How Poverty Is a Direct Result of Corruption

Head to any of the most disadvantaged places in America and ask local leaders what is holding their community back, and invariably you will hear a story about the local poor. They don’t want to work, don’t behave like they should, and have become dependent on government welfare programs. This story is centuries old. Indeed, the narrative of the shiftless poor inhabits a perpetual space in the nation’s collective consciousness.

These days, though, the biggest story about welfare cheats isn’t about the poor making off with a few dollars in undeserved aid. Any such fraud is dwarfed by the actions of Nancy New, a nonprofit leader in Mississippi, and John Davis, director of the state’s welfare agency, who, from 2017 to 2020, scammed a government program meant to help impoverished children in Mississippi, the nation’s poorest state, to the tune of nearly $80 million. It’s the largest public corruption scandal in the state’s history.

Rather than alleviating poverty through cash aid, child care, or job training, New and Davis used New’s nonprofit Mississippi Community Education Center to line their own pockets and those of a number of celebrity athletes, among other dubious schemes. Pulitzer Prize-winning reporter Anna Wolfe uncovered the scheme, but the whole thing might not have made national headlines but for the involvement of Super Bowl champion quarterback Brett Favre. Favre was paid $1.1 million by New’s nonprofit for speaking events that, according to Mississippi state auditor Shad White, did not happen. Another $5 million went to build a volleyball stadium at Favre’s alma mater, the University of Southern Mississippi, with the justification that the funds would be used to host events for underserved youth. To date only one such event has occurred.

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While the Mississippi story is particularly shocking, our five years of research in America’s most disadvantaged places has shown that government corruption is disturbingly common. We saw firsthand how members of the local elite exploited the community’s meager resources—even aid meant to help the most vulnerable—through corruption of all kinds, a pattern enduring across generations. Through hundreds of interviews with local leaders and ordinary citizens alike in our nation’s most disadvantaged places—clustered in central Appalachia, South Texas, and the historic Cotton Belt—we learned that many people assume that the poor are eager to take advantage of the dole unless proven otherwise, a guilty-until-proven-innocent framework. Yet the same people who are eager to blame the poor will often discount a case like New’s, dismissing her as just one “bad apple.”

Take Crystal City, Texas, which has a poverty rate of close to 30%, according to the U.S. Census Bureau. A major obstacle to bringing new jobs to town that might drive that poverty rate down is that the city is still reeling from 2016, when the mayor, the city manager, and three current or former members of Crystal City’s city council were convicted in a conspiracy and bribery scheme. Yet another council member had already gone down on human trafficking charges, leaving only one member of the city council to run the town. The broader region has seen an economic boom from fracking in recent years, bringing in new hotels and restaurants along with new jobs. Yet Crystal City has missed out on this surge completely. Residents we spoke to complained that local government was largely non-functional when it should have been vying for a piece of the pie.

Read More: America Looks at Poverty All Wrong

In Clay County, Kentucky, which has a poverty rate of nearly 36%, The City of Manchester’s long-serving mayor Daugh White and several of his cronies pleaded guilty to racketeering and conspiracy charges in 2007 for pursuing kickbacks from companies bidding on city contracts. Just before White’s demise, a set of reformers decided to take him on. But in their efforts to unseat White and his coalition, the reformers employed an age-old eastern Kentucky tactic—vote buying. After a federal RICO investigation, they also found themselves in the clink.

Our government must find new ways to get resources to where they are most needed. Since at least the New Deal, there has been an expectation that aid from the government will flow not directly to the needy, but to local governments, who will distribute resources for the betterment of their community. While we met many honest and well-meaning local officials through our research, this approach is a recipe for corruption because all too often the officials responsible for delivering this aid to the poor are self-dealing people. A federally administered expanded Child Tax Credit, such as the one briefly implemented by the Biden administration during the Covid-19 pandemic, is one way to get aid directly to poor families while circumventing the open pockets of local elites. Targeted funding to local governments should be made in full recognition that especially in these places, the investments are at risk of not getting to where they are most needed. Government agencies must build in safeguards to avoid graft.

A broader problem in getting resources to the places of greatest need is that for decades, the government has invested in places through policies by soliciting proposals from the communities themselves. While this may sound like a good thing, rarely is the process driven by experts in regional development. Instead, local elites—with their own self-interest—typically control the undertaking. Expertise, not cronyism, is needed to determine which strategies are most likely to lead to meaningful gains.

In many of America’s most disadvantaged regions, corruption has exerted a chokehold that has kept local communities from thriving. In the words of John Kerry, civic corruption is “an opportunity destroyer because it discourages honest and accountable investment; it makes businesses more expensive to operate; it drives up the cost of public services for local taxpayers”—a toxic alchemy. Deeply disadvantaged communities cannot thrive until more people scrutinize the actions of the local elites who run them.

Correction: This article originally said Nancy New's nonprofit was called Mississippi First. It is called the Mississippi Community Education Center.