NCPA - National Center for Policy Analysis

Business Discovers Education

November 4, 1999

Corporations, pension funds and the general public are suddenly pouring billions of dollars into for-profit educational ventures. They are setting up law schools and new elementary schools, training factory-floor employees and taking over the operation of existing junior and senior high schools.

"Changes in education are coming as surely as the Berlin Wall went down," says William F. Weld, the former governor of Massachusetts. In office eight years ago he encountered opposition to the idea of public schools being managed by for-profit companies. Now he is part of a group which has raised $150 million to invest in for-profit education -- and which seeks to raise another $100 million by early next year.

Why the sudden emphasis on profit opportunities in education?

  • Experts say that in many ways the race to invest marks the triumph of a market mentality that has consumed the nation in the late 20th century.
  • Education's traditional custodians have by and large fallen down on the job and business people, adept at problem solving, think they can far outperform unionized teachers, bureaucratic school boards and uninspired politicians.
  • Professionals who want to change careers are flocking back to classrooms -- witness the fact that nearly half of all students in higher education today are over age 25, up from 28 percent in 1970.
  • Corporations no longer see training as a cost to minimize -- but as a competitive and productivity-enhancing advantage to exploit.

The education and training industry accounts for 10 percent of U.S. GDP, according to "The Book of Knowledge," a report by Michael T. Moe of Merrill Lynch. Michael R. Sandler, chief executive of EduVentures in Boston, estimates that $6 billion has been invested in private education companies by venture capital concerns and other investors.

Source: Edward Wyatt, "Investors See Room for Profit in the Demand for Education," New York Times, November 4, 1999.


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