Parents are likely to want their children to study. This makes the demand for education easily predictable and, thus, schooling one of the safest businesses out there. As a consequence, private education providers should profit, if they are provided with the right legal framework. But are there efficiency and welfare gains if they are encouraged to enter the market?
Reforms carried out in 1994 allow the common Swedish citizen to open a new school, basically anywhere, anytime. The students are admitted on a first-come, first-served basis and the local municipality is required to pay the private school the amount it would spend educating each child itself. Depending on the school´s location and child´s age, this would be between 8.000$ and 12.000$ a year. There are no admission exams, no other special entrance requirements and no fee is allowed.
Despite being controversial, this reform proved to be quite popular. After two decades, approximately 25% of Swedish students are allocated to private equity run schools, opposed to nearly 1% before the reform took place. In fact, the parental acceptance, confirmed throughout years, probably has to do with the Swedish model approach making some sense, at least theoretically. The emergence of more schools would rise up competition levels, and boost efficiency both in private schools and public schools (as a necessary response to the upgrade to be verified in the private sector). The increase in the set of choices available would allow parents to choose schools which fit best their children needs and aspirations. Everything should work just fine. Except that it didn´t.
PISA tests prove it. In 2000 Swedish students performed above average. Unsurprisingly, let´s say, as Sweden has one of the highest public spending levels on education and free school is a reality from primary school to university. Money cannot be the problem. In spite of this, in 2009 Sweden’s overall score fell below the OECD average. Other rankings show a similar trend. Universities now complain about Swedish students arriving unprepared and the education system´s quality, once a clear Swedish competitive advantage, is now one of its handicaps.
What policy makers back at the early 1990’s probably expected was private schools to be foreign language schools, or run by parents clubbing together to keep local schools alive at rural areas. What really happened, nevertheless, was the emergence of big chains of private schools, such as the Kunskapsskolan (“Knowledge Schools”), which is responsible for more than 10.000 students. Making profit is ok and was a fundamental part of the system designed in 1994, but profit-oriented decisions are said to be one of the prominent causes of such poor results as the ones attained by the Swedish education sector. The excessive standardization and business-oriented approach has named these private Swedish schools as IKEA schools. Wonder why.
It is curious, if not a paradox, that this pioneer reform was carried out in such a big-state country, as traditionally social-democratic Sweden.