Jack Grubman is a character torn from the pages of a Dickens novel and left to his hapless devices on the streets of an uncaring city. True, hapless schemers and social climbers, half comic and half tragic, dreaming of Society but ground beneath the wheels of Commerce, are a mainstay of many authors. But only Dickens would have had the cheek to dub his thwarted speculator "Grubman."
(Lizzie Grubman: any relation? I'm at once astonished and not at all surprised that her PR firm (don't click that link!) tries to make itself your home page).
Of course, the primary scandal in the Grubman case -- analysts hyping stocks to hoodwink small investors while earning the gratitude (and business) of the big boys -- is such common practice that its shock value is minimal. This sort of corruption is the business story of the year, which makes it no story at all.
Instead, it's the secondary scandal -- hyping stocks to get the analyst's kids into preschool -- that has news legs, not least because the means-ends ratio is so wildly disproportionate. After all, the school got a million-dollar donation (Grubman's annual salary, please note, was in excess of twenty million). The value to Sandy Weill of winning his boardroom fight was almost certainly many times that figure. The value to AT&T (and owners of AT&T stock) of having its rating artificially inflated was even larger.
That is, Jack Grubman, possessed of Awesome Cosmic Power, uses it to get his kids into preschool? ("Why, Richard, it profits a man nothing to give his soul for the whole world . . . But for Wales!" I love having my books with me; checking a quotation against a book on your shelf is one of the great pleasures of life.) It's like, oh, using a chartered ocean liner to deliver a telegram.
Much ink has been spilled on this topic. "Spilled," that is, as in "wasted." Take, for example, Michael Wolff's The Price of Perfection, in which the word "education" appears exactly twice. Edging it out are such important issues as the ability of high-status private schools to ease parental marital strife, the "Platonic ideal" of dress codes, and "social currency." (It shouild be noted that this kind of piece is a favorite trope of New York Magazine; it alternates with articles about the terrible drug/sex/fashion/dust-bunny problem at these elite private schools. They do the same sort of thing with doctors and vacation spots: one issue brings an article on the 100 best plastic surgeons, while the next provides breathless horror stories of plastic surgery gone horribly wrong.) The article is useful_; it provides a illustrative snapshot, reflective at times, of the mindset behind nursery-school fetishism. But utility is not quality.
Katha Pollitt's Times Op-Ed on similar problems surrounding public-school admissions is better, if only in that Pollitt is willing to look beyond personal neurosis to the plight of the great majority of parents, for whom the competitive-admissions game is not an option. Although she never quite connects the dots, she points out that the quid-pro-quo game, in whose terms the private-school-parent Wolff already sees the entire educational world, is making inroads to public-school admissions:
The "hotter" the school or program, the more we prospective parents were told about the thousands of dollars parents donated for art, music and supplies, the "frills" that were vanishing from the system overall. A school's heat could be gauged too by the preponderance of white faces � principals, teachers, parent volunteers � in charge of these visits. At some schools you could measure the rising temperature by the increasing paleness of the students: the fifth grade might look like Trinidad, but the kindergarten looked more like Bavaria.
What do Manhattan parents do to get their little ones into the top public elementary schools? They do what I did: They get someone � friends with kids in the school, someone connected, someone famous � to put in a word, and they write sycophantic letters in which they profess allegiance to the school's educational philosophy, promise to work their tails off for the parents association and read their child French fairy tales at bedtime.
(emphasis added). I wouldn't be willing to stake my life on it, but I think I see what's going on here. Public schools, although not officially allowed to charge tuition or pick kids on the basis of parental wealth, are finding proxies for these factors. Involvement in the parents' association is a useful one: it redirects some resources from parents to schools. Of course, you can't condition admission on parents making donations or taking their kids' classes on field trips, which makes the whole thing a subtle and uncertain dance, but you can certainly urge prospective parents in one direction and see how eagerly they respond.
Or, more helpfully, look at the deal from the other end. There are parents who care deeply about their childrens' educational success, to the point of picking the perfect kindergarten and obtaining admission by any means necessary. These parents are going to be scoping out the admissions system with the piercing eye of a lawyer or a burglar, looking for pressure points and unlocked doors. Sooner or later, they'll find something, because even large bureacracies have needs. Maybe it's the PTA, or maybe it's the standardized-test advantage that private tutoring brings, or maybe it's having a kid with polished manners and a deferential air toward teachers. The specifics don't precisely matter. The point is that someone will find the right fulcrum, and once one parent has found it, others will follow.
To complete the picture, it suffices to note that rich parents are more likely to be in this position, and better able to play the game. More likely because they're under more parental-peer pressure to put their kids in the high-bragging rights schools (and, in a variant of William Langewiesche's argument in "Peace is Hell" in the October 2001 issue of The Atlantic Monthly, they have more untethered obsessive attention to overconcentrate on this one object). Better able because they have the money to spend hunting down the particular Snark the school happens to care about. The end result is that the elite public schools take on, step by step, all the unfortunate characteristics of elite private schools, even as no one quite understands why.
The "why" is quite simple, though, when described this way: a market is developing. Schools and parents each have resources desired by the other; they're working out ways to trade those resources. The market is best descrbied as a market in admissions slots; the goods offered in exchange for those slots vary, depending on the particulars. Money isn't actually the currency, although it's never far from the scene. It paces back and forth, restlessly, ready to convert itself into more useful media of exchange as the market demands. Where there are people with enough money (or power, or time, or any other resource), and where there are things (be they goods, services, laws, or anything else under the sun) that these people want, a market for those things will struggle to be born.
This principle is a general one; once you know to look for it, you see it everywhere. Employers put enormous pressure on colleges to stamp and differentiate their students (call it "credentialling" or call it "signalling," if you prefer). Where colleges putatively thwart that pressure by adopting flatter grading scales (note that grade inflation has substantially the same effect), students will find new ways to differentiate themselves -- hence the rise of the quadruple major and the ever-more-glowing recommendation letter. Where politicians can be bribed, businesses bribe them. Where politicians can't be bribed, businesses provide campaign contributions. Where campaign contributions aren't possible -- say, to non-elected administrators at federal agencies -- the (implicit) possibility of lucrative post-retirement private-sector employment becomes the carrot.
The point is that where the carrot does not already exist, it becomes necessary to invent the carrot, and this is what markets do. Innovation? Entrepreneurship? These are just buzzwords for the speculative process of dreaming up new vegetables.
Let's go back to the private-school shenanigans with which we started, keeping this principle in mind. Now, admissions slots to selective private schools cost good money, but tuition money isn't the real market here. Tuition is invariably set well below the level a school could charge and still fill its class. To the objection that they'll have fewer applicants if they raise tuition, the reply is that by increasing financial aid awards by the amount of the tuition increase, the school could retain those applicants it felt were actually adding to the academic quality of its student body. There's some price discrimination going on here, sure, but as the Grubman example illustrates, it pales in comparison to the price discrimination in the "hidden" market.
What keeps it from being a "real" (by which, I must confess, I mean "interesting") market is that admissions slots aren't property. You can't resell them, for example. Thus, the Jack Grubmans of the world can't just offer to pay their cool million to the parent of a successful applicant. Nor can they simply go to the school and offer a million, straight up. The normative constraints on education say, simply, you can't do that. For some strange reason, when a school openly auctions off places, its reputation among potential parents suffers, even when those same parents have purchased their kids' slots through the same back door as Jack Grubman. It becomes necessary to find roundabout ways of accomplishing the same goal, and thus this secondary market arises, a market populated by Sandy Weill and other shady middlemen.
(Note that it can't even be the presence of some number of kids who got in under their own steam that makes parents prefer the covert system. A school could simply announce that it was holding 80% of its slots for "real" students and auctioning off the other 20% to "rich" students (who met some minimum academic standard, of course), and end up enrolling exactly the same class for exactly the same amount of money. What's at work here is the same sort of societal preference not to talk about certain matters that pervades medical ethics. These preferences may or may not be legitimate (I've seen quite convincing arguments both ways, and I'm not yet willing to commit myself), but they're quite real, and it becomes necessary to take them as given, if one is to talk sensibly about such issues.)
There's another term for this sort of transaction. (No, not "black market;" the illegality here has nothing to do with the involvement of a school.) We call this sort of shell game "money laundering." Jack Grubman has piles of money, perfectly good cash money American except that there are certain things on which he cannot spend it, certain things which he desires very much. So Jack Grubman takes his piles of money and he finds a respectable-looking businessman and says to this businessman, here, take from me these piles of money and make them not appear to come from me, so that I can obtain these certain things which I desire very much but cannot spend my own money to obtain.
This respectable-looking businessmen then takes Jack Grubman's money (to be precise, in this case, the "money" involved was, in the first instance, a combination of those other familiar universal currencies, power and information), does some fancy tricks with it (invests it in a corporate battle, then draws some power from a different account and converts it into a million-dollar check) which result in it emerging at the other end, sqeaky-clean, where it is then used to obtain for Jack Grubman those certain things he so desparately desires.
Except that -- and here is where I detect the hand of Dickens at work -- it's not so clear anymore that Jack Grubman has really done right by his kids' educational futures. After all, the 92nd Street Y's programs stop after preschool. If you were the admissions director of a selective private school looking over the Grubman files, would you want to risk the potential publicity disaster of admitting his kids to your school? Sure, you can say that no palms were greased and no side deals struck, but is that claim really a negative you'd like to have to prove?