One of the major themes in American education reform of the last 20 years is the idea of improving education quality by introducing more competition. Business-style freemarketism will force schools to improve, because, if people have more options they’ll demand better performance.

This is the theory behind primary and secondary reform initiatives like vouchers and charter schools, and also higher education ideas like for-profit colleges and Massive Open Online Courses (MOOCs). As Brian Mitchell writes at Today’s Campus:

Within higher education, technology has introduced an entirely new level of competition whose outcomes are not yet fully understood. Cash-strapped families find the strategy behind Coursera, Udacity and edX enormously appealing.

While it’s true that the outcomes of completion “are not fully understood”, it shouldn’t be that big a mystery. In fact, one country made an enthusiastic attempt to introduce market forces in its education system. It didn’t work out very well.

Lili Loofbourow has a fascinating piece in the latest issue of Boston Review looking at Chile’s policy of privatizing education. It’s really pretty scary:

During the dictatorship of Augusto Pinochet, education, previously considered a public good, was commodified and repackaged as a private investment yielding purely private gains. But since student protests began in 2006, Chileans have been trying to get their education back.

Pinochet’s neoliberal dream was that the free market would optimize education and wean educational institutions off state support. Military “rectors” were appointed to the universities and charged with purging them of dissenting faculty and students. Over time, funding for public education was systematically slashed in order to create an educational vacuum that could be filled by private enterprise.

And filled it was. But private enterprise didn’t, it turned out, result in higher quality. But more on that later.

[Private enterprise] makes sense if one regards education as a privilege rather than a need, and Pinochet did: he recast secondary and higher education as non-essential, matters for individual choice. His 1979 Presidential Directive on National Education, which set out his entire educational program, stipulates that while primary education is necessary, secondary and university education should be regarded as atypical and even luxurious: these are “the exception for young people,” Pinochet wrote, “and those who enjoy [secondary or higher education] must earn it with effort and pay for it” or compensate the “national community” in some other way.

Wow. There’s really nothing like hearing American education reformers’ talking points regurgitated by a brutal foreign dictatorship.

And so what happened? First, Pinochet gutted the public university system. As one of his advisors explained “None of the existing eight universities find themselves subject to competitive challenges between themselves since they are assured financial support by the state budget.” Despite Pinochet stepping down in the 90s, his reform plan is still essentially in place.

Three decades later, Pinochet’s neoliberal model has gone mostly unchecked, and “indirect control” still aptly describes the relationship between the state and higher education in Chile. The government has delegated regulation and oversight to the market and minimized legal obstacles to the establishment of private universities. The country is now awash in universities, institutes, and centers for technical learning. Their number exploded from eight in 1980 to a peak of 310 in 1990. In 2012 there were 174.

But completion doesn’t really appear to have improved quality.

These institutions certainly compete for students’ money. Private universities advertise on television, in newspapers, on the subway, on billboards; their ads are as familiar as Coca-Cola’s. But the schools don’t compete in the way Guzmán envisioned. The institutions producing the best research and maintaining the highest academic standards continued to be Chile’s traditional universities, most of which are public and pre-date the neoliberal model.

Sound familiar? Adjusted for income Chile now has the most expensive higher education system in the world. We have the second most expensive system.

In 1980 the military regime implemented vouchers. The vouchers would theoretically empower any student to choose between a public school or any of a large number of government-subsidized private schools. The new system was intended to promote competition between schools and to stimulate the public schools to improve.

But that’s not what happened. What occurred was that the professional families basically exited the public school system altogether.

Poorer students, for whom the vouchers were primarily intended, were much less likely to attend the subsidized private schools. Some couldn’t get to schools across town, some couldn’t afford the supplementary fee, and some students or their families simply didn’t understand or act on the opportunity. Swamped with applications, many subsidized schools started “creaming off” and accepting only the highest-achieving students—those who were easiest and cheapest to teach and who most likely could afford to pay. Government funding that had previously gone to public schools was diverted to subsidized private schools, leaving public schools with shrinking budgets to educate the country’s most vulnerable and disadvantaged students.

What’s more, this privatization didn’t seem to make the actual quality of education much better. According to the article, the World Economic Forum ranked Chile’s higher education system 91st out of 144 countries; and math and science education rank 117th.

And now, fed up with this complicated, class-reinforcing and overpriced system, the students have started to revolt.

When ongoing university student protests began in May 2011, the demands for change had grown: the students want nothing less than the elimination of the voucher system and the formation of public education. Their slogan is “¡No al lucro!”—“No to profit!” The slogan is explicitly aimed at the private universities and banks profiting from high interest rates and exorbitant surcharges on risk-free government-backed student loans, but it also bluntly rejects the intensely neoliberal foundation on which Chilean society is based.

The student protesters demanded that the universities be investigated for profiteering. They demanded that municipalization be reversed. They demanded free education. They shut down several universities for an entire academic year. They took over government buildings. On June 30, 2011 some 100,000 Chileans turned out in the streets of Santiago and were joined by another 300,000 or so in solidarity marches in the rest of the country.

Chile hasn’t fixed this problem yet, though the government has made some effort to introduce reforms.

There is some question, presented in the article, about why this privatization effort has proved so unpopular with the country’s students. Former Chilean president Ricardo Lagos argues that this is simply a stage of development. First Chile needed more access, which the system provided: “The educational problem was coverage. Now the question is quality, and quality is quite different.”

No, it’s not that complicated, argues University of Chile sociologist Alberto Mayol. The problem is simply that all this market enthusiasm destroyed the country

We are Chileans of an age in which ideas . . . are ‘bought,’ where ‘to cooperate’ means to be dim or naïve (because to be intelligent is to be selfish), where achieving an object regardless of the means is ‘making it,’ and where being a millionaire is synonymous with a high intellectual capacity.

And that’s what Chilean students might be protesting. It’s not necessarily that access comes before quality and now it’s time to work on quality. Maybe the problem is that neoliberalism in education is the cause of low quality.

Let’s keep this in mind, education reformers. In theory more competition offers all sorts of potential to improve quality. But we can move beyond theory here; we know how this story goes.

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer