When Schools Compete

By Edward B. Fiske and Helen F. Ladd

The following is condensed from the final chapter of the recently released book, When Schools Compete: A Cautionary Tale ( Brookings Institution Press, 2000). The section below analyzes one of the arguments for market-based reforms — that they will pressure low-performing schools to compete and better serve their students, in the process raising academic achievement.

The section comes from the book’s final chapter, “Lessons for the United States and Other Countries.” The chapter also takes up other issues, such as problems of polarization, a “winners and losers ” approach to reforming schools, and what happens when self-governance is combined with competition.

The search for more effective ways to organize and manage state educational systems has become a global phenomenon. In recent years attention in many countries has focused on two distinct but interrelated sets of ideas.

The first set of ideas revolves around the concept of decentralization. Many reformers believe that the transferring of governance and management authority, from a centralized state educational agency to local schools, will energize schools by giving parents and local communities a greater role in setting school missions. Others favor such decentralization as part of a broader governance and management strategy involving the exchange of control for accountability. The pure form of this arrangement might be referred to as a tight-loose-tight governance structure, in which the central authority tightly specifies schools’ missions and out- come standards, loosely allows schools to use whatever methods they choose to achieve those standards, and then tightly holds schools accountable for results.

The second set of ideas is centered in parental choice and market competition. Proponents believe that the quality and efficiency of education are enhanced when parents are given the right to select the school their child will attend, thereby putting schools in a position of having to compete for students. Some see choice as a way of promoting more coherent school communities of persons with shared values and encouraging a proliferation of schools tailored to children with particular academic, social, or other needs. Others argue that if individual schools can no longer treat parents and students as captive customers, teachers and school administrators will be forced to become responsive to the needs of their students, and they will deliver education that is both higher quality and more cost-effective.

Significant experimentation with such ideas has taken place in many countries, including England, Australia, New Zealand, and Chile, and they have attracted growing attention in the United States.

While the question of whether such reforms, or various packages of them, are desirable for the United States or other countries is a hotly contested issue, the debate thus far has tended to generate more heat than light. To move the debate about this whole cluster of reform ideas forward, it would be useful to have a large-scale experiment in which self-governing schools operate in a competitive environment involving extensive parental choice over a long period of time.

New Zealand provides just such a large-scale experiment. In 1989 this nation of 3.8 million persons adopted a school reform package, known as Tomorrow’s Schools, that overnight transferred operating responsibility from the Department of Education to each school’s newly elected governing board of trustees. Two years later, in 1991, with a new government in power, New Zealand enacted further reforms that introduced full parental choice of school and established a competitive environment in the state educational system.

We suggest that, despite the distinctive features of New Zealand’s experience, New Zealand offers as reasonable and useful a laboratory to observe these ideas in practice as one could hope to find.

We can offer no overall conclusions about whether the New Zealand reforms represent a net improvement or a net loss for the system as a whole. Instead, we use the New Zealand experience to draw conclusions and lessons related to specific issues and to highlight potential areas of concern that policymakers in other countries or states will need to address, if they choose to proceed down a reform path similar to that taken by New Zealand.


The problems of schools serving concentrations of disadvantaged students will not be solved by school autonomy and parental choice. To the contrary, reforms of this type exacerbate the problems of such schools.

Much has been written about the problems of urban school systems and the fact that in many schools in large

U.S. cities student performance is unacceptably low, given the demands of today’s economy. While many explanations for this low performance are offered, including the challenges of educating concentrations of disadvantaged students, some critics of urban education in the United States attribute the problem to excess bureaucracy and to inappropriate incentives for schools to improve. To such critics, school autonomy and parental choice provide hope for improvement. Autonomy would give schools the flexibility — and parental choice would given them the incentive — to improve. Failure to improve their educational offerings would lead to a loss of students and funding.

The New Zealand experience indicates that these expectations are mis- placed for the schools at the bottom. There is little doubt that parental choice made it possible for many students to escape from low-performing schools and thereby to improve their educational experiences. However, there is also little doubt that parental choice significantly exacerbated the problems faced by many schools serving concentrations of disadvantaged students. Over the period since the beginning of Tomorrow’s Schools, schools in south Auckland and other low-income urban

areas have become repositories for increasing concentrations of difficult- to-teach students. These schools enjoy the same operational flexibility as other self-governing schools, and they share the same incentives as other schools to improve the quality of their programs in order to attract more students and more funding. In some cases they appear to be well managed. Nevertheless, they find themselves unable to compete successfully in the academic marketplace.

Although these schools faced difficult challenges long before the Tomorrow’s Schools reforms, the reforms complicated their problems. For instance, the emergence of enrollment schemes as a marketing technique also made it possible for popular schools to avoid the hassle of dealing with difficult-to-teach students and to ship them down the decile scale to schools with empty seats, which were obliged to accept them.

One potential benefit of the new governance arrangement is that the failures of such schools are more visible and less easily ignored than under the old system. Despite the logic of the market model, which would be to let failing schools go out of business, the New Zealand government has been reluctant for political reasons to close such schools. Another conspicuous limitation of the market model is that the mar- ket has failed to create sufficient incentives for new schools to move into these areas and offer alternative educational programs for difficult-to-teach students. Had such schools materialized, the ministry would presumably have been more willing to close down failing schools.

The problem with applying the market solution to failing schools is that every child must have access to some school. If there is no room in nearby schools for children who are in failing schools, or if the nearby schools are also failing, political pressures coalesce to keep even a failing school operating. In light of this political reality, a preferred approach would be to figure out how to turn failing schools around.

New Zealand’s Approach to Fail- ing Schools. Initially, New Zealand’s approach was to do little or nothing for failing schools. In cases of severe governance breakdown, the Ministry of Education stepped in and used the power granted to it under Tomorrow’s Schools to replace the board of trustees with a commissioner. Other than that, it did very little until political pressures from a variety of sources, including publicity in the media and a major report by the Education Review Office, forced it to recognize that the hands-off approach was not working and that the problems of such schools were sufficiently serious to warrant attention.


Once the Ministry of Education decided to intervene, it focused primarily on bolstering the management capacity of such schools. It chose that approach because it was the only form of intervention consistent with the principle of self-governing schools. Any direct substantive policy interventions from the center would undermine the principle. Presumably, some of the ministry’s effort to improve management have achieved their objective. Nevertheless, even with good management, which many of these schools now appear to have, they still find themselves unable to compete effectively in the educational marketplace. The improvement of managerial capacity, while perhaps necessary, turned out to be insufficient in and of itself to solve the competitive problems of schools with disproportionate numbers of difficult-to-educate students.

In mid-1999 some of these troubled schools received favorable reports from the Education Review Office, and it appears that they may be working their way back to viability. Administrators at the schools attributed the turnaround to a variety of factors, including infusions of significant new funds that have made it possible for them to address issues such as teachers’ training and the students’ need for supervised homework centers.

Other Approaches. The ministry’s preoccupation with bolstering managers runs counter to the advice of the independent Education Review Office (ERO) in its public report on south Auckland schools. Although the ERO couched many of its policy recommendations to the ministry in managerial terms, it also acknowledged that such schools face serious problems that are outside their control and recommended, among other things, policies to address the challenges they face in attracting and retaining high-quality teachers. Such problems cannot be addressed by the schools themselves because the government controls salary schedules and the supply of teachers through its fund- ing for teachers’ educational programs. Given that the problems are not exclusively managerial, other strategies need to be considered. At this point, the New Zealand experience provides little guidance.

Thus the main lesson from New Zealand is a negative one: Governance and management changes alone are not going to solve the problems of overburdened schools. This negative lesson has a clear implication for policymakers. If a country cares about the students in such schools, it must be prepared to experiment with large-scale interventions specifically directed at the educational challenges faced by such schools.

Edward B. Fiske was education editor at The New York Times from 1974 to 1991. Helen F. Ladd is professor of public policy studies and economics at Duke University’s Sanford Institute of Public Policy.

© 2000 by The Brookings  Institution Press. All rights reserved. Reprinted with permission.