Saturday, May 16, 2015

The Greek Debt Crisis and the psychology of post-modernization


As I write this post, the Greek government faces a deadline. It needs money from its European partners to counter capital flight from its banks, meet the demand of its creditors, and funds its activities.  The two sides disagree both on the terms of bailout, for example should the EU extend the maturity of Greek bonds, and on how Greece should restructure its economy and fiscal policy to regain its creditors’ and partners’ confidence. The Greek government, under the leadership of the left wing party, Syriza, raised the minimum wage, froze privatization and rehired public servants, all steps which contravened its partners’ demands for restructuring and austerity.  But Syriza was elected on a platform of resisting European imposed austerity and for good reason. Greek privation is significant. As of January 2015 the economy had shrunk by more than a quarter, incomes collapsed by nearly a third, and one in four Greeks — and one in two young people - were unemployed.
It is clear that an austerity program, even if successfully implemented will not help Greece significantly reduce a government debt of over 400 billion.  In 2013 Greece ran an export surplus of 1 billion. If it met its partners’ criteria of running a primary budget surplus equal to 4.5% of GDP, which is about 250 billion, its budget surplus would be about 11 billion. Adding the two numbers together, the export surplus and the government surplus, and assuming for simplicity that the value of the debt does not grow, it would take, 400/12, or 33 years at current levels of economic activity for Greece to pay off its debt. As Paul Krugman writes, “at this point Greek debt..is not a very meaningful number. After all, the great bulk of the debt is now officially held, the interest rate bears little relationship to market prices, and the interest payments come in part out of funds lent by the creditors. In a sense the debt is an accounting fiction; it’s whatever the governments trying to dictate terms to Greece decide to say it is.”
Moreover, as many economists have written, targeting the budget deficit as signal of the Greece’s fiscal discipline is misplaced, because when a government reduces spending, the economy contracts, taxes collected fall, unemployment benefits rise and the deficit may in fact grow, as happened from 2008 through 2010
                                                       Greece Government Budget



 
So what is the meaning of the political and economic pressure the EU has imposed on Greece? One conventional narrative is that the pressure reflects the unfair demands of a German government, ready to punish the Greeks for their profligate spending between 2000 and the Great Recession. In that period, Greek households borrowed money to import goods and services from the rest of Europe. Living standards rose but so did household debt. Moreover, in that same period, investment was limited and imports were greater than exports. In effect, as happened in the United States during the run-up to the sub-prime housing crisis, growth was fueled by debt.
But, so the story continues, consumer spending grew because cheap German loans financed Greek borrowing. The Euro's creation as a common currency in 1999 meant that lenders to Greek banks no longer faced a currency risk; the risk that at one time the Greek Drachma would depreciate as Greek consumers imported goods and services from the rest of Europe. Moreover, at the turn of this century, Germany itself went through its own difficult economic period. Called at the time the “sick man of Europe,” it experienced a recession, partly in response to the IT bubble of the late 90’s. Instead of spending, German companies and households focused on rebuilding their balance sheets, becoming net savers. German lenders therefore looked for new borrowers and Greek households were ready to take on new debt. So Germany, in this narrative, is responsible for Greek profligacy!
There is some truth to this story but I think it is too one-sided, creating a stereotype of the German as an oppressor without a moral claim, a familiar cultural trope, to match the stereotype of the Mediterranean Greek as lazy and profligate.
So, what in fact is at stake, and what accounts for the difficulty, severity and at times intractable conflict between Greece and its partners? As I write this post, the New York Times reports that, “Far from giving Greece a break, the Governing Council (of the European Central Bank) is expected to tighten the screws next Wednesday by placing further restrictions on emergency cash the central bank provides to keep the Greek banking system from collapsing.” I propose that we need to symbolize the situation as a Russian doll, where one level of reality gains its salience from the context that subsumes it.  We cannot understand the debt crisis without considering its widest meaning.
Consider for example that one simple solution to the Greek crisis is to allow Greece to implicitly default on its bonds, for example, by extending their maturity, reducing the interest rate, asking private creditors to take a “haircut,” linking principal payment to Greece’s GDP growth, and enabling the Greek banks to borrow money from the European Central bank (ECB) using devalued Greek government bonds as collateral. This would be a default in all but name. In fact, private creditors have already taken a substantial cut, and the ECB had accepted Greek government debt as collateral for Greek bank loans until this past February.  
But calling it a default, as opposed to a restructuring, suggests that the European Central Bank (ECB) has become a “lender of last resort” to all banks and private creditors who hold devalued sovereign bonds. This was the role the U.S. Federal Reserve bank played as a lender to those U.S. banks and financial institutions whose assets evaporated in the subprime crisis.  But if the ECB keeps public and private creditors whole, this means each European country becomes in effect “too big to fail.” The anxiety is that countries and their creditors will then experience few constraints to lending and borrowing in the future. This is why on Monday, May 11 the ECB stated explicitly that the, “Bank cannot act as a lender of last resort to countries in the Eurozone.”
This anxiety helps explain why in fact the “Troika”—the European Central Bank (ECB), the International Monetary fund (IMF), and the European financial stability facility (EFSF), insists that Greece restructure its economy before it gets its next tranche of aid, some €7.2 billion, even though, as one analyst notes, “Compared to what has already been disbursed, the 7.2 billion euros are a small amount.” In other words, the financial stakes are not high. Moreover, as he points out, the value of Greek’s maturing debt spikes this year, 2015, and then stabilizes through 2033. “It is thus surprising,” he notes, “that the Euro zone governments and the ECB put the whole exposure of their citizens to Greece at risk just for this issue.”
Moreover, the Eurozone governments, particularly Germany and France, have taken steps to reduce their own banks’ exposure to Greek public debt. As the French Finance Minister noted, “We have learned to build walls to protect ourselves, to protect the banking system to protect other countries which could become fragile. So Europe is much stronger. Europe has sheltered itself from turbulence. The danger is for Greece.”
In this sense the overhang of Greek debt has become a symbol, rather than the measure of a substantial financial risk.  But a symbol of what? One hypothesis is that should the European Central Bank become officially and explicitly a lender of last resort, supporting deficit spending countries, the prime minister of Germany, Angela Merkel, worries that the German people’s commitment to the grand European experiment of a single currency will weaken. One survey showed that Germans’ support of economic integration across Germany fell five percentage points between 2012 and 2013. Support in France fell fourteen percentage points!  I believe that Merkel’s personal commitment to the European project of integration is inviolate, and not for economic reasons alone. It has been a vehicle for strengthening the democratic practices of the post-Soviet Eastern European countries. It is also a symbol of a democratic capitalism at a time when China and Russia are developing the practices of an authoritarian version. 
But the economic difficulties facing Greece, Portugal and Spain are undermining Germans’ belief in the viability of an integrated Europe.  Indeed, should Greece’s debt be forgiven, or should it in fact exit from the Eurozone, “The German people," one analyst writes, would discover instantly that a large sum of money committed without their knowledge and without a vote in the Bundestag had vanished. Events would confirm what citizens already suspect, that they have been lied to by their political class about the true implications of ECB support for southern Europe, and they would strongly suspect that Greece is not the end of it. This would happen at a time when the anti-euro party, Alternative fur Deutschland (AfD), is bursting on to the political scene, breaking into four regional assemblies, a sort of German UKIP nipping at the heels of Angela Merkel.”
But should Greece default, would the Germans incur substantial losses on both private and public debt? Are their anxieties based on the prospect of material losses?  I suggest again that the threat to Germany is more symbolic than real.  During the normal course of business the Bundesbank is exposed to claims on Greek banks, as all the central banks of Europe net out their claims on each other every day. Like the Federal Reserve Bank, the ECB is the clearing and settlement house for all central banks. Writing in December of 2014, one writer notes, that Bundesbank claims on the ECB system as a whole, “Have jumped from €443bn in July to €515bn (though down from €750 in 2012-LH). He writes, “Most of this is due to capital outflows from Greek banks into German banks, either through direct transfers or indirectly through Switzerland, Cyprus and Britain.” To be sure, this represents 14% of Germany’s GDP, through in the event of the collapse of the Eurozone, Germany would be liable for only 27% of the debt, or 3% of its GDP. But should the Eurozone remain intact, as is most likely, these claims, as The Economist notes, “are merely bookkeeping entries.”  The ECB can effectively print Euros through Quantitative Easing, buying soverign debt to cover its central banks’ liabilities. Strikingly, while yields on short term Greek Government debt are very high, the yield on its ten-year bond has fallen over the past month, while the yields on other sovereign debt within the Eurozone have risen only slightly. The bond market is not panicked about the long run. 
Let me propose the following hypothesis. The sense of the Euro’s fragility is linked to fears that the European project of integration and modernization, writ large and beyond finance, is losing its legitimacy.  Indeed, from 1974 to 2004 belief  among Europeans in the European Union as a “good thing” declined. 







What is the basis for these feelings? One scholar suggests that Europeans increasingly resist the union because it has developed undemocratic practices of governance, that there is a "democracy deficit."  She writes, “In democracies public policy requires the ability to generate and sustain consent among the ones who are affected by a generally binding decision. Without such consent the European project will remain fragile. Besides, growing skeptical views on the European union will reduce the willingness of citizens to support the European integration process and to show solidarity throughout Europe” (p. 115). It is important to note in this regard, as two authors write, “Few nations sought popular support to create the euro. The German leadership avoided a referendum, and in France, the Maastricht treaty was passed with a thin majority of 51 percent.” Denmark voted against the Euro and Sweden chose not to joing the European Exchange Rate Mechanism (ERM)
It is also striking in this regard that just as Pan-European institutions have offered their citizens the prospect of an integrated polity extending from Portugal to Romania, there has been a countermovement of devolution and fragmentation, for example in Catalonia, Scotland and among the Walloons of Belgium. These are not movements against Europe per se but rather movements in the search of conditions of more local governance. As a Wikipedia entry on the 2014 elections to the European parliament notes, “These elections saw a big anti-Establishment vote in favor of eurosceptic parties taking around 25% of the seats available. Those who won their national elections include: UKIP in the UK (the first time since 1906 that a party other than Labor or the Conservatives had won a national vote), National Front in France, The Peoples Party in Denmark, Syriza in Greece, and second places taken by Sinn Fein in Ireland. Following the election, European Council President Herman Van Rompuy agreed to re-evaluate the economic area's agenda and to launch consultations on future policy areas with the 28 member states.” Moroever, David Cameron, the winner in the recent British elections for Parliament has pledged to hold a referendum on Britain's membership in the EU. In this sense, we can say that Greece has become a symbol of a much wider process that is undermining the European Union’s political and psychological legitimacy.
This development is striking because the original European Common Market was a triumph. It was an instrument for rebuilding Europe after World War Two, for modernizing the continent’s economies, for securing the peace between Germany and France, for resisting prospective Soviet incursions and-- by sustaining welfare state policies -- for reducing the political appeal of indigenous communist parties, particularly in France and Italy. To be sure, it originally consisted of only six countries. But its success demonstrated that countries could modernize by integrating their economies. This conception was based partly on the United States as an example of a country that developed economically by expanding from "sea to sea." The question is why would this modernizing and integrating thrust be jeopardized today? What delegitimizing process is at work?
It is interesting to look at the Greek economy and society here. There is a general consensus both among Greek and non-Greek economists and sociologists that Greece harbors an only partially developed economy. Compared to the other advanced economies in Europe, Greek wages are low, but not as low as it prices, so that production costs are high while the profit share of national income is relatively low. As the following table from a Mckinsey report shows, Greeks work more hours, earn less income and are strikingly less productive than their European counterparts.  This is partly due to the fact that Greek workers support a proportionately larger number of people who do not participate in the workforce, one result of its generous pension system. As one analyst writes, “The average age of retirement age in Greece was 61; in Germany it was 67.”

US

EU

Greece
GDP per capita
$46,000
$35,000
$31,000
Dollars per hours worked
$58
$49
$35
Hours worked per capita
793
706
882
Hours per employee
1,700
1,600
2,100
Participation rate in labor force
74%
73%
66%
                  
There is a sense in which Greece retains some of its pre-modern cultural characteristics.  Both Greek and Non-Greek critics refer to what they call the culture’s “clientistic” sense of government and its services, which enables interests groups to exploit government programs to increase their own standing and well being, for example through patronage, bribes, special favors, tax evasion or avoiding license requirements. Lacking is a sense of the government as an impartial arbitrator, setting standards for efficiency and supporting economic development. As one Greek critic notes, “Greece is ranked 69th in the world on the Corruption Perceptions Index 
alongside Bulgaria, Italy and Romania. Greece also has the EU's lowest Index of Economic Freedom and Global Competitiveness Index, ranking 130th and 81st in the world respectively. Citing a Transparency International study, he notes that, “In 2009 alone, the Greeks paid an average of €1,355 in bribes for such services as speeding up the process of obtaining a driver’s license or building permits, getting admitted to public hospitals, or manipulating tax returns.” Greece also has the largest informal or shadow economy in Western Europe, and as a result a very poor record of tax collection.  This is one reason for its persistently high budget deficits.

Similarly, a 1995 study of Greek family life, suggests that, “although affluence has been increasing in recent years, the traditional extended family has not decomposed into isolated nuclear families, but has changed its configuration. Its morphological equivalent is the extended family system in the urban setting with a continuation of contacts with its network of kin. Indeed, in comparing the frequency of these contacts with other cultures, Greece has one of the highest rates of visits and telephone contacts with relatives.” The scholar goes on to note, “This explains why such a large proportion of Athenian families live in the same apartment building.” To be sure, this study is two decades old, but it does suggest that when Greece households began to run up their debt at the turn of this century, Greek family life had some of these pre-modern characteristics, with overtones of attachment to kin displacing attachment to the polity. This is why they could exploit government services. [1]

There is little doubt that Greece must modernize its economy, but let me propose the following hypothesis.  Greek resistance to modernization, for example reducing pensions, privatizing industry and increasing productivity, has stimulated some wider anxieties about what we can call post-modernization or what some critics call, “Neo-liberalism.” This trends and its vicissitudes are germane to all advanced capitalist countries. In this sense Europeans, as well as observers in the United States, are projecting onto Greece, feelings and anxieties stimulated by their own emerging difficulties.

Consider for example, the experience of Germany when, at the turn of this century, it was characterized as, “The sick man of Europe.” As one German journalist wrote in June 1999, five months after the Euro was introduced, “The social-market economy devised in Germany after the Second World War, with its careful blend of market capitalism, strong labor protection and a generous welfare state, served the country well for several decades. But it is now coming under pressure as never before. As economic growth stalls yet again, the country is being branded the sick man (or even the Japan) of Europe. ”
The journalist goes on to catalogue a host of obstacles to efficient market functioning, such as, “a byzantine and inefficient tax system, a bloated welfare system, excessive labor costs” and the disincentive to hiring workers because the cost of firing them is too high. “Getting rid of workers is costly too. Severance pay is typically a month's salary per year worked, plus generous retirement pay-offs for older workers. ‘The jobs market doesn't really deserve to be called a market,’ says one disgruntled company manager.’” Moreover, he writes, “Germany is still smothered in regulations that crimp markets. Many prices are still regulated, and consumers remain “protected” in bizarre ways: shops can be fined for discounting or making three-for-the-price-of-two offers if these are deemed to send confusing signals to consumers.” Shades of Greece!
One response to this economic crisis was that labor, business and government together agreed to progressively dismantle the system of centralized wage bargaining by industry, so that wages would be set according to local conditions, in others words, to further “marketize” the labor market.  As two authors write,The fiscal burden of German reunification, coupled with an immediately more competitive global environment, made it increasingly costly for German firms to pay high union wages. The new opportunities to move production abroad, while remaining still nearby, changed the power equilibrium between trade unions and employer federations, and forced unions and/or works councils to accept deviations from industry-wide agreements which often resulted in lower wages for workers.” One result was that from 2003 to 2007 unit labor costs in Germany fell (the green-lowest- line) while they rose in the rest of the Eurozone. 


This was also the period in which the German government “loosened” the labor market by lowering unemployment benefits, reducing welfare payments and, when the jobless fail to follow through on their commitments to look for work, cutting benefits. In other words, the Germans went through their own period of privation, of what the authors call “painful reforms.” Income inequality rose in this period as well.
John Kenneth Galbraith, the economist, published a book in 1967 titled The New Industrial State.” It proposed that Big Labor, Big Capital and Big Government, particularly in its instantiation as the Welfare State, oversaw national economic and social development. This was also the time when in Europe, central economic planning still appeared as a viable strategy for building economic wealth. [1] 
We could call this the “corporatist” form of capitalism. One way to interpret the German experience, and indeed the North American experience, is that countries today are dismantling corporatism. Today, Big Labor is losing its clout throughout the western world, and Big Capital, in the form of the global corporation is less vested in the interests of any particular locale or even country. Moreover, in facing the global competition for jobs and investment, states have less discretion over their welfare programs. The tripartite system of power sharing, which once characterized modern or advanced capitalism, has unraveled. I want to call this unraveling process, post-modernization, and suggest that the Germans have connected this new process and the social pain it stimulates, to the more classical challenge Greece faces in modernizing its own somewhat pre-modern economy and society. Indeed, facing post-modern conditions, Greece itself can hardly modernize by simply lowering unit labor costs or reducing wages. Its challenge instead is linked to the technical sophistication of its products and services. As two economists note, “German exports are concentrated in the most-complex products of the complexity scale while Greece and Portugal’s exports are concentrated in the least complex." The potential trauma facing Greece is that its economy is in fact outmoded.
 My critical reader may ask why I reference a process of “post modernization” rather than “neoliberalism.” The latter term is customary and proposes to describe a new phase in the developmental of capitalism, hence the term, “neo.”  It also carries with it a critical edge, suggesting that this new phase is perhaps not really new, that it simply represents a new form of classic liberalism based on our continued and even more pervasive subordination to market processes. In this way of thinking, by dismantling the welfare state, neo-liberalism returns us to the market of the 19th century. And today, all job-holders, facing uncertain prospects in the labor market, become the new proletarians.
I use the term “post-modernism” because the term “neoliberalism” does not express the broader cultural changes, the changes in sensibility that are reshaping Western countries everywhere. The rebellion of the Scots, the decline of big labor, Europeans’ resistance to the EU’s undemocratic practices, weakened state power and the marketization of society, are all cut from the same cloth. They reflect I propose, profound trends of decentralization and devolution at every level of society, and contests for authority in every institution. This is one reason for example that some economists focus increasingly on the city rather than the nation as the new locus of economic development. The city has become the hothouse for innovation producing dense networks of association among technologists, crafts people, service professionals, investors, and financiers. These networks are intensely local in character. That is one reason why it is so hard to “reproduce” a Silicon Valley anywhere else. It must emerge spontaneously or not at all. Density replaces scale.  
Nonetheless the term “neoliberalism” highlights the dark side of post-modernity and helps account for the resistance to an integrated Europe, often expressed by the right rather than left.  Should every person become a cipher in a network of market exchange, investing in his or her individual “human capital,” to hopefully survive the obsolescence of not simply jobs, but entire industries and professions?
Edmund Phelps, the economist, examines the decline of corporatism in advanced capitalism. He associates corporatism with “traditionalism.” Linking surveys of traditionalism with job satisfaction he finds that people in more traditionalist countries such as Portugal, Spain and France have less job satisfaction than people in less traditionalist countries such as the U.S., Denmark and Finland. 
                                                                Mean job Satisfaction

The survey used to construct the index of traditionalism includes such questions as,  Do you feel that service to others is important in life?” “Do you think that children should have respect and love for their parents?” “Do you think that parents have responsibilities to their children?” “Do you agree that unselfishness is an important quality for your children to have?”  As this set of questions suggests, we have to ask what price we are willing to pay for job satisfaction in particular, or for marketization in general.
My sense is that we carry within us a profound ambivalence about these developments. Job satisfaction may very well be a marker of an institutional world in which our skills and interests are acknowledged and respected, and we have a voice in the development of our settings. In fact, I believe this is true. This is perhaps the promise of devolution, localization and decentralization. But for the moment, this transition is very painful, nor is it entirely certain. After all, signposts of devolution are matched by indicators of the further concentration of power, for example by national security agencies, and by global financial institutions, for example the European Central Bank.
I suggest that we are projecting our ambivalence about post-modernization onto the Greek debt crisis. It has taken on a meaning that transcends the facts undergirding it. There is therefore a risk that decision makers and leaders will not take pragmatic steps to resolve it, falling prey instead to their roles in a symbolized conflict.
Observers have been puzzled by the provocative stance that the Greek finance minister, Yanis Varoufakis has taken in the ongoing negotiations. For example, he accused the head of the ECB Mario Draghi of being afraid of Germany’s hard liners. Draghi’s “soul” he said, “was filled with fear.” The day before I posted this blog he said that he wished that Greece, “still had the drachma.” Naturally, he has offended many of his counterparts, so much so that the Greece’s prime minister and his close collaborator, Alex Tsipras, has sidelined him in the negotiations. One conception of group dynamics is that participants are anointed to play symbolic roles in the wider drama that carries the cultural meaning of particular events. Of course they have to have a valence for such roles. As a self -described “erratic Marxist,” he may relish leading the fight against world neo-liberalism. But this is not really his battle, nor does he have the standing and resources to lead it. And the Germans, pressed by the stresses of their own post-modernizing situation may willingly take up the role of taskmaster for others. Where is the pragmatism?


[1] Indeed one reason, that Greece today has many state owned enterprises, is that under the direction of Prime Minister Karamanlis, the first post-junta prime minister and the founder of the Conservative New Democracy party, Greece pursued a policy nationalizing private enterprise as a vehicle for accelerating Greek economic development. While 35 years later, such an approach seems outmoded, at that time it was considered part of the normal practice of statecraft.

[1] This reading of the situation however is a partial one and in some sense unfair. One cannot separate the current Greek experience of government from its dark history. A military junta ruled the Greek people from 1968 to 1974. As one scholar recounts,The worst and most visible act of brutality came in November 1973 when students occupied Athens Polytechnic and university buildings in Salonika and Patras. Coup leader and post-coup Prime Minister (and eventually President) Georgios Papadopoulos sent in troops and tanks to crush the students; this was apparently carried out with extreme brutality and at least 34 students and others were killed, hundreds of others were wounded and almost a thousand arrested. The treatment of the students in Athens and other locations was met with extreme revulsion, and although not on the scale of the brutality carried out in the early Franco regime, this, along with the lengthy period of repression after the civil
war—Greece was ruled by repressive regimes for more than twenty-five years—may have been enough to convince citizens and civilian opposition from all political leanings
that an authoritarian government was to be avoided at all costs in the future.” In other words the image in Greek mind of central authority was one of toxicity. Moreover, when in 1980 the Socialist party, PASOK came to power it expanded welfare state benefits partly as compensation for the suffering and trauma that Greeks on the left had endured since the defeat of the communists in the aftermath of World War Two.



Thursday, April 16, 2015

The Charter School Conflict in New York City: The Psychodynamics of Self-Control


New York City is the site of an angry political and communal dispute about its public school system. For those of my readers from outside the United States, many cities in the U.S., in response to failing public schools,  have developed what is called a “charter school network” as an alternative to the customary public schools.  Charter schools are funded by tax dollars but its teachers and administrators are free, within limits, to design the curriculum according to their best assessment of what children, particularly poor and minority children, need. Some charters are not-for-profit institutions, others are in business to make money while serving children and their parents. They do not have to comply with all of the city’s administrative mandates, and more importantly, the teachers they hire need not be members of the major teacher’s union. This last provision is particularly attractive to some principals and school executives, since they believe that union work rules constrain their ability to create fruitful teaching settings, for example by extending the school day so that children leave at 5 pm rather than at 2 pm. City residents are free to enroll their children in any charter school, but should there be more children applying than there are seats available, admission is determined by lottery. The “Success Academy,” a charter school network, is at the center of the current conflict in New York City. In 2015, 22,000 children applied for 2,688 spots available in the network’s schools. Parents want in.   

The proximate stimulus for the conflict is a fight over money, space and permits. The prior mayor of New York City, Michael Bloomberg, gave the Success Academy network of schools free space in current public school buildings. But the current mayor, Bill Deblasio, has threatened to charge Success Academy for the space they use, while also denying it permits to open more schools in the city. The result has been a nasty public fight between Eva Moskowitz, the CEO of the Success Academy and Mayor Deblasio. Moskowitz has been astute in mobilizing her parents to protest any constraints on the network’s ability to function and expand. For example, she bussed thousands of parents and children to Albany, the capital of New York State, to protest the Mayor’s threatened decisions.

The conflict also provokes some larger conflicts about privilege, social class, power and poverty in New York City, the quintessential global city.  The Success Academy, while supported by public funds, also gets some money from two hedge fund billionaires. Community leaders and activists are suspicious of the latter’s motives, believing that the two are ideologically committed to “marketizing” public services. This process, activists worry, will undermine a community's experience of itself as a group of people with common interests and resources committed to every member’s welfare. Other critics and community leaders worry that these hedge fund executives are exercising arbitrary authority simply because they have the money to influence events, decisions and elections. They seem to be manipulating society to advance their own private ideals or, in one harsh reading, to indulge in a hobby of “doing good” on their own terms and without being held accountable to citizens and the public.

Two YouTube videos (here and here) highlight the political and communal conflict the Academy’s expansion provokes. The city’s Board of Education held a community hearing to consider the question of whether or not a Success Academy school should be allowed to move into a public school building, thereby taking some space from the public school, called, “P.S. 30,” currently housed there. Both proponents and opponents of Success Academy, including many parents, came to the meeting.  As one can see in the video, P.S. 30 parents and teachers refer to the Success Academy as an “invader” and “intruder,” and as a signal of the city’s gentrification. One speaker passionately invokes the history of school segregation, and bemoans the fact that the Success Academy schools are splitting families apart in a form of a “divide and conquer” strategy. “Look at everybody here,” he says, “We have black and Hispanic versus black and Hispanic.” Parents whose children attend the Success Academy heckle the speaker insisting that they have a right to choose which schools their children attend.

Critics of the Success Academy and its pedagogy believe that its schools are punitive and harsh to both students and teachers. As one journalist reports, “Success has stringent rules about behavior, down to how students are supposed to sit in the classroom: their backs straight, and their feet on the floor if they are in a chair, or legs crossed if they are sitting on the floor. The rationale is that good posture and not fidgeting make it easier to pay attention.” In addition, when students take practice tests, to prepare for statewide exams, they cannot go to the bathroom and sometimes wet themselves. Also, “Students who are deemed to not be trying are placed in an ‘effort academy’ which is part detention and part study hall.” 

In addition, students are suspended from the Success Academy schools at a rate higher than is the case in regular public schools. At the Success Academy Harlem 1 school, 23% of the 896 students were suspended for at least one day in 2012-13, the last year for which the state has data. At Public School 149, a school in the same building, 3% of students were suspended during that same period. Moreover, students who take practice tests and succeed get prizes such as remote-controlled cars, arts and crafts kits, and board games. “Former teachers said that they were instructed to keep the prizes displayed in the front of their classroom to keep students motivated.” In addition, as one journalist writes, “At most schools, if a child is flailing academically, it is treated as a private matter. But at Success Academy Harlem 4, one boy’s struggles were there for all to see: On two colored charts in the hallway, where the students’ performance on weekly spelling and math quizzes was tracked, his name was at the bottom, in a red zone denoting that he was below grade level.”  Finally, as the reporter notes, “A teacher complained that she was expected to announce all of her students’ scores on practice tests, by asking those who had scored a four to stand up, followed by those with a three and then those with a two. The teacher and her colleagues persuaded their supervisors not to make students with a score of one stand up, but those students were still left conspicuously sitting down, she said.”  Responding to the claim that the Success Academy schools were unduly harsh, Moskowitz, the CEO, told a reporter, “We cannot let up on them (the students). Any scholar who is not using the plan of attack will go to effort academy, have their parent called, and will miss electives. This is serious business.”

Let’s accept for the moment that the culture is harsh, though I believe that as a primary descriptor of the setting, this charge is one-sided. Many observers, and more importantly parents, are persuaded that Success Academy’s teaching and administrative bring order and calm to what is often a chaotic setting. Conduct that seems harsh and unforgiving may also represent a teacher’s total commitment to a student’s success and a belief in his or her ability. A reporter for the New Yorker writes, “At Success, the school year is ten months long and the school days stretch from 7:45 A.M. to 5 P.M. for those in fifth grade or higher. Similarly, one parent writes, “As soon as you enter the doors, one senses there is something different. Teachers are on their toes, politely and efficiently directing where you need to go. All are well dressed, well informed and carry themselves with an absolute commitment to providing the best possible education for students in attendance at one of the 14 Success Academies in New York City. This isn't to say one couldn't find this kind of enthusiasm in a different kind of school, but it's rare. Personally, there are only two times I have ever seen it: as a teacher and staff member for Teach for America, and walking through the doors of a Success Academy school.” Success Academy students are also exposed to more art, music, chess and physical play than comparable students in public schools.  Moreover, they are encouraged to talk as much as possible. “‘We’re not big on hand-raising here,’ Moskowitz said.’”


Most importantly, the Academy’s schools are successful. An independent university based evaluation of 3rd graders’ achievement in the network’s first school in Harlem found that the students did better on tests of math and language competence than students who had applied to the school but had not won a seat through the lottery.

In addition, “Last year, sixty-four per cent of the third grade students at Success Academy Harlem 5 passed the state English exam and eighty-eight per cent passed the state math exam. At Public School 123, the Mahalia Jackson School, which is located in the same school building as Success, only eighteen per cent of students passed the English test and only five per cent passed the math test.”

If we grant the Success Academy the benefit of the doubt, that it is successful, the question is what meaning can we make of the sometimes harsh discipline the school imposes on its students. One straightforward hypothesis is that discipline is one vehicle for helping students develop self-control. My readers may recall the famous “marshmallow test” in which pre-school aged children are presented with a challenge: “Sit in front of a marshmallow alone in a room for 15 minutes. If you don’t eat it you will get two marshmallows. If you do eat it, you only get the one in front of you.”  The experiment’s originator, Walter Mischel, found that children who passed the test were more successful as adults. As one journalist writes, “Follow-up studies on these preschoolers found that those who were able to wait the 15 minutes were significantly less likely to have problems with behavior, drug addiction or obesity by the time they were in high school, compared with kids who gobbled the snack in less than a minute. The gratification-delayers also scored an average of 210 points higher on the SAT.” (An entrance exam for college applicants.)

The link between self-control and achievement is readily apparent. A precondition for achieving any worthwhile goal is the ability to not only delay gratification, but more importantly, to tolerate pain, frustration and difficulty. The pain is a measure of the work required for success. This suggests that Success Academy’s disciplined approach would have merit for poor and minority children insofar as they are less able than their middle or upper class peers, to control their impulses. Certainly, many risk factors that shape a child’s ability to control their own behavior affect poor and minority children negatively. 

For example, “Children whose parents, particularly mothers, have greater formal education are better able to exhibit self-control in social and school settings. Mothers with lower educational attainment have children who perform worse on tests of self-regulation..while other studies have found that higher educational status for both parents positively predicted behavioral regulation. Moreover, “The available literature indicates that minority status may be a risk factor for lower self-regulation. When controlling for a host of risk variables, Sektnan et al. (2010) found that being African American was significantly correlated with lower self-regulation in kindergarten.”

There are probably several channels through which risk factors, such as poverty and race, shape a young child’s capacity for self-control. For example, children in single parent, poor families, may experience their setting as unreliable and untrustworthy. They don’t believe, based on their experience, that by delaying gratification and tolerating pain they will garner rewards. In addition, children who internalize their parent’s experience of victimhood, one possible result of settings shaped by institutional racism, may feel unworthy. This means that they don’t expect to be treated fairly; to be rewarded commensurate with their effort. In addition, surveys document that African American parents use more physical discipline than their white counterparts, partly because they believe that their children live in higher risk settings, where misdeeds and mistakes are more likely to expose them to predators. To be “no-nonsense” parents, they physically discipline their children preemptively to keep them out of a larger harm’s way.


But physical discipline tactics can short circuit a child’s development of self-control. The child learns to avoid the parent rather than to modify his or her own behavior. The parent is not experienced as a figure to be admired and imitated, but as one to be feared.  

Finally, it is a well-established finding that children in poor households are exposed to 30 million fewer words by the time they are three-years-old than children from high-income households. But one way in which children develop self-control is by speaking to themselves, first overtly by talking out loud, and then covertly. For example, two researchers found that, “Children talked to themselves more when they were faced with a difficult task, when working by themselves, or when a teacher was not available to help.  They studied the private speech in Appalachian children, (a region of great poverty), as well as middle-class children. They found that Appalachian children’s private speech developed at a slower pace than those who were middle-class.”

Psychoanalysis helps round out our understanding of the dynamics of self-control. Certainly one puzzle of human motivation is why people would inflict pain on themselves. The high school athlete who trains to the point of exhaustion, the high school violinist who practices for hours a day are submitting to what at times is self-imposed tedium, discomfort and disappointment.  One possible explanation is that they anticipate great rewards. But in fact, unlike the setting of the Marshmallow test, these rewards are far in the future and very uncertain. A different hypothesis is that starting out, as young strivers, they are rewarded by their teachers’ and mentors’ approval, but that later, as they mature, they internalize this approving voice. The voice becomes part of their psychological makeup, so that they can reward themselves with feelings of self-esteem and worthiness even when their objective achievements are partial or incomplete and their experience is unpleasant.  

Psychoanalysis calls this internal voice, the “ego ideal” while developmental psychologists describe it as a process of “moral internalization.” Broadly, this process describes how young people are acculturated. Consider the extreme case of a young research scientist who spends a decade on a research question encountering only one dead-end after the other. In this situation the scientist’s internalized “voice” has become abstract, represented not by a person, but by the ideals of scientific study and its meaning for human achievement. One way to understand Freud’s use of the term ‘sublimation” is to envision a developmental movement in the psyche’s structure, starting with the “teacher in the flesh,” moving through the internalized voice of a mentor, and arriving at an end point where a person subordinates himself or herself to abstract cultural ideals such as the scientific method. When parents use physical disciplining tactics excessively, they derail the moral internalization process.

Psychoanalysis proposes that this developmental movement does not proceed smoothly and without conflict. In this way of thinking, children and adults do not readily relinquish what gratifies them immediately, that is why people under conditions of stress resort frequently to drug use, drinking or sexual acting out. Freud argued that in this sense the process of civilizing the individual creates in its wake conflict and discontent. It is never complete and can create unhappiness, hence the regression. One way then to understand the harsher features of the Success Academy schools, is to posit that the school must become an agent of necessary acculturation, imposing the pain and discipline the child must suffer through, in order to gain the self esteem and sense of self-worth that achievement and approval brings.

But I can well imagine my reader recoiling from such a proposition. There is after all a very vital and powerful tradition of theorizing about schooling, “the progressive education movement,” which posits that the acculturation process can be naturalized, so that children, led only by their search for pleasure, their innate curiosity and their wish to play, can acquire all the intellectual and emotional skills they need to thrive as adults.  This idea has been expressed in innumerable pedagogical innovations, for example the “open classroom,” “whole language teaching,” “project based learning,”   “self-guided instruction,” "teaching 'critical thinking skills' (as against a substantive understanding of a discipline),"  “child-centered pedagogy,” and “constructivism.”

I know that I am at some risk of crossing swords with experts, but as far as I understand the history of these innovations, none have been successful when applied to the teaching of young children, particularly children from low-income families, except when seriously modified or implemented by charismatic teachers.  One reason that I can say this with some confidence is that the driving impulse behind these pedagogies is the faulty assumption that just as children learn to speak a language and master the social rules of the playground spontaneously, so they should be able to spontaneously learn to read write, figure, and think critically. But our modern understanding of the mind is that it is modular in construction (See, Egan: 2002). The skills for learning language or understanding a social hierarchy are specialized and innate. They do not represent a generalized ability to learn. In this sense, it is useful to see progressive pedagogy as one branch of “utopian thinking,” a schema through which adults project onto children the wish that a society could socialize its members so that individuality is never compromised and individual impulses are never suppressed.

There is remarkable piece of social history that is relevant here. From 1967 to 1995, the U.S. federal government launched and sustained, Project Follow Through, which remains still today, “ as the world’s largest education experiment.” “Over the first 10 years more than 22 sponsors, worked with over 180 (educational) sites at a cost of over $500 million in a massive effort to find ways to break the cycle of poverty through improved education.” Schools with the support of parents could adopt one of a number of educational models. The reading portion of this study involved over 15,000 students and was designed to test the effectiveness of models of reading instruction by gauging three outcomes; basic skills, cognitive growth, such as critical thinking skills, and the child’s affective experience, for example his or her self esteem. Program results were measured by tests that assessed children’s academic achievements in math and reading competence, their cognitive skills, and two tests of their affective experiences, --their self-esteem, and their readiness to attribute their successes and failures to their own efforts. Interestingly, a plurality of parent groups and schools, chose a program called, “Direct Instruction,” (see YouTube), a highly scripted teaching program that emphasizes both drill, assessment and individual attention. Abt Associates, the premier program evaluation firm of the last decades of the 20th century, conducted the evaluation of Project Follow Through with the following results.



To the embarrassment of progressive education theorists, Direct Instruction, a scripted and teacher guided method of instruction was by far and away the most successful program on all three dimensions, the academic, the cognitive and the affective. Many of the programs in fact reduced achievement. The Harvard Educational Review published a critique of the Abt evaluation methodology and the evaluators countered with a spirited defense in the same issue of the journal.  A group of progressive education theorists persuaded the National Institute of Education, to not disseminate the results of the study in part because, “The audience for the Follow Through evaluations is an audience of teachers for whom appeals to the need for accountability of public funds, or the rationality of science are largely irrelevant.” In other words, teachers would not care.

There is another piece of this story that helps shed light on the political passions that that the Success Academy network of schools provokes. Some of my readers may recall or may have learned about a visceral and dramatic conflict that took place in New York City in 1968 between the teachers union (UFT), black parents, community leaders and the city’s board of education, over who would control the schools. The teachers, wary of local community boards who might decide to fire or remove teachers at will, went on strike, opening up a social and psychological chasm between white teachers and black parents. The conflict also exacerbated tensions between the black community and the Jewish community (many teachers were Jewish) in the city. It was by all accounts a visceral, and an emotionally draining conflict. Some political scientists argue that the historic Black-Jewish political alliance, which was fashioned and strengthened during the Civil Rights movement, never recovered.

One result of the conflict was that a group of parents at Public School 137 in the Ocean-Hills Brownsville section of New York City, -- the epicenter of the communal conflict – decided to bid for participation in Project Follow Through and then chose Direct Instruction as the model they wished to test! As two researchers write, “ The well publicized conflict between the administrators and staff at Public School 137 and the United Federation of teachers in 1966-1968 over the issue of community control irreversibly politicized the Ocean Hill Brownsville District and P.S. 137 in particular. Related activities got parents involved in schools in such a way not found in any other poverty-ridden area. Parents learned how to use power. Some used this power to have P.S. 137 chosen as one of the schools in the national Follow Through program and to select the structured Direct Instruction model. Parent support has kept the program going for 14 years, despite cuts due to the New York City budget crisis of 1975 and subsequent reductions in Federal funding.” Reporting on an evaluation of this program at the school, the researchers note that Direct Instruction was a success.

I think this bit of social history provides some insight into the raw feelings and conflicts that Success Academy has provoked. Let me speculate on what I believe to be the question that community leaders in the black community are raising.  Can the Black community in old inner cities collectively empower itself? Can it, through its own political consciousness, bring will and self control to the aid of its parents and children?  Answering this question in the affirmative may be the only route through which the black community can exercise its forcefulness, without succumbing to the kind of street violence we saw in Ferguson Missouri, after a jury acquitted a white policeman charged with murdering a young black man. This self control was also what the Nation of Islam offered Malcolm X, a reprieve from his criminal impulses, so that through rigorous religious practice and faith he could recover his many and extraordinary talents. Or if the answer is "no," will this community become the object of social programs and social experiments that others -- elites, policy specialists, urban planners, shape and lead? 

If I am right about this question, I wonder if there is not a deep yearning for recovering what was in fact the greatest exemplification of self control in a political movement -- when the Civil rights movement and its leaders taught its members to respond to beatings, murders and fire-bombings, non-violently. But the distressing issue this yearning raises, is on what grounds can community leaders who hope to build empowerment collectively by building political consciousness, possibly deprive individual children and parents of an opportunity for a better education? This is why in the YouTube video of the community meeting, the opponents of Success Academy must concede to its proponents, parents of children who attend its schools, that they do have the right to choose where their children will study. I believe that this concession undermines the opponents’ moral standing and political effectiveness.

Diane Ravitch, a scholar of education and a fierce opponent of charter schools, argues that charter schools undermine the society’s commitment to public education. The question is what vision of public education in the inner city is on offer. The reality is inescapably dispiriting. As I write from Philadelphia, the schools are segregated, students are promoted to higher grades without mastering the requisite skills—a form of psychological expulsion -- and parents do not exercise a strong voice in shaping the school’s climate. Only the black community can save itself collectively from these conditions. No one else cares enough. Absent that, charter schools are an escape valve for the many children lucky enough to attend the good ones.