[Viewpoint] The blackboard monopolists

U.S. President Barack Obama, like many Western leaders nowadays, made improving education one of his main promises to voters during his election campaign. But other domestic issues - health-care reform, budget battles and high unemployment - have understandably loomed larger. And the United States is not alone: education reform is being held up in the United Kingdom and continental Europe as well.

Improving education remains one of the clearest ways that governments can make a lasting positive economic impact. A well-functioning education system is the most effective way to help equip people with the knowledge and skills they need to boost incomes and compete in a globalized economy. The key to such a system is embracing the role that competition can play in delivering better education to students.

That means, of course, considering the role of teacher unions as well - an issue that elicits very different reactions from the left and the right. On the left, many worry that President Obama, U.K. Prime Minister David Cameron, Swedish Prime Minister Fredrik Reinfeldt and other leaders are already focusing too much on increasing accountability: they view any reforms that treat teachers as part of the problem with suspicion. On the right, it often seems the opposite: any policy - such as vouchers - must be good if teachers oppose it.

Common ground can be hard to find in such debates if both sides disagree fiercely over basic principles. But competition is one principle that ought to command broad political support, because of the benefits that it tends to deliver for ordinary people. Many on the left nowadays seem especially confused about the advantages of competition and many progressives’ approach to education is an excellent example of this.

In the United States, for example, the left today looks back fondly on Franklin Roosevelt’s New Deal - and the big government that it ushered in during the Great Depression and beyond. But the left should also heed events earlier in the twentieth century, during the Progressive Era, when “trust busting” was all the rage.

One reason big business was considered a threat at that time was its monopoly power over assets that were crucial to many ordinary Americans. Farmers did not want to pay steep rates to transport their crops to market, and resented the railroads’ market power. Likewise, workers wanted employers to compete for their services by offering higher wages and better conditions. They fought back against large businesses that threatened to monopolize access to physical capital: the plants, machines and equipment that workers needed to be more productive.

Politics mattered as much as policy: when their pricing leverage was combined with political clout, the power of big business seemed even more threatening. The fear that big businesses were harming the general welfare by stifling competition - and were politically powerful enough to entrench their monopoly power - allowed reformists from the left and right to find some common ground.

Modern progressives, surveying the economic and political landscape of the past few years, see the potential for another assault on big business, marrying populist outrage with the political muscle of the organized left, such as labor unions. But, while their antipathy to big business appears to honor their intellectual roots, progressives have lost the plot when it comes to competition.

Unlike a century ago, when access to physical capital was the most obvious way to boost a worker’s productivity and income, ordinary workers’ most important asset nowadays is education. Yet, instead of urging schools and teachers to compete with each other on behalf of students (tomorrow’s workers), many insist on defending teachers’ monopoly over access to education - that is, access to investments in income-boosting human capital. Just as with the early industrialists, moreover, teacher unions in many countries have enough political clout to resist reforms that erode their monopoly power.

Some unions are coming to understand the need for change, or at least concession. In Illinois, the teacher unions recently backed a bill that included rules making it harder to strike and easier to get rid of underperforming teachers. But the Chicago Teachers Union subsequently withdrew its support.

Of course, merely loosening unions’ grip on policy and finding ways for teachers and schools to compete over who can provide the best education will not deliver the knowledge and skills that modern workers need. Reformers will also need to keep experimenting to find the right way to measure standards - to make sure that teachers are competing on the correct dimensions - and to provide the many other kinds of organizational innovations and support that schools, teachers, and students need.

More competition, however, clearly seems to be part of the way forward.

By accepting this, progressives could forge a consensus with centrists and help to deliver better results for a core constituency: ordinary workers. It is time for them to recognize that a powerful monopoly holding those workers back is the one they have been mistakenly fighting to defend.

*The writer teaches at the University of Chicago’s Booth School of Business. This column was co-written by Brian Barry, executive director of the Initiative on Global Markets.

By Raghuram Rajan