Poverty–industrial complex

Last updated December 21, 2023

The poverty industrial complex refers to private corporations taking over social services functions that were formerly provided by government agencies. These private corporations have a vested interest in profit and it is thus debated whether the practice of privatizing social services is hurtful to society, in particular for the poor and vulnerable people that such agencies are supposed to provide services for.

History

It is believed^{[ citation needed ]} that the widespread outsourcing of human services formerly provided by government agencies to for-profit companies began with the Personal Responsibility and Work Opportunity Act, signed by president Bill Clinton in 1996. The reform changed a system that formerly provided large sums of direct cash transfers to those in need^{[ citation needed ]} into taking that federal aid in providing services for vulnerable citizens with it. Those services include child care assistance or work-related activities and refundable tax credits that are essentially a different form of cash transfer. According to the Institute for Research on Poverty,^[1] the largest sum is going to a spending category designated as "other", covering a broad range of services such as child welfare, parenting training, substance abuse treatment, domestic violence services and early education. Author Daniel Hatcher criticized that a poverty iron triangle has developed between the federal government, state governments and poverty-industry private contractors. Funds provided by the federal government to help vulnerable populations are misused and funneled towards private companies and in addition to that used by the states, which often have a tight budget, as a mere revenue stream.^[2]

Contemporary poverty–industrial complex

The United States Department of Health and Human Services (HHS) is an executive department that provides poverty assistance, with an annual budget of around US$1.2 trillion.^[3] One major branch of the HHS is the Office of Community Service (OCS). The OCS provides funds to states, counties and cities that are intended to lift people out of poverty.^[4]

Daniel Hatcher, author of The Poverty Industry: The Exploitation of America’s Most Vulnerable Citizens, has compared the practice of for-profit companies taking over government functions deemed for the most vulnerable in society as a huge "poverty industrial complex", thus comparing it to the military industrial complex. According to Hatcher, human service agencies and private companies conspire to create a large poverty industry in which billions in federal aid meant to go towards helping the poorest of society is instead taken by private companies. As a result, services provided to those in need become inadequate.^{[ citation needed ]}

Among the private companies providing these services are those known for integral roles in the United States defense industry – like Lockheed Martin and Northrop Grumman. These companies provide services like child support, Medicaid services, health insurance call centers and welfare-to-work programs. As for-profit companies, they turn to consultants that help them figure out how to maximize their bottom line. The company Maximus for example states in advertisements that it has partnered with state, federal and local governments to help provide high-quality health and human service programs in "cost-effective" ways tailored to each community. The company has been in contract with government agencies in different states where it was accused of not paying overtime to employees or not allowing them to work overtime, thus rendering it impossible to respond to emergency situations. Additionally Maximus was accused of misclassifying employees and underpaying employees. Maximus received the nation's first privatized welfare contract in 1987 from Los Angeles County and by 1990 was generating $19 million in revenue, Mother Jones reported in 2019. Maximus has partnered with agencies in 28 US states for 1.7 billion US dollars in services. 40% of the total revenue of the company is generated through state contracts to provide government services.^[5]

The Trials of Gabriel Fernandez

The term was mentioned in the 2020 Netflix series The Trials of Gabriel Fernandez , which surrounds the failure of social services and law enforcement to rescue Fernandez from an abusive home. As a result of this oversight, Fernandez's parents tortured the child to death, gaining widespread attention and critique of the child welfare system in the United States. The Netflix series mentions in particular the for-profit company Maximus, which has taken over social service functions formerly handled by government agencies in Los Angeles County.^[5]

Poverty Inc.

The 2014 documentary Poverty Inc. explored the poverty-industrial complex as a multi-billion dollar market of NGOs, multilateral agencies, and for-profit aid contractors turning the most vulnerable members of society into profit generators and misappropriating funds.^[6]

Related Research Articles

The United States Department of Health and Human Services (HHS) is a cabinet-level executive branch department of the U.S. federal government created to protect the health of the U.S. people and providing essential human services. Its motto is "Improving the health, safety, and well-being of America". Before the separate federal Department of Education was created in 1979, it was called the Department of Health, Education, and Welfare (HEW).

Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifically to social insurance programs which provide support only to those who have previously contributed, as opposed to social assistance programs which provide support on the basis of need alone. The International Labour Organization defines social security as covering support for those in old age, support for the maintenance of children, medical treatment, parental and sick leave, unemployment and disability benefits, and support for sufferers of occupational injury.

The prison-industrial complex (PIC) is a term, coined after the "military-industrial complex" of the 1950s, used by scholars and activists to describe the many relationships between institutions of imprisonment and the various businesses that benefit from them.

The Children's Health Insurance Program (CHIP) – formerly known as the State Children's Health Insurance Program (SCHIP) – is a program administered by the United States Department of Health and Human Services that provides matching funds to states for health insurance to families with children. The program was designed to cover uninsured children in families with incomes that are modest but too high to qualify for Medicaid. The program was passed into law as part of the Balanced Budget Act of 1997, and the statutory authority for CHIP is under title XXI of the Social Security Act.

Maximus Inc. is an American government services company, with global operations in countries including the United States, Australia, Canada, and the United Kingdom. The company contracts with government agencies to provide services to manage and administer government-sponsored programs. Maximus provides administration and other services for Medicaid, Medicare, health care reform, welfare-to-work, and student loan servicing among other government programs. The company is based in Tysons, Virginia, has 34,300 employees and a reported annual revenue of $3.46 billion in fiscal year 2020.

The Administration for Children and Families (ACF) is a division of the United States Department of Health and Human Services (HHS). It is headed by the Assistant Secretary of Health and Human Services for Children and Families. It has a $49 billion budget for 60 programs that target children, youth and families. These programs include assistance with welfare, child support enforcement, adoption assistance, foster care, child care, and child abuse. The agency employs approximately 1,700 staff, including 1,200 federal employees and 500 contractors, where 60% are based in Washington, DC, with the remaining in regional offices located in Boston, New York City, Philadelphia, Atlanta, Chicago, Dallas, Kansas City, Denver, San Francisco, Missouri and Seattle.

The terms poverty industry or poverty business refer to a wide range of money-making activities that attract a large portion of their business from the poor. Businesses in the poverty industry often include payday loan centers, pawnshops, rent-to-own centers, casinos, liquor stores, lotteries, tobacco stores, credit card companies, and bail-bond services. Illegal ventures such as loansharking might also be included. The poverty industry makes roughly US$33 billion a year in the United States. In 2010, elected American federal officials received more than $1.5 million in campaign contributions from poverty-industry donors.

The United States Children's Bureau is a federal agency organized under the United States Department of Health and Human Services' Administration for Children and Families. Today, the bureau's operations involve improving child abuse prevention, foster care, and adoption. Historically, its work was much broader, as shown by the 1912 act which created and funded it:

The said bureau shall investigate and report to [the Department of Commerce and Labor] upon all matters pertaining to the welfare of children and child life among all classes of our people, and shall especially investigate the questions of infant mortality, the birth-rate, orphanage, juvenile courts, desertion, dangerous occupations, accidents and diseases of children, employment, legislation affecting children in the several states and territories.

The Low Income Home Energy Assistance Program is a United States federal social services program first established in 1981 and funded annually through Congressional appropriations. The mission of LIHEAP is to assist low income households, particularly those with the lowest incomes that pay a high proportion of household income for home energy, primarily in meeting their immediate home energy needs. The program, part of the United States Department of Health and Human Services (HHS), is funded by grants appropriated from the federal government.

In the United States, federal assistance, also known as federal aid, federal benefits, or federal funds, is defined as any federal program, project, service, or activity provided by the federal government that directly assists domestic governments, organizations, or individuals in the areas of education, health, public safety, public welfare, and public works, among others.

Juvenile Protective Association (JPA) is a private non-profit agency devoted to protecting children from abuse and neglect by providing intervention and treatment services to families in Chicago.

<span class="mw-page-title-main">Social programs in Canada</span> Overview of social programs in Canada

Social programs in Canada include all Canadian government programs designed to give assistance to citizens outside of what the market provides. The Canadian social safety net includes a broad spectrum of programs, many of which are run by the provinces and territories. Canada also has a wide range of government transfer payments to individuals, which totaled $176.6 billion in 2009—this cost only includes social programs that administer funds to individuals; programs such as medicare and public education are additional costs.

In the United States, poverty has both social and political implications. In 2020, there were 37.2 million people in poverty. Some of the many causes include income inequality, inflation, unemployment, debt traps and poor education. The majority of adults living in poverty are employed and have at least a high school education. Although the US is a relatively wealthy country by international standards, it has a persistently high poverty rate compared to other developed countries due in part to a less generous welfare system.

<span class="mw-page-title-main">Social programs in the United States</span> Overview of social programs in the United States of America

The United States spends approximately $2.3 trillion dollars on federal and state social programs include cash assistance, health insurance, food assistance, housing subsidies, energy and utilities subsidies, and education and childcare assistance. Similar benefits are sometimes provided by the private sector either through policy mandates or on a voluntary basis. Employer-sponsored health insurance is an example of this.

Privatization is the process of transferring ownership of a business, enterprise, agency, charity or public service from the public sector or common use to the private sector or to private non-profit organizations. In a broader sense, privatization refers to transfer of any government function to the private sector - including governmental functions like revenue collection and law enforcement.

<span class="mw-page-title-main">Foster care in the United States</span> System of non-parental care in America

Foster care is the term used for a system in which a minor who has been made a ward is placed in an institution, group home, relative placement, or private home of a state certified caregiver. The placement of the child is usually arranged through the government or a social-service agency. The institution, group home, or foster parent is paid. The state via the family court and child protection agency stand in loco parentis to the minor, making all legal decisions, while the foster parent is responsible for the day-to-day care of the minor. The foster parent is remunerated by the state for their services.

Welfare in California consists of federal welfare programs—which are often at least partially administered by state and county agencies—and several independent programs, which are usually administered by counties.

The Summer Food Service Program (SFSP) began in 1968. It was an amendment to the National School Lunch Act. Today, the SFSP is the largest federal resource available for local sponsors who want to combine a child nutrition program with a summer activity program. Sponsors can be public or private groups, such as non-profit organizations, government entities, churches, universities, and camps. The government reimburses sponsors for the food at a set rate. There are still communities that have not created a Summer Food Service Program in their community. For those individuals that want to help ensure children have meals during the summer, they can get more information from the USDA or their state government agencies.

The Office of the Assistant Secretary for Planning and Evaluation (ASPE) is the principal advisory group to the United States Secretary of the Department of Health and Human Services (HHS) on policy development and provides coordination and support for HHS's strategic and policy planning, planning and development of legislation, program evaluation, data gathering, policy-related research, and regulatory program.

Assets for Independence (AFI) is a federal program that distributes discretionary grants to help the impoverished achieve one of three goals: (1) homeownership; (2) business ownership; and (3) post-secondary education. AFI was created by the Assets for Independence Act.

References

↑ "INSTITUTE FOR RESEARCH ON POVERTY – Research | Training | Policy | Practice – UW–Madison". www.irp.wisc.edu. Retrieved July 13, 2020.
↑ Johnson, Toni. "IN CASE YOU MISSED IT: THE POVERTY INDUSTRIAL C". heron.org. Retrieved February 29, 2020.
↑ Office of Budget (OB), Assistant Secretary for Financial Resources (ASFR) (October 5, 2019). "HHS FY 2020 Budget in Brief". HHS.gov. Retrieved July 13, 2020.
↑ Alford. "More on the Poverty Industrial Complex". nationalbcc.org. Retrieved February 29, 2020.
1 2 Sederstorm, Jill (February 28, 2020). "Did The For-Profit Company Maximus And The 'Poverty Industrial Complex' Fail Gabriel Hernandez?". oxygen.com. oxygen. Retrieved February 29, 2020.
↑ "The Poverty Industrial Complex: The Hidden Side of "Doing Good"". medium.com. medium. June 25, 2019. Retrieved February 29, 2020.