Journalist Jane Jacobs coined the term “cataclysmic money” to describe a sudden, large investment into a neighborhood. It is in the precise sense of “deluge” or “flood” that she means the word, inviting us to imagine spigots of public or private money looming ominously over urban America, poised to rain torrents of dollars on the just and unjust alike. “This money shapes cataclysmic changes in cities,” Jacobs writes in The Death and Life of Great American Cities. It behaves like “manifestations of malevolent climates beyond the control of man—affording either searing droughts or torrential, eroding floods.”

　　Jacobs’s book is about how communities work, what policy makers do to foster their life, and what they do to kill it. She was writing about urban redevelopment in the 1960s, but her discussion of the possibilities and perils of investment is just as apt for today, and in describing other kinds of social spending. The welfare fraud scandal in Minnesota, for instance, is a post-diluvian event.

　　The general picture that has emerged is that federal and state welfare programs are doing a great deal of harm to the Somali-American immigrant community—and that ethnic Somalis in Minnesota are using those programs to do a great deal of harm to themselves. The very institutions and forces that should be driving the success of this community—strong family ties, thick civil society, and a certain kind of entrepreneurial energy—have instead been turned to crime, underwritten by poorly managed federal dollars. “Money is a powerful force for both city decline and regeneration,” Jacobs writes. “But it must be understood that it is not the mere availability of money, but how it is available, and for what, that is all important.”

　　It is a cliché of Covid-era commentary that the pandemic exacerbated previously existing social pathologies rather than creating new ones. This truism applies to welfare fraud as much as it does to “the loneliness epidemic” or the struggles of public education. According to federal prosecutors, the roots of the fraud scandal stretch back to at least 2018. But the annual amounts of money stolen only become really eye popping only once the pandemic starts.

　　In the last decade, something like $9 billion has been stolen from Medicaid-funded programs in Minnesota. These include a housing program intended to serve drug addicts, the elderly, and the mentally ill; a meals program for low-income kids (the “Feeding Our Future” scheme); and after-school programs for kids with autism. Nearly everyone indicted in connection with the scandal is an ethnic Somali and a naturalized American citizen.

　　There are many dimensions to this story, none of them edifying. It suggests something is deeply rotten in the political culture of the Land of 10,000 Lakes—or the Land of 10,000 Frauds as a memorable Wall Street Journal headline dubbed it. Was the staggering industrial-scale fraud” enabled by the sheer incompetence of Minnesota’s civil servants—or a product of the cynicism of the Twin Cities’ political machine? These are serious questions that dozens of criminal trials, public hearings, and hard-nosed reporting will hopefully answer.

　　But as the melodrama in Minnesota continues to play out, I think we can hazard some observations, based on what we currently know, about money, the impoverished immigrant community at the center of this scandal, and our broken welfare system.

　　In The Death and Life of Great American Cities, Jacobs was writing about the “urban renewal” era of the 1940s to 1970s, when the standard model for urban improvement involved demolishing historical buildings and neighborhoods, underwritten by federal money, for the purpose of rebuilding something modern and planned. What today we call “redlining” prevented poor neighborhoods of all ethnicities from securing modest amounts of capital, what Jacobs called “gradual money,” to achieve steady improvement.

　　A steady stream of poorly managed government aid—and the deluge of pandemic relief—seems to have suppressed the conditions for success among Somali Americans in Minnesota.

　　When investment finally did come, it typically meant the clearing away of the institutions and businesses native to the neighborhood and the displacement of its inhabitants. “Aid” and “renewal” became synonymous with destruction. A similar dynamic plays out today with other kinds of social spending. Money can wash over communities like a great flood, warping or obliterating what was solid and reliable, repressing and smothering good things that could be. Torrents of investment, if not properly channeled, can effect unpredictable changes. These changes might be as obvious as a neighborhood’s physical destruction. Or they might be more subtle, like the supplanting of local dollars for federal dollars in local charity. In either case, financial capital crowds out or infects social capital, and the ties that bind a community sicken. The bureaucratization of community life is just one disease of the welfare state.

　　On the post-liberal right, it has been trendy in recent years to observe that the law is a teacher. Money is a teacher, too. How the money shows up, as Jacobs observes, matters a great deal, especially in poor communities and perhaps even more especially in communities of people who are learning how to be Americans.

　　Reading about the indictments, one gets a sense of the closeness of relationships among Somali Americans in Minnesota. Many of these fraud schemes seemed to be family affairs. But whereas those relationships might have been springboards to productivity and success—as has so often been the case among close-knit immigrant communities in this country—instead they facilitated fraud. At a time when local community is reportedly collapsing in the United States, when loneliness has been declared “an epidemic,” it is extraordinary—almost darkly comical—that a social group apparently immune to one of the most discussed social pathologies of American life in the 2020s has exploited that immunity for crime. The pervasiveness of fraud in the Somali-American community is mind-boggling, exactly because many of the fraud schemes were perpetuated as a community.

　　The tension between the good and bad of intense “bonding” social capital in an immigrant community is not so unique in America’s history. One thinks, for instance, of the experience of Italian Americans and the reputation for criminality they had to overcome. In shedding their “mafiosa” image, assimilating as good Americans, and climbing the socio-economic ladder, however, one thing Italians did not have to contend with is today’s enormous welfare state, with all its perverse incentives, enervating temptations, and anti-social pedagogy.

　　Another quality of the Somali Americans that shines through the Justice Department’s press releases is a kind of entrepreneurial energy. As the enormity of the fraud schemes suggests, many of them were organized and, we could say, ambitious. While many Americans during “Covid-tide” were clearing their social calendars, watching Netflix, and drinking too much, Somali Americans in Minnesota were getting after it—though unfortunately, the “it” for many was participating in “staggering industrial-scale fraud.”

　　My point in highlighting the family ties and “go-getterness” of the perpetrators is not to romanticize their criminality. That injustice typically possesses so many noble qualities—a certain amount of rationality, a certain amount of attractiveness, a certain amount of skill—makes it all the more horrible. Strong family ties, thick civil society, and entrepreneurial energy—all qualities that Somali Americans in Minnesota apparently possess—should have been a recipe for social mobility and community success. Instead, they were the elements that made these extraordinary crimes possible.

　　As the old saying goes, however, “fool me once, shame on you; fool me 9 billion times, shame on me.” While taking nothing from the culpability of the fraudsters, a great deal of the blame has to lie with our poorly designed and poorly managed welfare state. “Cataclysmic money” is just as devastating when it is dumb cataclysmic money.

　　Especially in the case of the autism services scam, which involved kickbacks of Medicaid funds to families who were willing to acquire bogus autism diagnoses for their children, the organizers of these schemes rightly identified that our government attaches economic value to deficiency. The Somali-Americans of Minnesota were commodified by these programs—and often they commodified themselves by participating. That our social assistance programs enabled and incentivized this degrading behavior by an immigrant community is as much an indictment of the social assistance programs as it is of the immigrant community.

　　The pedagogical message of the system exploited by ethnic Somalis—and which is being exploited to one degree or another by many other groups, institutions, and governments across the country—is quite clear: Commodify your deficiency, exploit your diagnosis, leverage your identity. This is no way to build a flourishing life or community. Americans, who are overwhelmingly welcoming and generous to legal immigrants, are rightly indignant at newcomers exploiting the social safety net. But anger about this situation, if it is to be constructive, should be directed on the whole at the bad system we are welcoming these new Americans into, and through which they are learning how to be Americans.

　　“Money has its limitations,” Jacobs writes. “Money can only do ultimate harm where it destroys the conditions needed for inherent success.” A steady stream of poorly managed government aid—and the deluge of pandemic relief—seems to have suppressed those conditions among Somali Americans in Minnesota. Whatever reforms come out of this ugly scandal, may they be attentive to the dangers of cataclysmic money.