Cashing in on Crime: The Prison Industrial Complex

 

An advertising brochure from an investment firm called World Research Group tells us that: "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!"   One reason this company is enthusiastic is reflected in the most recent figures on prison and jail populations.  As of December 31, 1999, there were 1,982,084 adults in jails and prisons in America.  This translates to an incarceration rate of 725 per 100,000 population. For comparison, the average incarceration rate for all countries of the world is around 80.  Thus, America's incarceration rate is nine times greater than the average country.

During the past couple of decades the overall imprisonment rate has increased about four-fold.  This increase has largely been the result of the war on drugs, as convictions for drug law violations (mostly possession) accounted for about one-half of the increase in state prison inmates.  Between 1988 and 1994 alone the number of prison inmates who had been convicted of drug offenses went up by over 150%!  And the impact has been felt most heavily by African-Americans.  Consider the following figures:

 

ü      While African-Americans constitute only around 12% of the U.S. population and about 13% of all monthly drug users (and their rate of illegal drug use is roughly the same as for whites), they represent 35 percent of those arrested for drug possession and 74% of those sentenced to prison on drug charges. 

ü      Drug arrest rates for minorities went from under 600 per 100,000 in 1980 to over 1500 in 1990, while for whites they essentially remained the same. 

ü      The rate of incarceration for African-Americans exceeds that for whites by a ratio of 8 to 1, while the odds of an African-American male going to prison is more than one in four (28.5%), compared to about one in twenty-five for white males.

ü      While two percent of all adults have been disenfranchised because of a felony conviction (mostly drug convictions), about 13 percent of all black men have been! In six states the percentage of black men disenfranchised is 25 percent or more, going higher than 30 percent in Alabama and Florida. 

ü      From 1986 to 1991, right in the middle of the crackdown on drugs, the proportion of African-Americans incarcerated for drug offenses went up an incredible 465 percent, compared to an increase of 110 percent for whites.

ü      During a three year period (1992-1995) out of around 2,400 persons charged in federal courts with crack cocaine violations, not a single one was white and all but eleven were African-American.

 

These figures are just a sampling of the human wreckage resulting from the punitive policies used by this country during the past 20 years.  Today prisons are literally found in just about every part of the country, with the bulk of them (especially those built during the past 20 years) in rural areas.  There is also a great deal of human rights abuses in American prisons (and also jails and juvenile correctional facilities) such as cruel and unusual punishment (e.g., long periods in solitary confinement) and extreme brutality and violence.  Moreover, there is a lot of forced (and cheap) labor, much of which produces great profits for corporations. 

During the past twenty-five years we have witnessed the emergence of what many are calling a "Criminal Justice Industrial Complex."  Many observers have suggested that this has taken over where the "Military Industrial Complex" left off, since we no longer have many external enemies, we somehow must now have internal enemies.  The new enemy is crime, especially, crimes committed by minorities.  During the past 20 years expenditures on crime control have increased twice as fast as military spending.

One can clearly see the size of this complex by first noting the annual expenditures of the three main components of the "criminal justice industrial complex," law enforcement, courts, corrections. The most recent estimates indicate that the total expenditures are somewhere in the neighborhood of $150 billion annually, and it is estimated that if recent trends continue, then by the 2002 annual expenditures will be around $200 billion.  In the early 1980s the total expenditures came to a mere $30 billion!

Employment within the criminal justice industrial complex is growing rapidly, providing many career opportunities for both college students and high school graduates. There are more than 2 million employed within this system.  The largest increase has come from the corrections component. The U.S. Census Bureau reports that the hiring and training of correctional officers is the "fastest-growing function" of all government functions.

The amount of money the flows into the coffers of the correctional industrial complex from tax dollars alone are quite substantial.  The total operating budget for both state and federal correctional institutions came to almost $30 billion in fiscal year 1996, up from just under $7 billion in 1984. It costs about $20,000-40,000 per year to house one inmate in the U.S. prison system!  And remember, this does not count the costs of building them.  Expenditures for prisons have increased more than any other category of state spending.  For comparison, between 1985 and 1996 prison expenditures increased by 7.3%, compared to only 3.6% for education and 6.6% for health.

Prison construction has become a booming business.  During the past decade about 92,000 new beds were added each year.  And the beds are very expensive, ranging from $70,000 in a maximum-security prison to $29,000 in a minimum-security prison.  As of 1998, the total cost of new prison construction was $3.88 billion - and this is just for the cells!  The construction of new prisons has become such a big business that there is a special newsletter called Construction Report, just to keep vendors up to date on new prison projects.

The prison system has become so huge that many are calling this the "Prison Industrial Complex."  This complex not just prisons and jails alone.  It includes firms who build and operate correctional systems (discussed below), plus several types of businesses that benefit directly from the imprisonment of offenders.  These are firms that provide several different kinds of services, such as food, vocational training, medical services, drug detecting, personnel management, architecture and facilities design, and transportation.  There are also companies that sell a variety of products, such as protective vests for guards, fencing, furniture, linen, locks, and many more.  Specific examples include companies that provide health care, such as Prison Health Services Incorporated, and prison food services, a billion dollar enterprise that is growing by between 10% and 15% per year.  Even the Campbell Soup Company is getting in on the action, noting that the prison system is the fastest growing market in food service! Then there are brokerage houses, and banking firms, such as E.F. Hutton and Merrill Lynch, of which more will be said below.

A boom in prison construction in rural areas has resulted in one interesting fact: five percent of the population increase in rural areas during the 1980s was accounted for by the growth in inmates.  A total of 213 new rural prisons were built in the 1980s, up from only 40 built in the 1970s; in fact, between 1900 and 1980 only 146 new rural prisons were built in the entire country.  Many rural towns have begun to solicit state governments to build a prison nearby.  In Texas some towns "bombarded the [Texas Department of Prison] with incentives that range from country club memberships for wardens to longhorn cattle for the prison grounds."

A good illustration of how companies are "cashing in" on the boom in corrections is found in the amount of advertising done in journals related to this industry. One example comes from two major journals serving the correctional industry, Corrections Today and The American Jail, plus the American Correctional Association's annual Directory. (Corrections Today is the leading prison trade magazine and the amount of advertising in this magazine tripled in the 1980s.)  A sample of a few issues of these two journals found advertisements everywhere.  Among the companies whose products are advertised here include the following:

 

Prison Health Services, Inc., a company that has, since 1978, "delivered complete, customized healthcare programs to correctional facilities only.  The first company in the U.S. to specialize in this area, we can deliver your program the fastest, and back it up with services that are simply the best"; Southwest Microwave, Inc., manufactures fence security, with their latest invention known as "Micronet 750" which is "more than a sensor improvement," it is "a whole new paradigm in fence detection technology";  Acorn Engineering, Inc., with their stainless steel fixtures known as "Penal-Ware" (lavatories, toilets, showers, etc.) and "Master-Trol" electronic valve system; Rotondo Precast, Inc. boasting "over 21,000 cells...and growing"; Nicholson's BesTea" with "tea for two or...two thousand"..."Now mass-feeding takes a giant stride forward..."; Northwest Woolen Mills, manufacturing blanket with the slogan "We've got you covered"; and, "Prison on Wheels" from Motor Coach Industries, with their "Inmate Security Transportation Vehicle."

 

More than 200 different companies are listed just in these three sources alone! (There are many more corrections-related journals like those noted here.)  But this is a mere sampling, for there is now a web site on the Internet known as "corrections yellow pages."

Among the more recent developments in the prison industry has been the entrance of long-distance phone companies.  Such industry giants as AT&T, Bell South and MCI have found prisons to be an excellent market for long distance business.  Indeed, this makes sense because inmates all over the country spend countless hours on the telephone talking with relatives.  Of course this requires a collect call, which brings these companies into prison for the huge profits to be made.  AT&T has an ad that reads:  "HOW HE GOT IN IS YOUR BUSINESS. HOW HE GETS OUT IS OURS."  AT&T estimated that in 1995 prison inmates generated about $1 billion in long-distance calls.  MCI, not wanting to miss out, went so far as installing, for free, pay phones throughout the California prison system.  They levy a $3 surcharge for each phone call made, the cost of which is paid for by the inmates relative. MCI offered the Department of Corrections 32 percent of the profits.

One organization cashing in on crime is that of unions representing correctional officers and probation and parole officers. In California, for example, the number of employees within the correctional system increase by 169 percent between 1984 and 1992, while there was an 8.7 percent decrease in the number of employees in higher education. One report noted that the California Correctional Peace Officer's Association (the union representing prison guards) has become a potent political force in that state.  In 1992 alone this group was the second largest contributor to Political Action Committees, as they contributed just over $1 million to various candidates.  It is obvious that this particular union has a vested interest in growing prison populations.  In 1980 there were 22,500 prisoners in California, while the average salary of a prison guard was $14,400, and the budget for the California Department of Corrections was $300 million.  By 1996 there were more than 140,000 prisoners, the average salary of the guards stood at $44,000, 58 percent above the national average (more than $10,000 above teachers - a very telling statistic), while the budget was $3 billion. (Prison jobs constituted almost half of the growth in state jobs during this time.)  The union had only 5,600 members in 1980; currently they have around 23,000 members, and collect about $8 million in dues annually.  They contributed $101,000 toward Proposition 184, which created the "Three Strikes and You're Out" law, which in turn led to more convictions and sentences to prison.

A recent development in the criminal justice field, related specifically to the prison system, is the trend toward what is known as privatization.  This is where a private corporation takes over the operation of a jail or prison. One writer has called this phenomenon "creeping capitalism" or the transfer of "services and responsibilities that were once monopolized by the state" to "profit-making agencies and organizations."  It should be noted that "privatization" is a trend that includes more than the criminal justice system, for it involves a number of services formerly provided by state and local governments, such as public education, health care, waste collection and many more. There are at least 18 kinds of government services that saw an increase in private-sector involvement between 1987 and 1995.

A number of serious problems have occurred with respect to the privatization of prisons and jails.  Perhaps the most serious issue is the fact that private profit is the driving force in the privatization of the correctional system.  A report by Equitable Securities in March, 1996 called "Crime Can Pay" included a "strong buy" advice to investors.  The report concluded:  "We consider the industry very attractive.  There is substantial room for continued private-prison growth."  The potential for profits has not escaped Wall Street. Wall Street is indeed eager to back the growth in "crime control stocks" with such companies as Merrill Lynch, Prudential Securities, Smith Barney Shearson and Goldman Sachs among the leaders in support of privatization. The firm of Raucher, Pierce and Refsnes of Dallas, Texas are the underwriters and investment bankers for Wackenhut Corrections.  This company is reportedly doing about $5-7 million worth of business each year, mostly "buying bonds and securities from the private prison companies or the state entities which issue them and reselling them to investors.  That securities market is now a 2-3-billion dollar industry, up from nothing eight years ago..."  So enthralled about the profits, such securities firms have already launched the "next phase" of such development.  This next phase will have private companies financing their own construction, with help from securities firms.  Such an industry obviously depends upon a steady supply of prisoners and they just as obviously do not have a vested interest in reducing crime and protecting victims.

We have seen numerous instances of serious problems with the privatization of prisons and other components of the criminal justice system.  Not that the prison system has been all that successful in reducing crime, mind you, but at least prison administrators, and in fact the entire criminal justice system, are at least theoretically accountable to the public, since tax dollars support it.  With privatization, there is no accountability.  Numerous scandals demonstrate this, such as escapes, cost over-runs, etc. There have been numerous problems regarding security, staffing, and quality of services, which have plagued prison privatization from its inception.  In addition to numerous escapes there have been problems pertaining to both health care and food service which characterize the low quality of service in privately operated prisons.  The riots at a private prison in New Jersey operated by Esmor Corrections Corporation are illustrative.  After this riot there was a lot of media coverage, with the result that Esmor's stock went from $20 per share to $7.  Since this riot, numerous private- prison corporations have been caught failing to report problems within their prisons.  The reason is simple: such secrecy protects shareholders from adverse market reactions that would likely occur if a problem were to be reported.

The movement toward privatization has already touched the state of Nevada. We have in North Las Vegas a new women's prison built and operated by the largest private prison operator in the world, Corrections Corporation of America, a company that has seen its profits increase by more than 1000% during the past 15 years.  It remains to be seen how successful they will be in the operation of this prison.  Also, Nevada will soon have it's first "maximum-security detention center" for male offenders. This institution will be built in North Las Vegas at an estimated cost of around $20 million (spread out over 30 years for a mortgage, this means more like $60 million), a cost which does not count operating expenses (at least $4 million per year). It will be built and operated by Correctional Services, Inc. of Florida.  It will occupy an area in North Las Vegas not too far from the Speedway.  Finally, late last year the Moapa Town Advisory Board was presented an offer by a private corporation to build a prison in this area in order to house inmates from, of all places, the state of Hawaii. Other potential sites include Pahrump and North Las Vegas.  The most up-to-date information I have is that this company has been turned down by Moapa officials.  Whether or not they will seek the other two sites is not known at this time.