Obama’s Hidden Hand of Privatization

Rick Cohen

Is Shaun Donovan, widely thought of as the most capable of President Obama’s cabinet appointees, a renegade free marketeer hiding among the bushes of otherwise socialist members of the Obama Administration? It doesn’t appear to be that way.

At the Department of Education, Secretary Arne Duncan has been leading the “Race to the Top,” with support for charter schools at the core of the race (states that aren’t fully supportive of expanded charter schools are, per Duncan, out of the running). DOE’s “Race” as well as the highly anticipated Promise Neighborhoods program—meant to replicate the success of Geoffrey Canada’s Harlem Children’s Zone’s use of its charter school as its unifying central program component—both adopt what Denise Ravitch has referred to as a core privatizing concept of the conservative education canon. In her characteristically unvarnished style, Ravitch observes, “The Obama administration is promoting the privatization of large segments of American education and undermining the profession of teaching.”

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Donovan’s thinking about “market discipline” is well reflected in the new flagship initiative of the Corporation for National and Community Service. The Social Innovation Fund may not consume a significant piece of the federal budget, but it benefits from extensive Administration press coverage and personal involvement from the Michelle Obama. The Fund recently announced $45 million in matching foundation funding commitments from five foundations, four of them strongly focused on private sector entrepreneurship models in the nonprofit and public sectors, including, not surprisingly, charter schools. 

Although Donovan was intellectually dressed down by Frank for proposing to privatize public housing, he is hardly the only federal official to be upbraided for President Obama’s privatization proposals. Astronauts, Jim Lovell and Neil Armstrong savaged the President’s proposed privatization of much of the work of the National Aeronautics and Space Administration (NASA), causing the White House to backtrack much like Donovan’s HUD. 

A Harvard University senior fellow, Amy Wilkinson, characterized President Obama after his first year in office as “the new evangelist for entrepreneurship.” The characterization fits, with one significant caveat. Despite all the talk about social entrepreneurs, the Obama Administration’s implementation proposals, when stripped of their gauzy language, strongly lean toward privatizing, that is, giving to the corporate sector swaths of the social arena that used to be the province of the public or nonprofit sectors.

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Leveraging private capital into the public arena is smart fiscal politics. But turning over the public arena to the private sector because somehow it knows better how to deliver social benefits because of market magic flies in the face of the nation’s experience with the corporate-delivered economic freefall and the now ongoing circus of BP’s inability to stop its undersea oil well from gushing 25,000 barrels of crude into the Gulf of Mexico every day. 

Read Part I. Be sure to read part III, Whither Privatization’s Opponents, where I’ll discuss opposition to privatization and implications for the sector.