School Privatization, China and “It’s a Wonderful Life”
January 6, 2004

There appears to be a growing public legitimacy for privatizing American education. State universities are dramatically raising tuition. Some public Kansas schools are charging fees for all extracurriculars. So why not privatize the schools, drop the regulation, and let competition sort out the best?

I have already seen this conversion first hand. Not here, but in China. When I lectured in Shanghai in 1993, all Chinese schooling from elementary to university was free– paid by the state. With five times our population but one-fifth the universities, competition for higher education was intense. At all grade levels through university, stark classrooms were filled with a minimum of 60 students per class taught by underpaid teachers with few supplies. If you scored high enough to enter college, your room and board were also free.

When I returned in 1998, China was charging tuition for high school and college students. Not just one-fourth to one-third of the cost, as our university students pay, but full tuition to cover the complete operating costs. In the developed areas, teacher pay rose dramatically. School rooms were modernized. The government directed its money to capital building. And today, China has tripled its university capacity. In the developed regions of China, living conditions every month are measurably better than the last, and privatization of education is seen as an important part of the new market economy. It has supercharged educational development, moving it much faster than it ever could under a planned system.

I tell my Chinese hosts “It is China that has the privatized system, and American that has socialized education.” And they always quote Deng Xiaoping: “It does not matter whether the cat is black or white, as long as it catches the mouse.” In other words: whatever works.

But it is not working in the rural undeveloped part of China. Half the population lives in villages up remote valleys. They are 50 years behind the developed zones. Any brilliant child who can self study and succeed, leaves to go to the developed zone and never comes back. Government grants of free tuition for students who will return to teach, go unclaimed. In 2001, Premier Zhu Rongji told officials across China that this problem, this lack of good teachers and educational opportunity in the rural areas, must be solved within a year. When I traveled across China in 2002, I asked party secretaries at schools “How was this solved?” They hung their heads.

I remember this dilemma during this holiday season because it is now that so many Americans gather before the TV to watch the film classic “It’s a Wonderful Life.” And by so clearly contrasting what life would be like with and without the character played by Jimmy Stewart, we should all feel the consequences of operating for privatization or public good. If you remember, it is the private banker Mr. Potter who wants to close down the building-and-loan (a credit union) and who starts a rumor to cause a run on the community agency. Jimmy Stewart tries to save it. In this segment, Stewart addresses the crowd that is demanding to withdraw their deposits:

(Soundtrack excerpt here)

And so it is with education. We are all investing in Joe’s children. In everyone’s children. Because we all benefit when the younger generation is well educated. Even when we do not have any children ourselves.

The movie may be fiction, but it portrays some stark realities. Realities about privatization that my colleagues in rural China are discovering today.

This holiday allegory is about privatization versus public good. And when the public good prevails, the title says it all: “It’s a Wonderful Life.”