Many corporations have caught on to the fact that there is a lot of money to be made off of poor people. Every year the U.S. federal government spends about $900 billion dollars on anti-poverty programs and other services like Medicaid and affordable housing vouchers and subsidies—and also private homeless shelters, the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), school lunch, job training programs, and cash benefits for welfare. It also includes about $12 billion for child welfare and $7.8 billion for private prisons.
These companies have found a lucrative opportunity in providing services to poor and marginalized communities, often using government money as a primary revenue source.
This practice raises concerns about the motives behind privatization and its impact on the quality of services provided to vulnerable populations.
One of the most glaring examples of this phenomenon is the privatization of prisons. Private prison companies, such as GEO Group and CoreCivic, have benefited immensely from contracts with federal and state governments. These corporations are paid based on the number of inmates they house, creating a perverse incentive to increase incarceration rates rather than rehabilitate offenders or reduce crime. The profit motive can lead to cost-cutting measures that compromise the quality of care, safety, and rehabilitation programs for inmates.
For instance, underfunding mental health services, medical care, and educational programs can exacerbate the cycle of poverty and incarceration, disproportionately affecting poor communities.
Similarly, the privatization of healthcare services for low-income populations, particularly through Medicaid and Medicare programs, has also become a profitable industry. Companies managing these services often prioritize cost reduction over patient care. This can result in limited access to essential services, longer wait times, and lower-quality care for poor individuals who rely on government-subsidized healthcare. The emphasis on profit margins over patient outcomes undermines the very purpose of these programs: to provide adequate care to those who need it most.
The problem with this model is that it shifts the focus from public welfare to corporate profit. When the primary goal is to maximize earnings, the needs of the most vulnerable are often neglected. Moreover, the lack of accountability and transparency in private contracts can lead to corruption and abuse. The privatization of social services and prisons thus raises critical ethical questions about the role of government in providing for its citizens and the dangers of allowing corporate interests to dictate public policy.
But there is an underlying question: Do privatized social services do the job better and cheaper than government agencies or nonprofits? It doesn’t seem to make sense those private companies can deliver on their promises to provide the same or better outcomes as government agencies and still have profits left over to satisfy the demands of stockholders or private equity investors.
The privatization of services for poor populations funded by government money prioritizes corporate profits over the welfare of vulnerable communities, leading to substandard care and exacerbating existing social inequalities.
In Poverty for Profit: How Corporations Get Rich off America’s Poor (The New Press, 2024), veteran journalist Anne Kim investigates the multiple industries that infiltrate almost every aspect of the lives of the poor—health care, housing, criminal justice, and nutrition. She explains how these businesses are aided by public policies such as the wholesale privatization of government services and the political influence these industries wield over lawmakers and regulators.
Guest:
Anne Kim is a writer, lawyer, and public policy expert. She is a contributing editor at Washington Monthly, where she was a senior writer. Her work has appeared in the Washington Post, Governing, TheAtlantic.com, the Wall Street Journal, Democracy, and numerous other publications. Her new book is Poverty for Profit: How Corporations Get Rich off America’s Poor.
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*This interview will be recorded on Tuesday, August 27, 2024.
