The Poverty Industry: The Exploitation of America’s Most Vulnerable Citizens, by Daniel L. Hatcher

I’m still naive enough to believe that regulated capitalism is possible, perhaps even good. But cynicism is beginning to take hold. The state’s well-worn leash rarely restrains capitalism and increasingly it feeds on basic services that we hold dear. Margaret Thatcher’s quasi-market NHS is now primed for full privatisation. Who will pull back on the tether enough to save it?

Daniel Hatcher meticulously explains the impact of deregulated privatisation on America’s already residual care services. What was a “poverty trap” marked by failings of family, education and economics has morphed into a poverty industry that traps defenceless children and the elderly. Vulnerability is profitability. At times, Hatcher seems to target privatisation generally, but upon closer examination the target is privatisation “American-style”.

The US federal assistance programmes Medicare and Medicaid offer a (thin) safety net to the elderly and those below the poverty line (a poverty line not readjusted since its original definition in the 1950s). Additionally, the federal government offers matching funds for specified vulnerable groups to augment comparable spending from state budgets. Instead of expanding services, cash-strapped states provide a basic service and siphon funds into their general coffers. The complexity of federal funding for devolved state-based services presents significant financial opportunities for unregulated private companies.

Federal funding is linked directly to the number of people in need of the service, so to increase one, states work to increase the other. Hatcher explains that states hire “revenue-maximizing contractors” who use “data analytics, algorithms, prioritization and dissection” to increase service users/federal income. For example, private companies encourage the diagnosis of foster children or nursing home patients with mental health problems to tap into federal disability benefits, thereby increasing state income.

In Connecticut, for example, anti-psychotic drugs are given to two-thirds of nursing home residents “even though they have no psychosis or related condition”. In 24 months, one Florida juvenile justice department bought 326,081 tablets of anti-psychotic drugs – “enough to hand out 446 pills a day, seven days a week, for two years in a row” in facilities that could hold only 2,300 kids. Revenue-maximising contractors find, diagnose and provide services for children and the elderly in order to increase state income – all for a private-sector fee, of course.

This “mining” for vulnerable “assets” is compounded by lack of oversight. States hire the private companies’ subsidiaries to regulate service provision and to monitor for fraud. Imagine if Ofsted were a subsidiary of a private company that also provided schools and foster care.

In detailing this “poverty industry”, Hatcher describes the complex web of government policies and private schemes. Readers will need to pay close attention, particularly to the American welfare-market vocabulary. The devil is in the detail – and private devils profit by knowing the labyrinthine system better than most service users, politicians and policy administrators. While this book is largely for a specialist audience, lessons regarding the costs of unregulated capitalism, and the pitfalls of devolution, are important for all.

In the UK, we giggle at the rise of Donald Trump and crazy American politics. If Trump is the face of American democracy, what horrors lie at its heart? What happens when the remaining tethers of regulation break and the dogs of capitalism devour the most vulnerable? We know already. Hatcher’s cautionary American tale opens with the horrors of child suffering in feudal England.

Angelia R. Wilson is professor of politics, University of Manchester.

The Poverty Industry: The Exploitation of America’s Most Vulnerable Citizens
By Daniel L. Hatcher
New York-University Press, 288pp, £28.99
ISBN 9781479874729
Published 21 June 2016