The Ultimate $uperpower

One of the reporters, Bob Woodward, went to a high-level government source and complained: “The story is dry. All we’ve got are pieces. We can’t seem to figure out what the puzzle is supposed to look like.”

To which the infamous Deep Throat replied: “Follow the money. Always follow the money.”

Sidestepping Democracy

For nearly 40 years, “follow the money” has been an axiom in both journalism and politics—although, as Shakespeare might complain, one “more honour’d in the breach than the observance.”

It is useful to resurrect the axiom in analyzing the multimedia buzz and policy debates swirling around the movie Waiting for “Superman.” In education, as in so many other aspects of society, money is being used to squeeze out democracy.

Waiting for “Superman” and its surrounding campaign reflect an influential trend that has proven adept at dominating education policy in both Republican and Democratic administrations. This bipartisan alliance unites 20th-century conservatives closely aligned with the Republican Party, who made the bulk of their money before the dawn of the digital era, and 21st-century billionaires more loosely aligned with the Democratic Party, who generally made their fortunes through digitally based technology. These two groups can be described as analog conservatives and digital billionaires.

Despite their differences, both groups embrace market-based reforms, entrepreneurial initiatives, deregulation, and data-driven/test-based accountability as the pillars of educational change. Under the banner of challenging bureaucracy and promoting innovation, both groups chafe at public oversight and collective bargaining agreements. Above all, both rely on money to get their way.

Two decades ago, challenges to public schools were spearheaded by groups such as the Christian Coalition, a grassroots, church-based phenomenon that sought to abolish the U.S. Department of Education and to elect religious conservatives to take over local and state school boards. Today’s bipartisan corporate reformers tend to sidestep democracy altogether by abolishing school boards, promoting mayoral control, and hiring corporate-style CEOs who answer to a city’s power elite. No longer preoccupied with abolishing the U.S. Department of Education, they instead use their wealth to effectively control it and to dictate reform.

Hedge Funds Bullish on Charter Schools

This developing alliance is evident in Waiting for “Superman” and in the transformation of the charter school movement that the film champions. Originally, charter school reform emerged out of progressive and union-sponsored efforts to promote innovation that could improve public schools, particularly in urban areas. But in the past decade privatizers, including fabulously wealthy hedge fund managers, have come to dominate the charter school movement and shape its policy agenda.

But first about hedge funds—those masters of the universe known for their financial speculation and insane levels of compensation. (The top 25 hedge fund managers took in an average of $1 billion each in 2009—enough to pay for 658,000 entry-level teachers.) Encompassing the lower and east side of Manhattan and extending north to Greenwich, Conn., is a kingdom that New York magazine has dubbed “Greater Hedgistan.” Of the world’s hedge funds with more than $1 billion in assets, a significant majority is based in Greater Hedgistan.

Smack dab in the middle of Greater Hedgistan is Harlem.

These two worlds—one rich, white, and powerful; the other poor, African American, and Latino but located on prime real estate—meet in the charter school world, although not as equal partners.

“Charters have attracted benefactors from many fields,” a New York Times article noted almost a year ago. “But it is impossible to ignore that in New York, hedge funds are at the movement’s epicenter.”

Charters are edging out traditional public schools in Harlem and other poor neighborhoods—and the charters are overwhelmingly controlled by hedge fund directors and finance capitalists who sit on the boards of directors that are legally responsible for running the charter and establishing its financial, educational, and personnel policies. (There is more than a little irony that New York, home to one of the fiercest battles for community control of schools in the 1960s, is now a prime example of rich white billionaires controlling the education of low-income children of color.)

Take the board of trustees of the Success Charter Network, which, along with the Harlem Children’s Zone, is featured prominently in the film. Of its nine members, seven are involved in hedge funds or investment companies. The eighth is CEO of the Institute for Student Achievement, and the ninth is a managing partner at the NewSchools Venture Fund, involved in both for-profit and nonprofit charters across the country. No community, parent, or teacher representatives sit on the Success Charter Network board of trustees.

There is no single reason why charter schools have become the must-be-involved cause among the hedge fund and finance capital crowd. Real estate obviously plays a role, as Harlem and the South Bronx are the poor neighborhoods most ripe for gentrification now that so much of Brooklyn has come under the reach of condos, trendy restaurants, Trader Joe’s, and Ikea. (In New York City, no deal ever goes down that doesn’t involve real estate.) And, just as clearly, there’s old-fashioned altruism and missionary zeal at work. “What you’re seeing is for the under-40 set, education reform is what feeding kids in Africa was in 1980,” an education reformer said in explaining Facebook founder Mark Zuckerberg’s $100 million donation to the Newark public schools in September.

Another explanation is that the hedge fund crowd is comfortable with the charter way of doing business—overwhelmingly nonunion, which means that management gets to call all the shots; a guaranteed cash flow in the form of public dollars per student; minimal public oversight; lots of data and test scores; and an educational ideology based on a free-market model of schooling.

The minimal public transparency and oversight of charters is particularly in sync with the hedge fund culture. Infamous for their secrecy, hedge funds operate largely beyond public scrutiny. Their securities tend to be issued in “private offerings” that are not registered with the Securities and Exchange Commission, whose regulations were established in 1933 during the banking crises of the Great Depression. Nor are they required to make periodic reports under the Securities Exchange Act of 1934. And, to play the game, you have to be rich, with millions of dollars to invest.

Charter schools are the type of entrepreneurial initiative that “electrifies” hedge fund managers, according to Whitney Tilson, a finance capitalist, founding member of Teach for America, and board member of the Knowledge Is Power Program (KIPP). “With the state providing so much of the money, outside contributions are insanely well leveraged,” he told the New York Times .

Ravenel Boykin Curry IV of the money management firm Eagle Capital Management, who helped found the Girls Prep charter schools in New York, told the Times that charter schools are “exactly the kind of investment people in our industry spend our days trying to stumble on, with incredible cash flow, even if in this case we don’t ourselves get any of it.”

Charter schools have also become a way to network and hobnob with elite powerbrokers and celebrities (who knows what deal might emerge from such networking)—all in the name of helping poor people.

And, of course, there is money to be made. Harlem Children’s Zone (HCZ), for instance, is one of the most financially well-endowed education reform efforts in the country. Following the film, in which its founder, Geoffrey Canada, emerged as the most charismatic of those featured, HCZ received millions—including $20 million from Goldman Sachs in mid-September. New York City is also contributing $60 million toward a $100 million new school.

HCZ had net assets of $194 million listed on its 2008 nonprofit tax report. Almost $15 million was in savings and temporary investments, and another $128 million was invested at a hedge fund. Given that most hedge funds operate on what is known as a 2-20 fee structure (a 2 percent management fee and a 20 percent take of any profits), some lucky hedge fund will make millions of dollars off HCZ in any given year.

Politics and Profits Make Reliable Bedfellows

Historically, charter and voucher initiatives have received their most consistent support from pro-Republican, traditional conservatives such as the Walton Foundation of Wal-Mart fame and the Bradley Foundation, based on the fortune of the Allen-Bradley Company in Milwaukee. This was especially true under the Reagan and both Bush administrations, when vouchers for private schools seemed the stronger of the voucher/charter “school choice” reforms. Vouchers were never popular with voters, however, and so much of the emphasis shifted to the more politically palatable charter reform—with corporate-oriented Democrats and digital billionaires jumping on to the school choice/charter bandwagon. Take away the Gates, Walton, and Broad foundations, Teach for America alumni, Democrats for Education Reform (DFER), and a few essential hedge fund and investment managers, and the pro-corporate charter movement would shrink significantly.

DFER is a national political action committee that promotes charter and other “school choice” options. The movie’s central narrative metaphor—highly emotional public lotteries—turns out to have been perfected during a political strategy and public relations campaign engineered by Success Charter Network and DFER. A look at DFER and its relationship to Success Charter Network uncovers how the politics of charters operate in the real world rather than in the sanitized Hollywood version.

First, there are the personal connections—rich people rarely leave their fate to ping-pong balls and lotteries. John Petry, for instance, is on the boards of DFER, its nonprofit arm, Education Reform Now, and the Success Charter Network. Joel Greenblatt is on the DFER board of advisors and is chair of the Success Charter Network board.

Flooding the Zone, Bamboozling the Media

More interesting are the joint political efforts of the organizations, such as the 2008 effort “Flooding the Zone.” This campaign makes clear that the charter lotteries have more to do with political propagandizing than with serving the needs of children and families.

The Flooding the Zone campaign was jointly decided upon by the leaders of Success Charter Network and DFER (and, allegedly, a group of parent activists that appears to be moribund now that this year’s lottery is over). The campaign’s purpose was to “go ‘on offense’ to provide political cover” to increase the number of charters in Harlem, create a hospitable climate for charters to take over space in public schools, and promote the concept of parent choice.

The strategy was to create a groundswell of publicity for the charter lotteries and to “flood the zone” in Harlem with pro-school choice messages. No effort was spared, with hundreds of thousands of leaflets, multiple mailings to families, ads at bus stops, posters, and literature drops. Lacking a membership base, DFER used “an army of field workers, many high school students who were hired to blanket the neighborhood with materials.” Success Charter Network coordinated the information and DFER coordinated the political rally.

A recent article in the New York Daily News reported that Success Charter Network spent $1.3 million on marketing between 2007 and 2009, with most of that going to the leaflets, posters, and mailings that were part of the Flooding the Zone campaign.

Flooding the Zone makes clear that the Success Charter School lottery was a conscious public relations effort. Given the political and economic clout behind DFER and Success Charter Network, and the inherent drama of a winner-take-all lottery, it’s not surprising that Waiting for “Superman” used the lottery as its dramatic heart.

DFER’s “Done Waiting” campaign, meanwhile, is a partner in the film’s social action campaign, along with a who’s who of traditional conservatives and digital-age billionaires including the Walton Family Foundation, the Broad Foundation, and the Bill & Melinda Gates Foundation. (On the local level, groups such as the United Way and Stand for Children are coordinating efforts.) The Done Waiting partners, meanwhile, include not just charter organizations but also groups focused on vouchers for private and religious schools.

DFER prefers to play a behind-the-scenes role. The same is not true of the foundations that have emerged as the forces behind the corporate reform agenda that now dominates education policy discussions.

Although names like Rockefeller, Ford, Annenberg, and Carnegie traditionally have dominated foundation-funded education reform, in recent years a new group of foundations has emerged—Gates, Walton, and Broad, in particular. And all three are deeply involved in campaigns promoting the educational perspectives of Waiting for “Superman.” (Gates is featured as an education “expert” in the film, which does not include an interview with a single public school teacher.)

Gates—whose education grants in the last decade approach the $3 billion mark—has been so dominant that he has been dubbed the country’s education czar. Given the imperial nature of foundation-driven reform, the czar moniker is particularly appropriate. (Gates, with a net worth of about $53 billion, saw his worth increase by $13 billion alone last year, according to Forbes magazine.) Foundations, although benefiting from their status as nonprofits and thus essentially subsidized by U.S. taxpayers, are private institutions with private boards, able to make behind-the-scenes decisions and sidestep public accountability for the success or failure of their programs.

Given the realities of school funding, with public dollars focused on essential services, schools and districts—and even the U.S. Department of Education—often look to foundations to fund new initiatives. Add in grants to organizations such as Teach for America or the Charter School Growth Fund (which received $12 million from Gates this July), and the foundations have inordinate power in determining the future of public education.

“What we’ve done is create a new nobility, where basically the lords and ladies decide who gets the money,” argues Barbara Dudley, head of the Veatch Foundation in the early 1990s, former director of Greenpeace, former president of the National Lawyers Guild, and currently an adjunct professor at Portland State University. “It is not democratic and you can’t pretend that it is.”

Education’s role in strengthening our democratic institutions is a long-standing tradition in this country; it isn’t a mistake that the right to a free public education is enshrined in every state constitution in the country. Yet many charter school promoters don’t feel the need to make even a rhetorical nod toward democratic concerns.

The NewSchools Venture Fund, for instance, issued a 10-year report on its $100 million investment in nonprofit and for-profit initiatives and called the report “Investing in a Revolution.” Although the words “entrepreneur,” “entrepreneurs,” and “entrepreneurial” show up 84 times in the report, the words “democracy” or “democratic” do not appear even once.

Which leads to a fundamental and unaddressed question: Should the American people put their faith in a white billionaire boys club to lead the revolution on behalf of poor people of color?

As educational historian Diane Ravitch notes, the corporate-based reform agenda undermines community and democracy and is subject “to the whim of entrepreneurs and financiers.” The obsession with schools as a business, she notes, “threatens to destroy public education.”

“Who will stand up to the tycoons and politicians and tell them so?”