Should this be a (for-profit) business?

America's Private Gulag

By Ken Silverstein, Prison Legal News, June 1st 2000

What is the most profitable industry in America? Weapons, oil and computer technology all offer high rates of return, but there is probably no sector of the economy so abloom with money as the privately run prison industry.

Consider the growth of the Corrections Corporation of America, the industry leader whose stock price has climbed from $8 a share in 1992 to about $30 today and whose revenue rose by 81 per cent in 1995 alone. Investors in Wackenhut Corrections Corp. have enjoyed an average return of 18 per cent during the past five years and the company is rated by Forbes as one of the top 200 small businesses in the country. At Esmor, another big private prison contractor, revenues have soared from $4.6 million in 1990 to more than $25 million in 1995.

Ten years ago there were just five privately-run prisons in the country, housing a population of 2,000. Today nearly a score of private firms run more than 100 prisons with about 62,000 beds. That's still less than five per cent of the total market but the industry is expanding fast, with the number of private prison beds expected to grow to 360,000 during the next decade.

The exhilaration among leaders and observers of the private prison sector was cheerfully summed up by a headline in USA Today: "Everybody's doin' the jailhouse stock". An equally upbeat mood imbued a conference on private prisons held last December at the Four Seasons Resort in Dallas. The brochure for the conference, organized by the World Research Group, a New York-based investment firm, called the corporate takeover of correctional facilities the "newest trend in the area of privatizing previously government-run programs... While arrests and convictions are steadily on the rise, profits are to be made -- profits from crime. Get in on the ground floor of this booming industry now!"

A hundred years ago private prisons were a familiar feature of American life, with disastrous consequences. Prisoners were farmed out as slave labor. They were routinely beaten and abused, fed slop and kept in horribly overcrowded cells. Conditions were so wretched that by the end of the nineteenth century private prisons were outlawed in most states.
During the past decade, private prisons have made a comeback. Already 28 states have passed legislation making it legal for private contractors to run correctional facilities and many more states are expected to follow suit.

The reasons for the rapid expansion include the 1990's free-market ideological fervor, large budget deficits for the federal and state governments and the discovery and creation of vast new reserves of "raw materials" -- prisoners. The rate for most serious crimes has been dropping or stagnant for the past 15 years, but during the same period severe repeat offender provisions and a racist "get-tough" policy on drugs have helped push the US prison population up from 300,000 to around 1.5 million during the same period. This has produced a corresponding boom in prison construction and costs, with the federal government's annual expenditures in the area, now $17 billion. In California, passage of the infamous "three strikes" bill will result in the construction of an additional 20 prisons during the next few years.

The private prison business is most entrenched at the state level but is expanding into the federal prison system as well. Last year Attorney General Janet Reno announced that five of seven new federal prisons being built will be run by the private sector. Almost all of the prisons run by private firms are low or medium security, but the companies are trying to break into the high-security field. They have also begun taking charge of management at INS detention centers, boot camps for juvenile offenders and substance abuse programs.

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