Psychological Science in the Public Interest (a peer-reviewed journal of the Association for Psychological Science) published a review of phonics vs. whole language. Here is the money quote:
Quote
Two inescapable conclusions emerge: (a) Mastering the alphabetic principle (that written symbols are associated with phonemes) is essential to becoming proficient in the skill of reading, and (b) methods that teach this principle directly are more effective than those that do not. Using whole-language activities to supplement phonics instruction does help make reading fun and meaningful for children, but ultimately, phonics instruction is critically important because it helps beginning reders understand the alphabetic principle and learn new words.