Letter from the US: Profits from poverty


Letter from the US. By Barry Sheppard

Profits from poverty

Since President Clinton signed the bipartisan law abolishing the 60-year-old guarantee of federal aid to poor children, one startling development has been proposals by giant corporations to take over the running of welfare programs. It seems that good profits are to be had in the poverty business!

Under the new law, federal welfare programs are to be replaced by block grants to the states, which would be responsible for dealing with the poor. For the first time, states would be allowed to contract out their welfare programs to private corporations, which would also be allowed to determine who is eligible to receive assistance and how much.

To state and county officials facing capped welfare budgets and financial penalties if they fail to move most welfare recipients off the rolls in two years, a fixed-price contract with a private firm is appealing. If the firm fails to carry through the necessary cutbacks, the states could collect damages from it.

Consequently, a big new investment opportunity has opened up.

"We're approaching this marketplace the way we approach all other marketplaces", said Holli Ploog, an official with Lockheed Martin.

Lockheed Martin is one of the war industry giants, with a worth of $30 billion. So far its competition in the lucrative new field is Andersen Consulting, a $4.2 billion spin-off from the accounting firm Arthur Andersen, Electronic Data Systems, the $12.2 billion outfit founded by Ross Perot, and some small outfits already in the business.

The new law instructs the states to cut off benefits to any poor family, with some exceptions, if the parent(s) fail to get work and off welfare in two years. There is a lifetime limit of five years total that the poor can be on welfare.

These provisions can be put to good use by welfare firms in making sure to cut costs while raking in the block grants from the states.

The new law claims its purpose is to move people "off welfare into work". The scam, of course, is that there are no provisions for creating jobs. There aren't enough jobs for these people — which is why they are on welfare. The real result, whether the new law is administered by the states or by private companies, will be to slash drastically the number of poor receiving assistance, throwing millions into abject poverty, most of them children.

Private corporations like Lockheed Martin have a point when they claim they will be more ruthless than the states in carrying out this assault, as the interests of the needy are subordinated to the "bottom line".

Part of the program is supposed to be some job training and help in job placement. One of the selling points to prospective employers is that the ex-welfare recipient will work for the minimum wage.

One of the smaller companies already in the business, America Works, has contracts with a few cities. This is how its scam works: if the company is successful in placing a welfare recipient in a job, it pays the worker the minimum wage for four months, while the new employer pays America Works a higher wage. Then America Works collects $5000 from the city for each person placed. What happens after four months? Well, the "invisible hand" of the marketplace comes into play, and the newly placed worker is on her/his own.

Similar programs might be appealing to some employers as a way of replacing higher paid workers. Denise Hunter, who went through one of these training programs in San Francisco, was quoted in the New York Times as saying that after three weeks of looking for work, she saw the way the new law would work out. "People that's been working 20 years, they 're going to give us their jobs for minimum wage", she said.

Privatisation of welfare will also open new avenues for corruption, like those of the war industries, which have the guarantee of government funds. The Pentagon is famous for buying $100 fountain pens and $900 toilet seats.

"There's some easy money if the states aren't careful", said Robert Tyre, head of the government contracts division of Andersen Consulting. One can almost see him rubbing his hands and grinning.

Meanwhile, Clinton is making the new welfare law and his endorsement of it a centerpiece of his campaign. At a meeting of black church leaders, for example, he exhorted them to help the needy find jobs. He said that perhaps the churches could be paid by the states out of their block grants for this service.

Of course, without creating new jobs, this is so much hot air. What's really needed is a massive public works program and a shortening of the work week to create jobs. These steps would also increase the quality of life for working people.

But the capitalist class and its two major parties are going in the opposite direction.

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