is in the Nigerian shanty town of Makoko, his taxi rolling to a stop at the end of the paved road. Ahead lays only a muddy track, flanked by open sewers overflowing from the previous night’s rain. “Do you know of any private schools here?” he asks a group of teenage boys. They guide Tooley carefully through a maze of mud and slime to the Ken Ade Private School. It is one of dozens in the area.

Like a 21st‐​century Indiana Jones, University of Newcastle professor James Tooley travels to the remotest regions on Earth researching something that many regard as mythical: private, parent‐​funded schools serving the Third World poor. Government officials from across Africa, India and China repeatedly tell him that such schools do not exist in their countries — often after he has already visited those schools and interviewed their students and teachers.

Tooley’s interest in the subject dates back to the 1980s. As a young man fresh out of college, he spent three years teaching secondary school mathematics in Zimbabwe. From that experience, he was inspired to study education for the poor in developing countries, and discover how it could be improved and expanded. His work leapt into high gear in 2002, after a fortuitous meeting in Goa, India, with Templeton Foundation senior vice president Charles Harper. Impressed with Tooley’s study of private schools in the impoverished Old City section of Hyderabad, Harper encouraged him to draft a proposal for expanding his investigations on an international scale.

The result was a Templeton Foundation grant of nearly $800,000, allowing Tooley and his colleague Pauline Dixon to compare government and independent schools in Ghana, Nigeria, Kenya, India and China. Their conclusion? It is better to give students and their parents a hand up than a handout — and that the hand up should come from Adam Smith’s “Invisible Hand,” the free market.

Despite the repeated denials of government officials, Tooley, Dixon and their teams of researchers found that outright majorities of schoolchildren in the urban slums of the developing world already attend private, fee‐​charging schools. Even in small villages, half of all students are typically enrolled in private sector schools, though private sector enrollment is lower in the countryside. The poor have decided not to wait for promised reforms in government schooling, which is regarded as corrupt and educationally deficient even by its advocates.

But is the rapid growth of for‐​profit schools for the poor a good thing? Most government officials in these countries, along with the international development community, seem aghast at the thought. Consider the reaction of Mrs. Mary Taimo Ige Iji, head of the public school district that includes the shanty town of Makoko. As part of a BBC documentary, Tooley interviews her on the balcony of a public school just outside the slum. Standing at a railing overlooking her brand‐​new white Mercedes, Mrs. Ige Iji explains to the cameras why most poor families prefer to pay for private schooling rather than frequent the free government schools: “The most important point is ‘fake status symbol,’ ” emphasizing “fake status symbol” in finger quotes. She elaborates that poor parents “want to be seen as rich and caring, but in choosing private schools she believes they are, in fact, “ignoramuses.” These poor private schools are “ill‐​equipped,” she tells Tooley, and they’re instruction deficient because they lack the “fully qualified” teachers of their government sector counterparts.

Needless to say, the poor parents who are choosing fee‐​charging schools over the widely available — and often free — government alternative do not see their decisions in the same light as Mrs. Ige Iji. “We pass the public school many days and see the children outside all of the time, doing nothing,” one Nigerian father tells Tooley, “but in the private schools, we see them everyday working hard. In the public school, children are abandoned.”

But Mary Taimo Ige Iji is not alone in her views. Voicing the consensus among international aid agencies, Save the Children has declared that the assumption of private school superiority over public schools in the developing world may “be true for a select number of private institutions,” but is “by no means the case for a majority.”

Into this peaceful, almost ripple‐​free consensus, James Tooley dropped a bomb: In every region he studied, private school students were outscoring their government‐​sector counterparts in both mathematics and English, a language recognized in these countries as a valuable economic asset. The effect was both statistically significant and large in real terms, and persisted even after controlling for student background characteristics and IQ. Private schools were doing this, he added, for a small fraction of the per‐​pupil expenditures in the public sector. Fees at the private schools he studied in Hyderabad hovered around $2 per month, and at least 18 percent of students in these schools attended for free or at discounted rates — the poor were subsidizing the truly destitute.

As the messenger of such shocking, anti‐​establishment findings, Tooley did what any good scientist would do: He requested the reanalysis of his data by a respected independent body — the British National Foundation for Education Research. After a thorough review of his Hyderabad data, using the latest statistical methods for assessing educational outcomes, NFER agreed with Tooley’s findings — except that they found the private sector advantage to be even greater than his original estimate.

In cases such as this, where the intellectual and institutional status quo enjoys massive inertia, it is not uncommon for radical new findings to be ignored, regardless of their inherent persuasiveness. But Tooley’s bomb was to set off a chain reaction.

In September 2006, Tooley wins top honors in the first International Finance Corporation/​Financial Times Private Sector Development Competition for an essay reporting his Templeton project findings. In addition to receiving a $30,000 prize, he is invited to write an article (“Low‐​cost schools in poor nations seek investors”) for the September 17th issue of the Financial Times. One of the tens of thousands of readers of that article is Richard Chandler, founder of the Singapore‐​based Orient Global investment firm.

Fast forward to February 14, 2007, when the philanthropic arm of Orient Global announces the creation of a new $100 million Orient Global Education Fund. James Tooley is named its inaugural president two months later. In launching the new fund, Chandler comments that “education is the bridge between poverty and prosperity. Our goal is to ensure that every child…will receive a quality education that allows them to compete in a rapidly changing global economy,” and to “release their talents and creativity for the benefit of themselves and others.”

Tooley’s reaction upon being invited to take charge of the new Fund? “I was tremendously excited. I thought this was an incredible, incredible opportunity.…We can do something globally here which will transform the way that education is perceived, the way the poor are served.” After extensive travel, discussion and planning, Tooley and his team laid the foundations for the Orient Global Education Fund’s approach. A key goal is for the fund to be self‐​sustaining — to invest in education businesses that will simultaneously advance the organization’s mission while generating returns that will support other projects and investments in the future. While “$100 million is a huge sum in philanthropic terms, it’s a drop in the ocean compared to global education spending,” Tooley observes. He reasons that the only way for the fund to have a significant, growing, lasting impact will be for it to invest wisely.

With that as a guiding principle, the fund will follow a three‐​pronged strategy: invest in publicly listed and private enterprises that will further its mission while helping to sustain it over time (e.g., the Fund has acquired a 9.4 percent stake in India’s NIIT educational chain); conduct research and development for a pilot chain of budget private schools for the poor in India; and make grants to existing private schools to aid in their expansion and protect them from sudden political or economic shocks.

This emphasis on for‐​profit schools serving the Third World poor is, needless to say, a radical change for the worlds of education and philanthropy. But Chandler and Tooley are not alone in seeing promise in the private provision of education in developing countries. American readers may be familiar with the $40 million private school founded by Oprah Winfrey in South Africa, which opened earlier this year. The Oprah Winfrey Leadership Academy for Girls, set on a 22 acre estate, will serve 152 students hand‐​picked by the media personality herself. Their parents will pay nothing. Then there is India’s Bharti Foundation, which has committed at least $50 million to the creation of strictly nonprofit, private schools in the nation’s poor rural areas.

Over the coming years, education philanthropists and researchers from all over the world will be able to compare these alternative strategies — both to each other and to the international development community’s preferred solution of expanded government provision. Time will tell whose approach will have the greatest impact, but a reading of Tooley’s research and the broader academic literature suggests it would be unwise to bet against the radicals from Singapore.

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