DAN DIMAGGIO FOR BUZZFLASH AT TRUTHOUT
Last week the New York Times ran a stunning piece about the investments made by the Libyan dictatorship's sovereign wealth fund. According to the article, the fund owns a 3.27 percent stake (valued at $453 million) in Pearson, publishers of the Economist, the Financial Times, and Penguin Books, making it the company's third largest shareholder.
What the Times does not mention is that Pearson is also one of the biggest standardized testing companies in the U.S., touting themselves on their website as "the largest commercial processor of student assessments." They score statewide tests for 30 states, as well as the SATs and ACTs. In fact, Pearson's North American education division is responsible for almost half the company's profits.
Investing in Pearson was a shrewd move by the managers of Libya's sovereign wealth fund, given the growth of the educational publishing and assessment industries. In 2001, Pearson's CEO at the time, Peter Jovanovich, told a gathering of Wall Street investors that the No Child Left Behind Act "almost reads like our business plan" (Education Week, 2/21/01). "As envisioned by the company," Education Week reported, "students will use Pearson textbooks and take tests produced and scored by the company. Teachers and administrators will track student achievement on Pearson school software. And parents will check on their children's progress on a school Web site developed by Pearson." At the time, one investment analyst called Pearson "the 800-pound gorilla" in the education market.
Since then, as predicted, Pearson has experienced massive growth. The company's global revenues from testing grew from $293 million in 2002 to $1.64 billion in 2009 thanks to the expansion of the assessment industry and through purchases of a number of its competitors. (Anecdote: The testing industry has grown so fast and been so desperate for workers that they even re-hired my friend Todd Farley after he published a must-read book, Making the Grades: My Misadventures in the Standardized Testing Industry, in which he denounces the entire industry based on his fourteen years scoring and designing tests.) The company's North American Education division - which also includes textbooks and online learning tools - made $656 million in profits alone in 2009. Profits and sales at Pearson grew 8 percent a year from 2005 to 2009, lagging just slightly behind the growth of the Chinese economy.
How much of this money is made off of testing? The Assessment and Information component of Pearson's North American Education division brought in over $1 billion in business in 2009, accounting for 12 percent of the entire company's worldwide sales. If this aspect of Pearson's business enjoyed a profit margin comparable to that of the rest of the North American Education division (17.8 percent in 2010), that would mean the company likely made over $150 million in profit off of standardized testing and information services to schools in 2009.
Pearson has achieved this growth despite repeated instances of mistakes in their test scoring business. In just the past year alone the company was forced to pay fines of $5.1 million to Wyoming and $15 million to Florida after problems administering and scoring their state exams. A Wyoming Legislative Service Office report stated, "As a result of the problems experienced during its last PAWS administration, many policy makers and state officials have lost complete confidence in the vendor [Pearson]." However, the oligopolistic control over the testing market by four big firms (ETS, CTB/McGraw Hill, Riverside and Pearson - which acquired another big player, Harcourt, in 2007) leaves states with few other options.
Ironically, the revelation of the Libyan dictatorship's stake in Pearson came simultaneously with the issuance of the company's annual report, which documented a 28 percent rise in profits in 2010 and a 9 percent increase in dividends, the largest in a decade (Financial Times, 2/28/11). At the press conference announcing these results, Pearson CEO Marjorie Scardino (who ranked 17th on Forbes' list of most powerful woman in the world in 2007) said she was "uncomfortable with the holding." The company announced that the Qaddafi-controlled fund will not see any payout of these dividends and that its stake had been frozen (Bloomberg, 3/1/11).
Apologizing for the Libyan fund's shares in the company, Scardino explained, "We don't choose our shareholders, they choose us." Bloomberg reported that she "said she's never met with anyone from the Libyan Investment Authority and that the company once spoke to a 'middleman.'"
Still, it's notable that Scardino is also the Vice Chair of the Board of Directors at Nokia, which signed a $120 million contract with the Libyan government in 2004 to provide cell phone service to Tripoli and the Western part of the country.
These deals were part of a general trend among Western corporations, as many in the business lobby sought access to the vast wealth amassed by the Qaddafis and to the Libyan market.
None of this is meant to imply that Qaddafi's ownership of three percent of Pearson's stock had any impact on standardized testing in the U.S. (or on the editorial lines of the Financial Times or the Economist). But it is supremely ironic that the Libyan dictatorship thought it was a good move to invest hundreds of millions of dollars in a company that makes money off of tests that have been widely lambasted for their tendency to stifle creativity and critical thinking in U.S. children by sucking the joy and spontaneity out of the classroom.
The larger point is that control over standardized testing and the U.S. education system as a whole is increasingly being placed in the hands of some very powerful for-profit corporations. From testing to textbooks, and charter schools to for-profit colleges, education is increasingly being turned into a commodity, something that can enrich the shareholders of big corporations, who just might happen to be vile dictators.
The profits from testing will continue to grow, even if the Qaddafis can't take advantage of them. As the Financial Times writes, "Dame Marjorie [Scardino] said she expected continued profits growth in all divisions in 2011, with improvements in the North American higher education and assessment markets 'more than offsetting' pressure on US states' school budgets." In other words, even as teachers are laid off, class sizes skyrocket, and art, music, and sports programs are cut, don't worry - the money to be made off of standardized testing is safe (unlike the Qaddafi dictatorship).
I just thought students, teachers, and parents might want to know what kinds of companies are scoring their tests as standardized testing season approaches ...