Jim,
Your assessment and proposals for American schools clearly reflect a lack of understanding about education. To say that "public schools are organized to serve teachers and administrators rather than students and families" is both offensive and patently wrong. Nobody goes into teaching for the money -- you can make a better income driving a garbage truck, and that doesn't require a Masters' degree. Teachers and administrators are there because they are passionate about helping kids. Period.
As for making schools more market-like, that will have two effects:
1. It will cause schools to try to recruit better (meaning more affluent) students, and
2. It will further encourage teachers to teach to the test.
Market approaches are already crippling schools. All of the focus on "standards" and "competition" is hamstringing teachers by forcing them to teach to the test instead of actually evolving their curriculum and methods to meet the diverse needs of their students. And the emphasis on standardized testing encourages affluent parents to put their kids in the same schools as other affluent parents, because that's where the test scores are high, thus increasing socio-economic disparity.
If you want to actually improve the school system and grow the middle class, here's what it will take:
1. Smaller class sizes. This is, statistically, the biggest single predictor of educational success when socio-economic differences are factored out.
2. LESS emphasis on standardized testing. Let good teachers actually do what they are trained for.
3. A competitive wage for educators. My wife and I switched to the private sector because we couldn't afford to be teachers and raise a family, and in my state, 50% of new teachers quit in their first five years for the same reason. This is where market theory should be applied -- to attract the best talent to teaching.
4. Incentives for good teachers to work in low-income schools. Speaking from personal experience, it's much easier, as a teacher, to succeed with affluent suburban kids than with poor urban kids or poor rural kids. We should be putting our best teachers where they are needed most if we want to grow these kids into a middle class.
