Let the market economy loose to fix formal education


By Chris Becker

South Africa’s public education system has been in crisis for years. In 2006 already, JET Education Services found that 80% of South African public schools are “essentially dysfunctional.” Everyone, including the government, knows it.

The minister of the Department of Basic Education, Angie Motshekga, in April 2012 appealed “for greater societal involvement in tackling school infrastructure backlogs, saying state resources could not be relied upon to deal with the issue within an acceptable time frame.”

Government as failed service provider

The state never has the ability to satisfy the most urgent wants of consumers, as it has no way of gauging market demand and the necessary means to be used to satisfy those demands. Government does not have a profit and loss incentive, which is what guides the investment and productive activities of entrepreneurs and capitalists to ensure that goods consumers actually want are produced. It is the greatest shortcoming of a socialist economy. It cannot ever work.

It is for the same reason that South African consumers experience frequent electricity shortages, water shortages, are underserviced by the police and have to employ private security, and experience traffic congestion on public roads. The irony is that of the 25,000 public schools in South Africa, 14% have no electricity supply, and 10% no water supply. As Murray Rothbard pointed out, the greater the role of government in society, the greater the economic chaos that results. The government is piling layer upon layer of mismatching supply with demand, creating chaos.

It should come as no surprise that the government is unable to meet the demands of those consumers that demand a formal education for them or their kids, and that there is an estimated school infrastructure spending backlog of R86 billion.

Government is walking down a case of stairs in the dark, with its hands tied behind its back.

The government will forge ahead and spend billions to build new schools and employ more teachers. With the 94 Schools Project, government aims to renovate 94 schools in honour of Nelson Mandela, to celebrate his 94th birthday. But does the market actually want this?

The market responds to government failure

A study by Ann Bernstein of the Centre for Development and Enterprise titled “Hidden Assets” found that people of all races, religions, and income groups are sending their kids to private schools that serve the specific demands of the consumer.

“Our research turned into an extraordinary journey of discovery. We found 117 private schools in abandoned factories, shopping centres, shacks, and high-rise buildings. We found a chain of private primary schools operating in the Johannesburg city centre, Soweto, and Diepsloot, accommodating thousands of learners. The founders are planning to open high schools in Soweto and Diepsloot as well.

We found a private school – one of a rural chain – in Limpopo where learners were reviewing maths in the late afternoon, and another where teachers were working together to plan the next day’s maths class. We discovered a large private school in an abandoned office building in an administrative centre of the old Lebowa homeland, and another in an abandoned factory in Butterworth in the Eastern Cape.

We discovered that schools were generally valued by parents, many of whom were involved in school governance, accountable to those parents, staffed by dedicated teachers who often work for low salaries; and are run by principals and owners who are determined to provide the quality of schooling sought by local people.

Most of these schools are not registered with the Department of Education, and as such, are illegal in the eyes of the state. But that is not preventing schools from springing up wherever they are able to, in abandoned buildings, in people’s living rooms, and even parks. Parents are happy to send their children to learn at these facilities. Furthermore, where government regulation and inflationary policies have resulted in malinvestments that cannot be liquidated and used in another line of production – think factories and shopping malls – with minor tweaks, the infrastructure can be used in a new line of production – formal education. It means no capital expenditure is required up front to build school infrastructure. It also means malinvestments are transformed to productive assets once again.

Individual consumers have a range of means to choose from to achieve their ends in the most economical way. High income people can afford to spend to send their children to schools with higher infrastructure and maintenance costs, sports fields, gymnasiums, etc. while lower income people, when confronted with the choice, prefer to use less traditional school infrastructure in which to educate their kids.

This does not detract from the quality of a child’s formal education. In fact, as Bernstein finds: the main reason parents send their kids to these types of private schools is because better results are achieved.

The market economy keeps up with technological progress

Apart from billions of rands in wasteful school infrastructure spending, the government also believes it should spend some R100 million per year on textbooks, and has embarked on a process of nationalising the textbook industry by producing the textbooks it now buys from itself.

However, modern educational methods have moved on from printed educational material, to the digital domain. Through the use of a smartphone, tablet, or desktop computer, consumers can download interactive textbooks from the iBooks store at the same price it costs to produce a textbook. The material is more engaging, interactive, and interesting than a written textbook could ever be.

Furthermore, Salman Khan of Khan Academy makes available, for free, online, over 3,000 classes in subjects ranging from maths to science, to economics, to art history. Their slogan is “A free world-class education for anyone anywhere.” Why pay several million on a teacher wage bill if the youth actually prefer to learn from one of the best in the world in the comfort of their own home, when they want, at their own speed? All you need is a smartphone and a 3G internet connection.

Many would object that this is out of reach to most of South Africa’s youth. But is it really? If the government didn’t extract resources from (tax) the private sector to maintain and run the 25,000 public schools in the country, the private sector would have the resources and incentives to come up with solutions to lower the cost of education in South Africa. Specially manufactured tablet computers developed for low-income students could be the norm, with discounted cost of internet connectivity country wide.

The irony is that the speed of internet connections and availability of broadband is owed to government regulation of the airwaves and the inability of another public utility company, Telkom, to keep up with the progress of technology.

The state controls internet infrastructure and charges VAT and import duties on imported technology, leading to shortages of the former and higher prices of the latter. By also refusing to let go of its tight grip on the formal education system, of forcing parents to send their child to a state-accredited school teaching a state approved curriculum, through the SA Schools Act, 1996, the innovative market forces that have taken automobiles, television sets, smartphones, and convenience foods to the mass public, are caged and not able to provide solutions to consumers wanting a better and more cost effective formal education.

In conclusion, the state forges ahead with spending billions on archaic formal education methods. The market, as always, is moving on. Ultimately, South Africans will end up with major malinvestments in school infrastructure, and where modern, more effective, and cheaper teaching materials and classrooms could provide millions of youngsters with the resources to get a formal education, the state will hamper this process.

Chris Becker is economist and market strategist at ETM Analytics. Visit his blog, and follow him on twitter @chrislbecker.

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