site logo

Business-Managed Democracy

“Business-managed democracies are those in which the political and cultural arrangements are managed in the interests of business”

Sharon Beder

Business-Managed Education

photo of Edward B RustEdward B. Rust, Jr.

Edward B. Rust, Jr is at the centre of a vast network of business interests determined to have US public schools adopt standards and testing as a way to make them accountable to employers, who depend on schools to provide them with compliant, work-ready employees.

 

State Farm Insurance

reference

Rust is the CEO and chair of State Farm Insurance Companies, as was his father before him and his father’s father before him. The Rust clan have run State Farm for more than fifty years since Adlai Rust took over in 1954. You might imagine this is a family firm but, far from it, it is a mutual automobile insurance company for rural drivers that is owned by its policy holders, founded in 1922. By 1999 it insured 20 percent of the cars in the US, as well as millions of homes and lives. It had 79,000 employees and 16,700 independent agents servicing its policies.

reference

Edward B. Rust, who has worked at State Farm since 1975 when he graduated from Southern Methodist University, plays a key leadership role in a number of business coalitions and think tanks as well as educational advocacy groups, government advisory groups and commissions (see figure). His continuing refrain in each of these positions is a call for standards, testing and accountability in schools.

back to top

Accountability

reference

For Rust, accountability in schools is important because “large organizations like schools ‘don’t change because they see the light; they change because they feel the heat’…” He claimed that how well students performed at school would not only “determine an individual’s economic security” but also the “productivity and success” of the company that employs them.

reference

It is therefore surprising to find that the organization he heads is far from a paragon of high standards and accountability. In 1999, while Rust was pushing for high standards and accountability in schools, a jury asked State Farm to pay $456 million and $730 million punitive damages because it had breached its contract with policyholders by using cheap, inferior, ill-fitting replacement parts. The judge, noting that “State Farm occupies a position of trust with policyholders”, found that “State Farm violated this trust”.

reference

In 1998 the firm paid $200 million “to settle a class action charging that agents engaged in a variety of misleading sales practices.”That same year State Farm was forced to pay millions in various cases including $25 million for “systematic destruction of documents” and “systematic manipulation of individual claim files to conceal claim mishandling”.

reference

An Idaho District Judge stated in one case: “I find that the evidence was clear and overwhelming that State Farm, beginning with its claims adjuster and running up through its management, participated in the egregious process of manufacturing fictitious reports and obtaining biased opinions under the guise of obtaining independent and objective medical reviews.”

reference

Business Week noted: “If there’s a common theme in State Farm's big court losses, it’s that judges and juries think the company has taken cost-cutting too far.”

reference

In 2001 a Utah Supreme Court went further referring to State Farm’s “decades-long policy of fraudulent and dishonest practices”. Nevertheless, Rust unself-consciously led the business campaign for more accountability in public schools throughout the 1990s.

back to top

NEW! Contributers' Updates and Examples

If you have any examples or updates you would like to contribute please email them to me and I will add them here. Please give references for where you sourced the information.