The Cost of Success: How Letting Billionaires Shape Early Childhood Education Harms Kids - and Democracy

Three weeks after New York City expanded its historic preschool initiative to three-year-olds, Richard Buery held forth on his signature achievement at the Puck Building, owned by Charles Kushner and his son, Jared, Donald Trump’s son-in-law.  Bill de Blasio’s deputy mayor of strategic policy initiatives, architect of “PreK for All,” exhaled.

Many had expected him to fail.  All eyes were on America’s largest school district. Critics predicted a train wreck, the inevitable result of a rapid scale-up—a sacrifice of quality for access.  I welcomed this bold experiment, a key element of the mayor’s agenda to combat inequality.  Here was a model of government as a force for change, confirming early childhood education as a public good.  

Yet I worried.  Wages for preschool teachers in community-based organizations, home for the majority of four-year-olds, hovered around the poverty level, thousands of dollars less than their public school peers.  Charter schools were grabbing up the city’s limited space, overcrowding a threat to the small class sizes in which young children thrive.  And how would they fare in the most segregated school district in the country?  

Something else gnawed at me.  Venture capitalists and hedge funders, their millions and billions already shaping toxic education policy, were beginning to encroach upon the precincts of early childhood.  Pay for Success contracts—known by the more genteel name of social impact bonds—were lurking, tantalizing a sector long starved for public investment.

Growing drones

Buery regaled the audience with an anecdote about his discovery of reading as a young child in East New York, a Brooklyn community of concentrated poverty.  He spoke of the city’s notoriously difficult  preschool application process, of the hoops parents have to jump through at the Berkeley-Carroll School in upscale Park Slope, where tuition for full-day prekindergarten is $41,315—nearly $30,000 more than the cost per child in the public sector.

The administration’s vision for combatting inequality would seem irreproachable. But the deputy mayor’s modus operandi is troubling, as is his startling remove from conditions in the preschool classrooms he brought forth.

In his remarks, Buery mentioned one of his mentors, with whom he had apparently discussed the challenge of bringing high-quality universal prekindergarten to scale.  Look at how rich kids are educated, he told him.  

Child-centered, experiential learning, on a timeline that allows for the natural variability of development, has become a province of the elite.  The daughters of presidents—including Malia and Sasha Obama—have thrived in the dynamic classrooms of the progressive Sidwell Friends in Washington, D.C.  Silicon Valley executives send their kids to the Waldorf  School of the Peninsula, in northern California, which claims to foster “the capacities needed for a successful, purposeful, and joyful life, ignites intrinsic passion for learning, and inspires responsibility for self, community and the world.”

In the early years at schools like this one, inspired by Austrian philosopher Rudolf Steiner, they frown on mechanistic learning, offering knitting and beeswax modeling.  “At Google and all these places, we make technology as brain-dead easy to use as possible,” Alan Eagle, a top executive of the company once told a reporter. “There’s no reason why kids can’t figure it out when they get older.”  

Today, such experiences are increasingly off limits for preschoolers who live in the shadow of the Common Core. The demands of standards-based accountability, entrenched segregation, and the proliferation of charter schools with harsh discipline and developmentally inappropriate curricula—Eva Moskowitz’s Success Academy network in New York City an egregious example—are  transforming our youngest, and most vulnerable, children into joyless drones, their spirits crushed by benchmarks, testing, drills, rote learning, and the absence of play.

Big money, small vision

The progressive impulse is routinely squashed for those without resources, especially in the home of Wall Street, one of whose titans dominated education policy as Buery was making his career in public service.  With its 79 billionaires, the city leads the world in the members of that rarified species, their combined wealth just under $365 billion.  Former mayor, Michael Bloomberg, worth $40 billion, is the town’s richest individual.  Their influence is vast and deep.

De Blasio butted up against them early on.  To fund preschool for all, he sought to increase the income tax on residents making more than $500,000.  He asked former Goldman Sachs executive Alicia Glen, whom he strategically tapped for deputy mayor for housing and economic development, to crunch the numbers.  The tax increase was equivalent, she found, to the cost of a small latte at Starbucks, or $3.50 a day at the time.  

Andrew Cuomo, New York’s governor, put the kibosh on de Blasio’s plan.  As George Joseph wrote in an exposé in the Nation in 2015, Cuomo was indebted to New York City’s “cozy hedge-fund community,” from which he had received $5 million in individual campaign donations. Their agenda, to privatize the state’s education system—“one of the only remaining public monopolies,” as the governor described it—was secure.  To that end, Cuomo has starved the city and state’s public schools, owed, respectively, $1.9 and $4.3 billion in foundation aid, based on a Supreme Court decision made a decade ago, in response to a fiscal equity case first brought by New York City parents in 1993.

As a nonprofit executive and policymaker in New York City, Buery also has gotten cozy with this tightly connected ecosystem.  In his talk at N.Y.U., he mentioned a new grant from the Robin Hood Foundation: $2.5 million over a period of five years to ramp up computer science in 40 of the city’s elementary schools.  Larry Robbins chairs Robin Hood’s board.  As Forbes noted this past summer, his hedge fund firm, Glenview Capital Management, had come out of a recent slump, its assets rising to $11.5 billion.  

Robin Hood was founded by Paul Tudor Jones II, who runs an investment firm where venture capitalist Robert Dugger was a partner in the 1990s.  An economist by training, Dugger professes a strong interest in early child development, and has been a prime mover in promoting Pay for Success contracts to support initiatives—including preschool—for young children and families.

These investment vehicles are designed to address a range of issues such as recidivism, homelessness, and achievement gaps.  Local, state, and federal governments partner with private investors to fund programs over a period of years. If the projected outcomes materialize—kindergarten readiness, reduced special-education and grade retention among them—the investors reap the benefits. If not, the public partners and taxpayers are let off the hook, and the investor takes the loss.  

Buery has flirted with Pay for Success. In 2011, two years after he began his tenure at the Children’s Aid Society, he secured a grant from the Rockefeller Foundation to develop a social impact bond to scale up its juvenile justice program.  “We’re actively moving it forward,” he told Crains New York Business. CAS’s report on lessons learned, which was issued in 2013—it is cited as a case study in a technical guide to social impact bonds published by the Ontario-based MaRS Centre for Impact Investing—has mysteriously disappeared from the website of the Children’s Aid Society.

The price of success

Social impact bonds, pioneered in England in 2010 at the Peterborough Prison, 75 miles outside of London, have moved, inexorably, across the Atlantic.  By 2012, Goldman Sachs had launched the first U.S. Pay for Success experiment, designed to reduce teenage recidivism by 10 percent at New York City’s troubled Riker’s Island prison.  It was a failure; the control group fell apart, and the education department pulled out.  As Eduardo Porter noted in the New York Times, “designing social policy around precisely measurable results and narrow incentive mechanisms to draw private sector money" might be problematic, “orphaning the messier, hard-to-measure challenges.”

In 2013, as Goldman Sachs was trying to reverse the trajectories of some of New York City’s incarcerated youth, I sat in on a telephone meeting of the Human Capital and Economic Opportunity Global Working Group on the theory and practice of social impact finance.  Robert Dugger, who co-chairs the group with Nobel laureate James Heckman, at the University of Chicago, and two professors, Steven N. Durlauf and Kenneth J. A, at the University of Wisconsin-Madison, moderated the conversation.  

Among the presenters was Janice Dubno.  She had been working on a “remarkable project” in Salt Lake City’s Granite School District that she had brought to “quite impressive maturity,” as Dugger described it, as though he were talking about a blue chip stock.  A former investment banker at Goldman Sachs, she had enlisted the support of her employer and J.B. Pritzker to support the district’s high-quality preschool program.

Six hundred children would be funded in the first year, Dubno noted in her report on the five-year project. The investors would “get paid back based on the cost avoidance that’s achieved in special-education placement,” she said.  Dubno told the group that the venture had been narrowly defeated in the legislature.  “One of the issues,” she said, was the “fancy model.” It was, she conceded “a little too abstract for people.” They were able to make the sell, however, to Salt Lake County based on a benefit-cost analysis showing the savings the county could expect to achieve by investing in 600 low-income kids at risk.

Two years later, Goldman was under the microscope of nine early-education experts, who reviewed the program at the request of the New York Times, which issued a gentle reprimand to the hometown investment banking firm. They had grossly overstated the effect of its investment, claiming 99 percent of the children avoided special-education placement in kindergarten. Even well-funded preschool programs, the researchers said—not the case in Utah—can produce reduction of, at most, 50 percent.  More common are reductions of 10 to 20 percent.  The bottom line: the payments to Goldman and Pritzker “were probably also higher than they should have been.”

Commodifying childhood

By last summer, the U.S. Department of Education had gotten on board. Under the aegis of John King, former education commissioner of New York, they launched a Pay for Success grant competition, $2.8 million available for state, local, and tribal governments interested in exploring the investment vehicle’s feasibility.  Early this year, as Betsy DeVos replaced King in the top job, the department distributed funding ranging from $300 to $400 million to 8 recipients.  Rigorous evaluation, as the Urban Institute’s “Pay for Success Early Childhood Education Toolkit,” makes clear, is the sine qua non of the transaction, precise metrics and data collection essential for determining the venture’s outcome.

To quantify is to have the illusion of mastery over all that defies our control, yet the metrics fall short, the ends perverted: they cannot capture children’s unique capacities, or the uneven trajectory of their development—as messy and challenging as it gets.  

Three- and four-year-olds are not commodities.  They have had the grave misfortune of entering the academic arena in a period of measurement gone berserk. What young children need most is time, and sustained support for experiences that nourish their bodies, minds, and spirits—their due, according to the Convention on the Rights of the Child, which the U.S has not yet ratified more than 25 years after the resolution was adopted by the U.N. General Assembly.

The benchmarks and assessments of the Common Core violate this right—especially for our youngest students.  So do social impact bonds.  If the payback is contingent upon a particular timetable, and the desired outcomes are not forthcoming, where does that leave the kids?

Those who have made their millions and billions in private equity, investment banking, and hedge funds see themselves as the saviors of our most vulnerable children.  Yet their fancy models are putting our youngest learners at greater risk—along with democracy and the public good.