“No wonder,” says Anne Kim, “that poverty sticks around. There’s simply too much demand for it.”

Beginning in the 1980s, the U.S. government aggressively pursued the privatization of many government functions under the theory that businesses would compete to deliver these services more cheaply and effectively than a bunch of lazy bureaucrats. The result is a lucrative and politically powerful set of industries that are fueled by government anti-poverty programs and thus depend on poverty for their business model. These entities often take advantage of the very people they ostensibly serve. Today, government contractors run state Medicaid programs, give job training to welfare recipients, and distribute food stamps. At the same time, badly designed anti-poverty policies have spawned an ecosystem of businesses that don’t contract directly with the government but depend on taking a cut of the benefits that poor Americans receive. I call these industries “Poverty Inc.” If anyone is winning the War on Poverty, it’s them. […]

Perhaps the greatest damage that Poverty Inc. inflicts is through inertia. These industries don’t benefit from Americans rising out of poverty. They have a business interest in preserving the existing structure of the government programs that create their markets or provide their cushy contracts. The tax-prep industry, for instance, has spent millions over the past 20 years to block the IRS from offering a free tax-filing option to low-income taxpayers. The irony is that this kind of rent-seeking is exactly what policy makers thought they were preventing when they embraced privatization 40 years ago.