August 2009 • Volume 16 Number 8

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PerspectiveAugust 2009 Vol. 16, No. 8

Brandon Dutcher .................................. Editor

Perspective is published monthly by the Oklahoma Councilof Public Affairs, Inc., an independent public policy organi-zation. OCPA formulates and promotes public policyresearch and analysis consistent with the principles of freeenterprise and limited government.

OCPA TrusteesBlake ArnoldOklahoma City

Mary Lou AveryOklahoma City

Lee J. BaxterLawton

Steve W. BeebeDuncan

John A. BrockTulsa

David R. Brown, M.D.Oklahoma City

Aaron BurlesonAltus

Paul A. CoxOklahoma City

Jay T. EdwardsOklahoma City

Ann FeltonOklahoma City

Josephine FreedeOklahoma City

Kent FrizzellClaremore

John T. HanesOklahoma City

Ralph HarveyOklahoma City

John A. Henry IIIOklahoma City

Henry F. KaneBartlesville

Robert KaneTulsa

Tom H. McCasland IIIDuncan

David McLaughlinEnid

Lew MeibergenEnid

Lloyd Noble IITulsa

Robert E. PattersonTulsa

Bill PriceOklahoma City

Patrick RooneyOklahoma City

Melissa SandeferNorman

Robert SullivanTulsa

Lew WardEnid

William E. Warnock, Jr.Tulsa

Gary W. Wilson, M.D.Edmond

Daryl WoodardTulsa

OCPA Adjunct Scholars

OCPA FellowsSteven J. Anderson, MBA, CPA

Research Fellow

J. Rufus Fears, Ph.D.Dr. David and Ann Brown Distinguished Fellow

for Freedom Enhancement

J. Scott Moody, M.A.Research Fellow

Wendy P. Warcholik, Ph.D.Research Fellow

OCPA Legal CounselDeBee Gilchrist � Oklahoma City

OCPA StaffForrest Claunch / Executive DirectorBrett A. Magbee / VP for Operations

Brandon Dutcher / VP for PolicyMargaret Ann Morris / Director of Development

Sandra Leaver / Event CoordinatorDacia Dodson / Executive Assistant

Clara Wright / Receptionist

1401 N. Lincoln Boulevard � Oklahoma City, OK 73104(405) 602-1667 � FAX: (405) 602-1238

www.ocpathink.org � ocpa@ocpathink.org

Will Clark, Ph.D.University of Oklahoma

David Deming, Ph.D.University of Oklahoma

Bobbie L. Foote, Ph.D.University of Oklahoma (Ret.)

Kyle Harper, Ph.D.University of Oklahoma

E. Scott Henley, Ph.D., J.D., D.Ph.Oklahoma City University (Ret.)

James E. Hibdon, Ph.D.University of Oklahoma (Ret.)

Russell W. Jones, Ph.D.University of Central Oklahoma

Andrew W. Lester, J.D.Oklahoma City University (Adjunct)

David L. May, Ph.D.Oklahoma City University

Ronald L. Moomaw, Ph.D.Oklahoma State University

Ann Nalley, Ph.D.Cameron University

Bruce Newman, Ph.D.Western Oklahoma State College

Stafford North, Ph.D.Oklahoma Christian University

Everett Piper, Ph.D.Oklahoma Wesleyan University

Michael Scaperlanda, J.D.University of Oklahoma

Andrew C. Spiropoulos, J.D.Oklahoma City University

‘Cap and Trade’ Is Not the AnswerBy Jay T. Edwards

Many in Congress are intent on

imposing a tax on compa-

nies that produce carbon emis-

sions so as to improve the climate

and reduce global warming. The

U.S. House of Representatives has

sent this “cap and trade” bill to the

U.S. Senate. Under the plan,

acceptable levels of carbon

dioxide emissions will be deter-

mined and capped by the govern-

ment. Emissions over the cap will

be taxed unless the offender can

trade a credit with another com-

pany under the cap. This tax

scheme stems from a growing

concern about global warming

and the effect on global tempera-

tures by carbon dioxide in the

atmosphere.

Concern for global temperature

is not new to my generation. In

1970, scientific consensus held

that the planet was cooling and

we needed to find more sources of

energy or we would freeze to

death. The 30-year cooling fear

ended in the late 70s and was

replaced by the now ongoing

warming trend. Since the planet

has warmed only one degree over

the last 100 years, I wonder if

Congress isn’t overly concerned

about our planet’s ability to adjust

its thermostat. According to global

circulation models, if carbon

dioxide concentration in the

atmosphere were doubled it would

only result in about a one-degree

increase in average global tem-

perature over the next 100 years.

If the planet can adjust to our

intrusions, it brings up the ques-

tion about the need for carbon

emission regulation. Most every-

thing we do has a carbon foot-

print. Depending on how the “cap

and trade” tax is implemented, the

cost of everything will go up. A

low-carbon economy will be a

major setback to our standard of

living. Congress wants us to

reduce our carbon emissions by

80 percent by 2050. Since fossil

fuels constitute the greatest level

of carbon emissions, reductions of

this order cannot be achieved

until we have viable alternatives

for them. Consequently, with “cap

and trade” in place and no alter-

natives for energy production, the

government stands to raise huge

sums of revenue from emissions.

This will be useful in reducing the

massive federal budget deficit but

will devastate the economy.

The solution does not lie in wind

and solar power as alternatives

for fossil fuels. To generate com-

parable electricity to a typical

gas-fired power plant, a wind

farm would require by most

estimates about 40,000 acres of

land. Solar land requirements are

not much better. Currently, wind

and solar satisfy about one-sixth

of one percent of our energy

demand. The president proposed

to double that in the next four

years. That means, if he can do it,

the contribution will grow to one

third of one percent. Meanwhile,

demand is projected to grow by

30-plus percent in the next decade.

Let’s hope brighter minds

prevail on global warming and

the impact of carbon dioxide

before “cap and trade” becomes

law. �

Major General (Ret.) Jay T.

Edwards, USAF, was the founding

executive director of the Energy

Center at the University of Oklahoma.

He is an OCPA trustee.

To see how much “cap and trade” would cost your family,

visit http://www.taxfoundation.org/capandtrade

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J. RufusFears, Ph.D.World-renowned author, lecturer, and inspiring

professor of classics at the University of Oklahoma

September 17, 2009

Doubletree at Warren Place • Tulsa, Oklahoma

6:00 p.m. Reception • 7:00 p.m. Dinner • 8:00 p.m. Program

CON S T I T U T I O N DAY

“Securing the Blessings of Liberty

to Ourselves and Our Posterity:

Is It Still Possible?”

Oklahoma Council of Public Affairs, Inc.1401 N. Lincoln Boulevard • Oklahoma City, OK 73104

Office: 405-602-1667 • Fax: 405-602-1238www.ocpathink.org • ocpa@ocpathink.org

N O N - C O M P R O M I S I N GN O N - P A R T I S A N

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State Government Needs Your HelpNews reports tell us that a revenue shortfall is

likely for state government during the current fiscalyear. Reduced allocations tostate agencies are probable.

No word yet on whatOklahoma’s taxpayers—whohave no idea what it’s like toexperience revenue shortfallsin their family budgets—think ofthis catastrophic development.Granted, Oklahoma has 66,084too many state and localgovernment employees when

compared to the national average, but my guess isthat taxpayers—none of whom have lost their jobsrecently—will want to do everything possible tomake sure government payrolls remain intact.

Even though a tax hike is pretty much a non-starter in Oklahoma, all is not lost: Oklahoma lawallows citizens to make voluntary contributions tostate government. The statute (§60-383) says that“gifts of cash or the equivalent of cash shall bemade to and receipted for by the Director of StateFinance.” So please, write the most generous checkpossible and send it to the Office of State Finance,2300 N. Lincoln Boulevard, Room 122, OklahomaCity, Oklahoma 73105.

Together, we can make a difference.—Brandon Dutcher

Is Oklahoma Addicted to Federal Spending?By J. Scott Moody and Wendy P. Warcholik

Oklahoma’s share of President Obama’s federal

“stimulus” package will come to approximately

$2.6 billion over two years—or an average of $1.3

billion per year. This certainly sounds like a lot of

money, but it pales in comparison to what the federal

government already sends to Oklahoma.Unfortunately, Oklahoma is already highly depen-

dent on federal largesse to keep a large part of itseconomy moving. If policymakers aren’t careful, thestimulus package will only worsen this dependency.

Chart 1 shows the total amount of federal spendingin Oklahoma from federal fiscal year (FFY) 1981 (thefirst year of available data) to 2008. In FFY 2008,Uncle Sam spent a whopping $31.758 billion inOklahoma, or the equivalent of 24 percent of allincome earned in the state (see Chart 2). Between FFY2006 and 2007, the increase alone in federal spendingin Oklahoma was $1.609 billion—even before theBush or Obama stimulus packages!

Federal spending grew 352 percent to $31.758billion in FFY 2008 from $7.027 billion in FFY 1981.Even after adjusting for the growth in the economy,

federal spending grew as a percent of personal incomeby 11.6 percent—to 24 percent from 21.5 percent.

Chart 3 breaks down federal spending by type as apercent of personal income. (Unfortunately, federalspending by type by state was not available untilafter FFY 1988 when these statistics were merged intoa single report.) The single largest type of federalspending in Oklahoma is for “retirement and disabil-ity,” which consists mostly of Social Security spend-ing. Between FFY 1989 and FFY 2008, spending onretirement and disability has declined as a percent ofpersonal income by 7.1 percent—to 8.6 percent from9.2 percent (percentage change may appear slightlyoff due to rounding).

The second-largest type of federal spending is for“other direct payments,” which consists mostly ofMedicare payments but also includes unemploymentcompensation, food stamps, and other expenditures.Between FFY 1989 and FFY 2008, spending on otherdirect payments has increased as a percent of personalincome by 28.2 percent—to 5.7 percent from 4.4 percent.

The third-largest type of federal spending is for“grants to state and local governments,” whichconsists mostly of Medicaid spending and, to a muchsmaller degree, the Department of Transportation.Between FFY 1989 and FFY 2008, spending on grantsto state and local governments has increased as apercent of personal income by 32 percent—to 4.7percent from 3.6 percent. Continued growth at thispace may soon see this category rival other directpayments.

The fourth-largest type of federal spending is for“salaries and wages.” Nationally, this consists mostlyof non-defense personnel. In Oklahoma, however,federal salaries and wages are dominated by theDepartment of Defense at $2.2 billion, versus $1.7billion for federal civilian employees. Between FFY1989 and FFY 2008, spending on salaries and wageshas decreased as a percent of personal income by40.5 percent—to 2.9 percent from 4.6 percent.

Finally, the fifth-largest type of federal spending isfor “procurement,” which consists mostly of the De-partment of Defense. As with salaries and wages,Oklahoma has an even higher proportion of defenseprocurement than the rest of the nation. Between FFY1989 and FFY 2008, procurement has increased as apercent of personal income by 24.6 percent—to 2.2percent from 1.7 percent. Though this is a largepercentage gain, it stems from the fact that procure-ment spending was starting at such a low level.

Overall, Oklahoma’s dependency on federal spend-ing is alarming. Many of these programs are ones

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that Oklahomans likely wouldnot have created or expanded ifthey had to pay for them di-rectly. In fact, the federal gov-ernment is actually subsidizingthese programs with taxes paidby residents of other states.According to the Tax Founda-tion, Oklahoma receives $1.48for every $1 sent to Washington,D.C.

More disturbingly, a closerexamination of the compositionof spending points to a co-dependency between federaland state spending. The cat-egory of spending with thefastest growth was for grants tostate and local spending, whichcontains Medicaid spending.Between FFY 1998 and FFY2008, the federal portion ofMedicaid spending in Okla-homa grew 112 percent—to$3.519 billion from $1.657billion. This growth is problem-atic because for every $1 spenton Medicaid, Oklahoma’s stategovernment must pick up ap-proximately 27 cents of the tab.

Yet, as part of the recentstimulus package, the federalgovernment will lower the state’sportion of the Medicaid matchover the next two years, withencouragement from Uncle Samto expand Medicaid services asopposed to shifting the statedollars to other uses. Oklahoma’spolicymakers should not listento Washington, D.C., as it willonly serve to make Oklahomamore dependent on federallargesse. Instead, policymakersshould use this one-time stimu-lus money to enact reforms,especially in Medicaid, that willhelp wean Oklahoma fromfederal dependency. �

Economists J. Scott Moody (M.A.,

George Mason University) and

Wendy P. Warcholik (Ph.D., George

Mason University) are OCPA

research fellows.

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This Outrageous Spending Must StopBy Mickey Hepner

When most people find themselves deep in debt,

the first thing they do is look for ways to cut their

spending. Unfortunately, the federal government is

doing just the opposite.

According to the Congressional Budget Office, the

national debt this year will approach a record $8

trillion, with $1.8 trillion of that added this year alone.

Amazingly, just eight years ago our national debt was

only $3.3 trillion, meaning that in just the past eight

years we have more than doubled the debt it took our

nation 225 years to amass. To make matters worse,

the CBO projects that the debt will continue to rise for

the foreseeable future, nearly

reaching $12 trillion by 2019, and

this includes large tax increases

scheduled for 2011.

This must stop.

Contrary to what some of our

elected officials believe, every

penny the government spends must

be paid for in taxes on somebody,

somewhere, at some time. If we do

not pay the taxes today, and decide

to incur a debt instead, we are

simply passing the tax off onto

future generations.

This must stop.

What is even more troubling is

that the larger our debt grows, the

larger the interest payments we

must make. The CBO estimates that

by 2019 taxpayers will be paying $566 billion of

interest each year on our debt—more than the federal

government spends on any current government

program except for Social Security and the military.

Remember, when we make these interest payments

we do not receive any government services. This is

money we will be effectively throwing away.

This must stop.

The most troubling thing about having a growing

national debt, though, is that it slows the rate of

economic growth, thereby making future generations

poorer. When governments run a debt, they must

borrow money to fund government programs. Yet,

when the government borrows money it is more

difficult for private businesses to borrow money,

making it more difficult for businesses to expand. This

process, what economists call the “crowding out of

investment,” leads to slower economic growth and

lower future incomes.

This must stop.

The only way we can stop this madness is to stop

spending so much money. The CBO estimates thatnext year all federal government outlays will total$3.5 trillion. They will be a little higher under theCongressional Budget Resolution approved recently.If we freeze total government spending at that levelwe still would not balance the budget until 2015—again assuming large tax increases in 2011. Still,freezing government spending at $3.5 trillion annu-ally will shave nearly $4 trillion off the national debtin the next 10 years. Notice that under a governmentspending freeze we would have the same nationaldebt in 2019 that we will have this year … we would

have stopped the madness.It is important to remember that

a true freeze on governmentspending does not mean that everyprogram must be frozen. We canspend more on defense if we needto. We can spend more on healthcare if we need to. We can spendmore on education if we need to.We can spend more on SocialSecurity payments if we need to.Under a spending freeze, though,every penny of increased spendingin these programs must be offsetby penny decreases elsewhere inthe budget.

Where can we cut? We can startwith farm subsidies. The federalgovernment will spend more than

$10 billion this year on farm subsidies, which theUSDA admits mainly go to large, wealthy farmers,instead of the small family farms. We can eliminatetens of billions more by eliminating programs fromthe stimulus package that are not scheduled to beginuntil after the economy already has recovered. Andwe eventually can save hundreds of billions byseriously exploring ways to control entitlementspending.

There is no doubt that some government spendingis important, necessary, and beneficial. There also isno doubt that we cannot afford the level of govern-ment spending currently being proposed in Con-gress. If we continue down this path of profligacy, wewill only make our children poorer. Speaking as afather of two young children who are counting on meto protect them, I will continue to say that this muststop. �

Dr. Hepner (Ph.D., University of Oklahoma) is an associ-

ate professor of economics at the University of Central

Oklahoma.

If we continue downthis path of

profligacy, we willonly make our

children poorer.

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Government Fraud: Bigger Than MadoffBy Chris Edwards and Tad DeHaven

Every year, criminals and cheats pilfer more than

$100 billion—that’s $40 billion more than Bernie

Madoff scammed off his investors—in federal ben-

efits to which they are not legally entitled. Medicare,

Medicaid, food stamps, refundable tax credits, and

many other programs are targets for looting.

Government fraud has been in the news lately

because analysts are expecting major abuses of the

Obama administration’s $787 billion stimulus plan.

One Deloitte expert argued that “swindlers, con men,

and thieves could siphon off as much as $50 billion”

of stimulus funds, which are vulnerable because

policymakers are under pressure to shovel it out the

door quickly.

Even more troubling is the potential for fraud and

abuse created by President Obama’s other big

spending proposals—particularly his giant health-

care plan. Obama wants to inject hundreds of bil-

lions more tax dollars into federal health care in-

stead of fundamentally reforming Medicare and

Medicaid—broken programs that are already subject

to Madoff-sized larceny. That is incredibly unfair to

those of us paying the bills.

Take Medicare. The Government Accountability

Office reports that the program makes about $17

billion in improper payments each year. And that

doesn’t include problems in the new $60-billion-per-

year prescription-drug plan, which is a juicy target for

criminals. Harvard University’s Malcolm Sparrow, a

specialist in health-care fraud, recently testified to

Congress that official estimates are “lacking in rigor,”

are “comfortingly low and quite misleading,” and

exclude many kinds of fraud and abuse. He thinks

that as much as 20 percent of the federal health-care

budget is consumed by fraud, which would be $85

billion a year for Medicare.

The bottom line is that the enormous size and

complexity of federal health programs results in a

huge waste of taxpayer funds.

Medicare makes a staggering 1.2 billion electronic

payments each year, making it highly vulnerable to

cheating by health-care providers and organized-

crime rings. Criminals need only fill out the govern-

ment forms carefully and the “claims will be paid in

full and on time, without a hiccup, by a computer, and

with no human involvement at all,” according to

Sparrow. A perfect example is the recent case of a

high-school dropout in Miami who was able to

singlehandedly bilk Medicare out of $105 million

from her laptop by submitting 140,000 separate

claims for equipment and services.

Medicaid is also a huge abuse target. The GAO

puts Medicaid fraud at $33 billion—11 percent ofstate and federal spending on the program. Again,that is likely a substantial underestimate. A formerMedicaid investigator believes that up to 40 percentof New York State’s Medicaid budget is siphoned offin fraud and improper payments, but New Yorkprobably has a worse problem than elsewhere.Using Sparrow’s 20 percent estimate instead,Medicaid rip-offs top $60 billion a year nationwide.

How does all this fraud and abuse occur? Inmany ways, including billing for services andmedical equipment not provided, misrepresentingthe services provided, and double billing. That lastone is common.

Another trouble spot is Medicaid’s nursing-homebenefits, which are meant for people with lowincomes and few financial assets. Since nursinghomes are expensive, the program creates a bigincentive for higher-income families to falsify theirstatus and apply for the benefits. Indeed, a wholeindustry of financial consultants helps ineligibleseniors hide their income and assets so that theyqualify. The result is that the program loses about$10 billion a year to fraudulent claims.

The bottom line is that the enormous size andcomplexity of federal health programs results in ahuge waste of taxpayer funds. The inspector gen-eral of the Department of Health and Human Ser-vices recently told Congress: “Although it is notpossible to measure precisely the extent of fraud inMedicare and Medicaid, everywhere it looks theOffice of Inspector General continues to find fraudagainst these programs.”

Medicare and Medicaid are the biggest fraudtargets, but this problem plagues all governmentsubsidy programs. Official loss estimates for otherprograms include $12 billion for the Earned IncomeTax Credit, $5 billion for Supplemental SecurityIncome, and $14 billion for unemployment insur-ance. All in all, the cost to taxpayers is well over$100 billion a year, which translates into a theft of$1,000 or more from every household in Americaevery year.

We think that there are good policy reasons todramatically cut Medicare, Medicaid, and otherbenefit programs. But at the very least, the vastmagnitude of graft in these programs should giveevery policymaker pause before pumping evenmore taxpayer money into the federal subsidyempire. �

Chris Edwards is the director of tax-policy studies, and

Tad DeHaven is a budget analyst, at the Cato Institute.

While researching private schools in India for the World Bank, James Tooley wandered

into the slums of Hyderabad’s Old City and was shocked to find it overflowing with

small, parent-funded schools. So began the adventure lyrically told in The Beautiful Tree

and excerpted here—the story of Tooley’s travels from the largest shanty town in Africa to

the mountains of Gansu, China. It’s the story of children, parents, teachers, and entrepre-

neurs in the poorest corners of the globe who, in response to failed public education, are

not waiting for handouts. They are educating themselves—and succeeding under the

most challenging conditions imaginable.

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After a stint teaching philosophy of education at

the University of the Western Cape in South

Africa, I returned to England to complete my doctor-

ate and later became a professor of education.

Thanks to my experiences in sub-Saharan Africa

and my modest but respectable academic reputation,

I was offered a commission by the World Bank’s

International Finance Corporation to study private

schools in a dozen developing countries.

The lure of faraway places was too enticing to

resist, but I was troubled by the project itself. Although

I was to study private schools in developing countries,

those schools were serving the middle classes and

the elite. Despite my lifelong desire to help the poor,

I’d somehow wound up researching bastions of

privilege.

The first leg of the trip began in New York in Janu-

ary 2000. As if to reinforce my misgivings that the

project would do little for the poor, I was flown first

class to London in the

inordinate luxury of the

Concorde.

Forty minutes into the

flight, as we cruised at

twice the speed of sound

and two miles above

conventional air traffic,

caviar and champagne

were served. The boxer

Mike Tyson (sitting at the

front with a towel over his

head for much of the

journey) and singer

George Michael were on

the same flight. I felt lost.

From London it was on

to Delhi, Chennai, and

Mumbai. By day, I evalu-

ated five-star private schools and colleges that were

very definitely for the privileged. By night, I was put

up in unbelievably salubrious and attentive five-star

hotels.

But in the evenings, sitting and chatting with street

children outside these very same hotels, I wondered

what effect any of my work could have on the poor,

whose desperate needs I saw all around me. I didn’t

just want my work to be a defense of privilege. The

middle-class Indians, I felt, were wealthy already.

To me it all seemed a bit of a con: Just because they

were in a “poor” country, they were able to latch onto

this international assistance even though they as

individuals had no pressing need for it at all. I didn’t

like it, but as I returned to my room and lay on the

500-thread-count Egyptian-cotton sheets, my discom-

fort with the program was forced to compete with a

mounting sense of self-criticism.Then one day, everything changed. Arriving in

Hyderabad to evaluate brand-new private colleges atthe forefront of India’s high-tech revolution, I learnedthat January 26 was Republic Day, a national holiday.

Left with some free time, I decided to take anautorickshaw—the three-wheeled taxis ubiquitous inIndia—from my posh hotel in Banjara Hills to theCharminar, the triumphal arch built at the center ofMuhammad Quli Shah’s city in 1591.

My Rough Guide to India described it asHyderabad’s “must see” attraction, and also warnedthat it was situated in the teeming heart of the OldCity slums. That appealed to me. I wanted to see theslums for myself.

As we traveled through the middle-class suburbs, Iwas struck by the ubiquity of private schools. Theirsignboards were on every street corner, some on finespecially constructed school buildings, but others

grandly posted aboveshops and offices.

Of course, it wasnothing more than I’dbeen led to expect frommy meetings in Indiaalready—senior govern-ment officials had im-pressed me with theircandor when they toldme it was commonknowledge that even themiddle classes were allsending their children toprivate schools. They alldid themselves. But it wasstill surprising to see howmany there were.

We crossed the bridgeover the stinking ditch that is the once-proud RiverMusi. Here were autorickshaws in abundance, cattle-drawn carts meandering slowly with huge loads ofhay, and rickshaws agonizingly peddled by painfullythin men.

My driver let me out, and told me he’d wait for anhour, but then called me back in a bewildered tone asI headed not to the Charminar but into the backstreets behind. No, no, I assured him, this is where Iwas going, into the slums of the Old City. For thestunning thing about the drive was that privateschools had not thinned out as we went from one ofthe poshest parts of town to the poorest.

Everywhere among the little stores and workshopswere little private schools! I could see handwrittensigns pointing to them even here on the edge of theslums. I was amazed, but also confused: Why had no

New Faith, a private school in Kibera (the largest slum in Africa)in Nairobi, Kenya. Opposite page: Soweto Academy.

10

one I worked with in India told me about them?The young men at the bean-and-vegetable counter

hailed me and said there was definitely someone atthe Royal Grammar School just nearby, and that itwas a very good private school and I should visit.

They gave me directions, and I bade farewell. But Ibecame muddled by the multiplicity of possible rightturns down alleyways followed by sharp lefts, and soasked the way of a couple of fat old men sittingalongside a butcher shop.

Their shop was the dirtiest thing I had ever seen,with entrails and various bits and pieces of meatspread out on a mucky table over which literallythousands of flies swarmed. The stench was terrible.No one else seemed the least bit bothered by it. Theyimmediately understood where I wanted to go andsummoned a young boy who was headed in theopposite direction to take me there.

He agreed without demur, and we walked quickly,not talking at all as he spoke no English. In the nextstreet, young boys played cricket with stones aswickets and a plastic ball. One of them called meover, to shake my hand.

Then we turned down another alleyway (with moreboys playing cricket between makeshift housesoutside of which men bathed and women did theirlaundry) and arrived at the Royal Grammar School,which proudly advertised, “English Medium, Recog-nized by the Gov’t of AP.” The owner, or “correspon-dent” as I soon came to realize he was called inHyderabad, was in his tiny office. He enthusiasticallywelcomed me.

Through that chance meeting, I was introduced tothe warm, kind, and quietly charismatic Mr. FazalurRahman Khurrum and to a huge network of privateschools in the slums and low-income areas of the OldCity. The more time I spent with him, the more Irealized that my expertise in private education mightafter all have something to say about my concern forthe poor.

Mr. Fazalur Rahman Khurrum was the president of

an association specifically set up to cater to

private schools serving the poor—the Federation of

Private Schools’ Management, which boasted a

membership of over 500 schools all serving low-

income families. Once word got around that a foreign

visitor was interested in seeing private schools,

Khurrum was inundated with requests for me to visit.

I spent as much time as I could over the next 10

days or so with Khurrum, traveling the length and

breadth of the Old City, in between doing my work for

the International Finance Corporation in the new city.

We visited nearly 50 private schools in some of the

poorest parts of town, driving endlessly down narrow

streets to schools whose owners were apparentlyanxious to meet me. (Our rented car was a largewhite Ambassador—the Indian vehicle modeled onthe old British Morris Minor, proudly used by govern-ment officials when an Indian flag on the hood signi-fied the importance of its user—horn blaring con-stantly, as much to signify our own importance as toget children and animals out of the way.)

There seemed to be a private school on almostevery street corner, just as in the richer parts of the city.

I visited so many, being greeted at narrow en-trances by so many students, who marched me intotiny playgrounds, beating their drums, to a seat infront of the school, where I was welcomed in ceremo-nies officiated by senior students, while school man-agers garlanded me with flowers, heavy, prickly, andsticky around my neck in the hot sun, which I borestoically as I did the rounds of the classrooms.

Some of the private schools had beautiful names.Like Little Nightingale’s High School, named afterSarojini Naidu, a famous “freedom fighter” in the1940s, known by Nehru as the “Little Nightingale” forher tender English songs. Or Firdaus Flowers ConventSchool, that is, “flowers of heaven.” The “convent”part of the name puzzled me at first, as did the manynames such as St. Maria’s or St. John’s.

It seemed odd, since these schools were clearly runby Muslims—indeed, for a while I fostered the illusionthat these saints and nuns must be in the Islamictradition too.

But no, the names were chosen because of theconnotations to parents—the old Catholic and Angli-can schools were still viewed as great schools in thecity, so their religious names were borrowed to signifyquality to the parents. But did they really deliver aquality education? I needed to find out.

One of the first schools Khurrum took me to wasPeace High School, run by 27-year-old MohammedWajid. Like many I was to visit, the school was in aconverted family home, fronting on Edi Bazaar, themain but narrow, bustling thoroughfare that stretchedout behind the Charminar. A bold sign proclaimed theschool’s name.

Through a narrow metal gate, I entered a smallcourtyard, where Wajid had provided some simpleslides and swings for the children to play on. By thefar wall were hutches of pet rabbits for the children tolook after. Wajid’s office was to one side, the family’srooms on the other. We climbed a narrow, dark, dirtystaircase to enter the classrooms.

They too were dark, with no doors, and noise fromthe streets easily penetrated the barred but unglazedwindows. The children all seemed incredibly pleasedto see their foreign visitor and stood to greet me warmly.

The walls were painted white but were discolored

11

by pollution, heat, and the general wear-and-tear ofchildren. From the open top floor of his building,Wajid pointed out the locations of five other privateschools, all anxious to serve the same students in hisneighborhood.

Wajid was quietly unassuming, but clearly caringand devoted to his children. He told me that hismother founded Peace High School in 1973 to provide“a peaceful oasis in the slums” for the children. Wajid,her youngest son, began teaching in the school in1988, when he was himself a 10th-grade student inanother private school nearby.

Wajid having then received his bachelor’s in com-merce at a local university college and begun trainingas an accountant, his mother asked him to take overthe school in 1998, when she felt she must retire fromactive service. She asked him to consider the “lessblessed” people in the slums, and that his highestambition should be to help them, as befitting hisMuslim faith.

This seemed to have comeas a blow to his ambitions. Hiselder brothers had all pursuedcareers, and several were nowliving overseas in Dubai,London, and Paris, working inthe jewelry business. But Wajidfelt obliged to follow hismother’s wishes and so beganrunning the school. He wasstill a bachelor, he told me, because he wanted tobuild up his school. Only when his financial prospectswere certain could he marry.

The school was called a high school, but like othersbearing this name, it included kindergarten to 10thgrade. Wajid had 285 children and 13 teachers when Ifirst met him, and he also taught mathematics to theolder children.

His fees ranged from 60 rupees to 100 rupees permonth ($1.33 to $2.22 at the exchange rates then),depending on the children’s grade, the lowest forkindergarten and rising as the children progressedthrough school.

These fees were affordable to parents, he told me,who were largely day laborers and rickshaw pullers,market traders and mechanics—earning perhaps adollar a day. Parents, I was told, valued educationhighly and would scrimp and save to ensure that theirchildren got the best education they could afford.

Oddly, my “discovery” of private schools serving

the poor was no discovery at all, or at least not to

some people.

Leaving Hyderabad, I returned to Delhi to meet

again with World Bank staff before moving on to

continue my “field trip” in other countries. I was eagerand excited to tell them what I’d discovered in theback streets of the Old City of Hyderabad and to gaintheir insights on the way forward.

They weren’t at all impressed. I met with a group ofstaff members in their pleasant offices, replete withpotted ferns and pretty posters of cute children. Most,it was true, had never heard of private schools servingthe poor, and they were frankly puzzled about howschools charging only $10 a year could exist, exceptthrough charity.

And they told me that I had found some nongovern-mental organizations working in the slums, opening afew schools, that was all. They told me this, assumingI was simply misguided, even though I had told themit was something else altogether.

However, one of the group, Sajitha Bashir, hadherself seen a few private schools in Tamil Nadu—although she insisted there were none in Karnataka,

where she was now doing astudy, so they weren’t auniversal phenomenon.

In front of the group, shelaunched into a tiradeagainst such schools. Theywere ripping off the poor, shesaid, run by unscrupulousbusinesspeople who didn’tcare a fig for anything otherthan profits.

This didn’t gel at all with what I’d seen inHyderabad—how could such people devote theirweekends to science competitions and cyber-olympicsif money was their sole motivation? I was not at allconvinced and hesitantly related some details of whatI’d found. No one considered my information verysignificant. Those who hadn’t heard of these schoolssimply shrugged, and the meeting soon dissolved.

Afterward, Sajitha took me downstairs for coffee,clearly trying to be helpful in letting me see the errorsof my ways.

So the private schools might be there, some mighteven be better than the public schools, but that’s onlybecause they are selective. “They take the cream ofthe cream,” she said (and I had to force myself toremember that we were talking about parents earninga dollar or two a day), leaving the public schoolsmuch worse off.

Anyway, continuing the theme that only a few wereany good, she continued, “Most of the schools areshocking, there is a shocking turnover of teachers,they’re not trained, they’re not committed, and theproprietors know that they can simply get others be-cause there is a long list of people waiting to come in.”

But her main problem, clearly based on well-

Private schools for the poor

are burgeoning across the

developing world, and their

quality is higher than that of

government schools

provided for the poor.

12

intentioned personal convictions, was the question ofequality. Because some children, the poorest of thepoor, are left behind in the “sink” public schools, theprivate schools were exacerbating inequality, notimproving the situation at all, she said.

For that reason, we must devote all our effortstoward improving the public schools, not get carriedaway by what was happening in a few private schools.

For Sajitha it was clear: If many—or even a few—parents had higher aspirations for their children andwanted to send them to private schools, then “theyshould not be allowed to do so, because this is unfair.”

It’s unfair because it makes it even worse for thoseleft behind. This puzzled me. Why should we treat thepoor in this homogeneous way? Would we—Sajithaand I—be happy if we were poor, living in those slums,and unable to do the best for our children, whateverour meager funds allowed? But I said nothing.

As we parted, amicably enough, she told me thatthere was quite a bit of development literature aboutprivate schools for the poor in any case, and so Ishouldn’t go on too much about my “discovery” as Ihad done today, as people would only laugh. She

gave me a couple of references to look up.And she was right. I wondered at my own poor

detective work in not having located these referencesbefore. Perhaps my own lack of recognition for whatwas taking place was excusable. In the writings shepointed me to, and subsequent ones that I found,discussion of private schools for the poor was some-how veiled, or referred to tangentially, and ignored insubsequent writings.

It was certainly not headlined in any conclusions orpolicy implications—to which many of us lazily turnwhen we digest development writings. It was almostas if the writers concerned were embarrassed orbewildered by private schools for the poor.

They could write about these schools in passing,but instead of their leaping out at them as somethingof great significance—as they had to me when I first“discovered” them in Hyderabad—they didn’t seem toimpinge in any significant way on the writers’ policyproposals or future discussions.

Even for those who didn’t deny the existence ofprivate schools for the poor, everyone, it seemed,altogether denied their significance.

The more I explored those references, the morebaffled I became. It was one thing to argue that“education for all” could be secured only throughpublic education supported by international aid if youwere unaware of private schools for the poor.

But as soon as you knew that many poor parentswere exiting the state system to send their children toprivate schools, then surely this must register on yourradar as being worthy of comment in the “educationfor all” debate? Apparently not.

I read the Public Report on Basic Education (thePROBE Report), a detailed survey of educationalprovision in four northern Indian states, with growingamazement. It too was clear that “even among poorfamilies and disadvantaged communities, one findsparents who make great sacrifices to send some or allof their children to private schools, so disillusionedare they with government schools.”

Here was another source pointing to the phenom-enon of private schools for the poor—why weren’t theybetter known then? The PROBE team’s findings on thequality of public schools were even more startling.When their researchers had called unannounced on alarge random sample of government schools, in onlyhalf was there any “teaching activity” at all!

In fully one-third, the principal was absent. Thereport gave touching examples of parents who werestruggling against the odds to keep children inschool, but whose children were clearly learning nextto nothing. Children’s work was “at best casuallychecked.”

The team reported “several cases of irresponsible

Praise for The Beautiful Tree“With this important and passionately written

book, James Tooley has joined the late MiltonFriedman as a name to be reckoned with in supportof ‘market solutions’ for providing quality educationto poor children.”

—Hernando DeSoto, author of The Other Path

“Schools for the poor are the obsession of JamesTooley, an education specialist with a severe caseof wanderlust. He came across an unexpected

phenomenon: an unendingline of small, no-frills privateschools catering to poor kids.He found that, on average,they had smaller class sizes,higher test scores, and moremotivated teachers, all whilespending less than publicschools. With the zeal of aconvert, Tooley invokes themarket’s ‘invisible hand’ toexplain why private schoolsperform better: When par-

ents pay the fees that keep a school afloat, hereasons, the school becomes more accountable tothem. Tooley drowns readers in local color, detailingevery ‘bright-eyed’ school child and every ‘thindrifting smog’ above a shantytown. Tooley’s passioncomes off as genuine.”

—Carlos Lozada, Washington Post

13

teachers keeping a school closed or non-functionalfor several months at a time,” one school “where theteacher was drunk,” another where the principal gotthe children to do his domestic chores, “includinglooking after the baby.”

The team observed that in the government schools,“generally, teaching activity has been reduced to aminimum, in terms of both time and effort.” Impor-tantly, “this pattern is not confined to a minority ofirresponsible teachers—it has become a way of life inthe profession.” Butthey did not observesuch problems in theprivate schools servingthe poor.

When their research-ers called unan-nounced on theirrandom sample ofprivate unaided (thatis, receiving no govern-ment funding) schoolsin the villages, “fever-ish classroom activity”was always takingplace.

So what was thesecret of success inthese private schoolsfor the poor? The reportwas very clear: “In aprivate school, theteachers are accountableto the manager (who canfire them), and, throughhim or her, to the parents(who can withdraw theirchildren).”

“In a governmentschool, the chain ofaccountability is muchweaker, as teachers havea permanent job withsalaries and promotionsunrelated to perfor-mance. This contrast is perceived with crystal clarityby the vast majority of parents.”

Private schools for the poor are burgeoning across

the developing world. In many urban areas they

are serving the majority of poor schoolchildren. Their

quality is higher than that of government schools

provided for the poor—perhaps not surprisingly given

that they are predominantly businesses dependent on

fees to survive and, hence, are directly accountable to

parental needs. Those worried about how to extendaccess to education for the poor could usefully look tothe private education sector as a way forward. Byincreasing what private schools for the poor alreadyoffer, such as additional free and subsidized placesfor the poorest, sensitively applied targeted voucherscould broaden access on a large scale.

Crucially, because the private schools serving thepoor are businesses, making a reasonable profit, theyprovide a pioneering way forward for investor involve-

ment too. Investing inmicrofinance-style loanprograms so thatprivate schools canimprove their infra-structure is one wayforward. Providinginvestment for innova-tion in curriculum andlearning, which, ifsuccessful, could berolled out on a com-mercial basis, is asecond possibility. Andinvesting in a chain of

schools—eitherthrough a dedicatededucation invest-ment fund orthrough joint ven-tures with educa-tional entrepre-neurs—could helpsolve the informa-tion problem forpoor parents andimprove the existingeducational oppor-tunities.

Educating thepoor is a solvableproblem. �

James Tooley

earned his Ph.D. from

the Institute of Educa-

tion, University of London, and has held educational

research positions at the Universities of Oxford and

Manchester and the National Foundation for Educational

Research. Prior to entering educational research and policy

he was a public-school mathematics teacher in Zimbabwe.

Now an award-winning scholar featured in PBS and BBC

documentaries, he has written several books, and his work

has been covered in Newsweek, The Atlantic, The Wall

Street Journal, and the Financial Times. He currently lives in

Hyderabad, India, where he works with the entrepreneurs

and teachers who inspired his book The Beautiful Tree.

14

Entrepreneurial Spirit and a Mother’s LoveBy Patrick B. McGuigan

Four decades of involvement in education—as a

volunteer, writer, and sometime teacher—have

blessed me with riches that cannot be measured in

normal ways.

I have read stories to children at east Oklahoma

City schools, then walked to lunch with a dozen giggling

children clinging to hands, fingers, and suspenders. I

taught elementary, middle, and secondary students at

an alternative school for troubled and “at-risk” youth.

I substituted at public, charter, and private schools,

meeting dreams and despair, trial and triumph.

I’ve lectured to sometimes idealistic and hopeful,

sometimes skeptical and bored, college students

about history or drama, about writing or romance, or

about a call of the heart found in that tender tug from

the squeeze of a child’s hand to “read just one more.”

Frustrated with bureaucratic lethargy and angry

with those who have surrendered to the despair of

inner-city poverty and family col-

lapse, I’ve found and then reported,

sometimes in the most unexpected

circumstances, examples of heroic

service to children who lack stable

living environments.

In the Deborah Brown Community

School in Tulsa and at public and

private schools in Oklahoma City, I

have witnessed the miracle of learning in defiance of

life’s greatest obstacles. I have seen the future, or part

of it, at St. John Christian Heritage Academy, then

dreamed of justice for hopeful and productive people.

But for all our problems, nothing I have encoun-

tered in American ghetto schools or in the lives of our

nation’s urban poor can compare with the squalor

found in descriptions given by James Tooley in his

new book The Beautiful Tree, excerpted in this month’s

issue of Perspective.

Tooley describes a remarkable odyssey uncovering

productive but unregistered private schools all over

the world, places where the children of desperately

poor parents make lives better through mathematics

and composition, English and French, science and

hope, while preparing for success in work and life.

Tooley crossed stinking ditches, passed open

sewers, encountered reeking slaughterhouses, and

circled putrid fish boats all over the world, only to find

enclaves of excellence guided by great minds the

equal of Marva Collins of Chicago and Tracy

McDaniel of Oklahoma City. The schools Tooley

visited were islands of calm in the midst of turmoil,

“areas that lacked decent sanitation and clean water

supply, adequate roads, electricity.”

Some he met were Muslim, some secular, some

Christian or Christian-influenced, some libertarians

longing for freedom from government dictates and

irrational cultural norms.

All seemed to share the perspective of one head-

master, a man named Wajid at “Peace High School”

in India, who told Tooley he became a private school

educator because, well, “Sometimes, government is

the obstacle to the people.” Tooley took the name for

his book from a figure of speech Mahatma Gandhi

used in 1931 to describe ancient Indian traditions of

learning and erudition.

In 2009, members of the British Conservative Party,

transformed in their worldview by Tooley’s book and

related studies, wrote with wonder in a recent mani-

festo: “In the poor urban and semi-urban areas of

Lagos State, Nigeria, 75 percent of school children

attend budget private schools. In the slums of

Hyderabad, India, 65 percent of

schoolchildren are in private un-

aided schools. These schools

charge very low fees, affordable to

parents on low wages. ... These

schools are run for poor people, by

poor people.”

And what are the results coming

from these schools serving the

poorest of the poor?

Analysis of testing of 24,000 children in five coun-

tries found that even after adjusting for background,

“results achieved in private schools were significantly

higher, in every country studied and on every mea-

sure used, than in public schools.” Problems in their

peer public schools were low motivation, lack of

accountability, and high rates of teacher absentee-

ism. Competition among the “budget private schools”

provided “an incentive to keep standards high, in

order to retain their pupils.”

It should surprise no one that, as Tooley’s book

jacket reports: “Both the entrepreneurial spirit and the

love of parents for their children can be found in every

corner of the globe.”

Tooley found that spirit and love in Hyderabad, in

Lagos, in Ghana, and in China.

I found that spirit and love in north Tulsa and in

east Oklahoma City.

Let’s unleash that spirit and that love. Now. It’s a

small world, after all. �

Patrick McGuigan (M.A. in history, Oklahoma State

University) is an editor at The City Sentinel, a weekly

newspaper in Oklahoma City. He is the author of two books

and the editor of seven.

James Tooley found that

spirit and love in

Hyderabad and in Ghana.

I found them in north

Tulsa and in east

Oklahoma City.

15

Fire Drills and Straw MenBy Brett A. Magbee

A crisis mentality has taken over our nation.

Increasing numbers of policymakers think if

they holler FIRE, citizens will give them a mandate

to implement a big-government solution, which at the

end of the day merely exacerbates the original

problem. In fact, the only thing such “fire drills” really

do is to assist those same policymakers (who are

doubtless in part responsible for the problems in the

first place) in expanding their power and authority

over taxpayers.

Then there’s another strategy which policymakers

utilize to maximum advantage. It’s called “the straw

man.” It is used to avoid challenges to these big-

government fire drills from free-market think tanks

like OCPA. Wikipedia states, “A straw man argument

is an informal fallacy based on misrepresentation of

an opponent’s position. To ‘attack a straw man’ is to

create the illusion of having refuted a proposition by

substituting a superficially similar proposition (the

‘straw man’), and refuting it, without ever having

actually refuted the original position.”

Call such tactics political “posturing” or “games-

manship,” but either is clearly wrong because the use

of fear and/or misdirection shortchanges taxpaying

citizens from legitimate governance and in turn

makes a mockery of the process of representative

democracy.

That’s why OCPA has gained the support of thou-

sands of Oklahomans who are tired of politics as

usual and seek a source of reliable, nonpartisan

information and analysis they can depend on. They

know OCPA always puts principle over politics. That’s

why they support us. Do you? Your support expands

our work and our outreach, which furthers our effec-

tiveness and in turn encourages others to support us

as well. So please, give generously today! �

State Sen. John Ford (R-Bartlesville), chair-man of the Senate Education Committee,discusses a new Friedman/OCPA study withOCPA’s Brandon Dutcher (right).

Leslie Hiner, director of programs and state relations at the Friedman Founda-tion for Educational Choice, discusses education reform in the OCPA boardroomas journalist Patrick McGuigan (left) and OCPA trustee Bill Price listen.

At a recent state-capitol press conference, Chris-tian D’Andrea, policy analyst at the FriedmanFoundation for Educational Choice, outlines anew study published by Friedman and OCPA.

State Sen. Clark Jolley (R-Edmond), vice chairman of the Senate EducationCommittee, stresses the need for scholarships for special-needs students.Pictured also are (clockwise) Ginger Tinney of Professional Oklahoma Edu-cators; state Sen. John Ford; Peter J. Rudy of Oklahomans for ResponsibleGovernment; and David Dunn of the Oklahoma Family Policy Council.

Q U O T E U N Q U O T E

“Oftentimes, in government, you

don’t have the overall performance

driver like you do in the private

sector, which is profit. So we have

to look at different ways to make

sure we’re doing things as effi-

ciently as possible.”Claremore deputy city manager Matt Mueller,

quoted in a July 6 Tulsa World story. “For more

than a year and a half, Claremore has been

able to cut costs through outsourcing,” the World

reported. “The municipality has outsourced two

departments—fleet maintenance and planning

and zoning/engineering—since November 2007

and is in the process of converting a third.”

“Interchangeable widgets.”U.S. Secretary of Education Arne Duncan,

describing how teachers are treated under

the industrial model on which teachers’

unions were formed

“52 percent.”The top tax rate for some Oklahomans if

ObamaCare is enacted, according to a new

analysis from The Heritage Foundation

“The lottery has produced ad-

dicts, led to fraud, and broken up

families.”Senate Majority Floor Leader Todd Lamb

(R-Edmond), quoted in a July 20 Tulsa World

story, “Lottery revenue hasn’t hit jackpot”

Don’t Be a TeaseOklahoma’s own Greg

Johnson, who last month was

elected to a seat on the NEA

Executive Committee, said in

a speech to his fellow union-

ized teachers: “I challenge

you to think of a world where

there is no NEA.”

“Hey, Obama has just national-

ized nothing more and nothing

less than General Motors. Com-

rade Obama!”Hugo Chavez, June 2, 2009

“I suppose you can’t really blame

Congress for trying to impose its

wishes on GM. After all, the

Constitution is silent on the matter

of which branch of government

furnishes the CEO of nationalized

companies.”Cato Institute scholar Daniel Ikenson

“Not one single person has ever

been killed by global warming.

The number of species that have

gone extinct from global warming

is exactly zero.”OCPA adjunct scholar David Deming

“Why are these conservative and

right-wing bastards picking on

NEA and its affiliates?”Question asked (to raucous applause

from schoolteachers) in a speech last

month by National Education Association

general counsel Bob Chanin

Oklahoma Council

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