In 1964, President Lyndon B. Johnson declared “unconditional war on poverty,” and since then, federal spending on anti-poverty initiatives has steadily ballooned. The federal government now devotes hundreds of billions of dollars a year to programs that exclusively or disproportionately benefit low-income Americans. That spending has done a lot of good over the years—and yet no one would say that America has won the War on Poverty.

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 apparently serve. At the same time, badly designed anti-poverty policies have produced 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. These industries are called “Poverty Inc.”

Perhaps the greatest damage that Poverty Inc. inflicts is through inertia. These industries have a business interest in preserving the existing structure of the government programs that create their markets or provide their easy contracts. 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.

Privatization advocates were heavily influenced by “ public -choice theory,” proposed by the Nobel-winning economist James M. Buchanan. According to Buchanan, government agencies are as motivated by self-interest as any other entity. Instead of serving the public good, Buchanan argued, bureaucrats act to preserve their own status by maximizing their budgets and job security. Insulated from competition, they become inefficient and detached from the public interest. Privatization was supposed to pop that bubble of bureaucratic inertia. Instead, it merely shifted it from government agencies to corporate boardrooms.

Perhaps the clearest example of public-choice theory turned on its head is Job Corps, a $1.8 billion job-training program for young adults that, unlike most War on Poverty initiatives, has been contracted out since its start in 1964. Decades of evidence suggest that the program accomplishes very little. Nevertheless, Job Corps administrators manage to hang on to government contracts for decades. Contractors’ longevity stems in part from their ability to outlast administrations—and the simple fact that, once a contract is awarded, the company that wins it often becomes a de facto monopoly. When the next contract rolls around, there may be no credible competitors.

In short, an effort to streamline Big Government has instead preserved the worst of both worlds; all the spending and bloat of government, with none of the public accountability. No wonder, then, that poverty sticks around. There’s simply too much demand for it.

Buchanan argued that government agencies