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Critical Perspective on Prison Privatization

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A Critical Perspective on Prison Privatization

Topic Statement: “Is the privatization of prisons for profit an ethical practice?”

The topic of a country privatizing areas of industry is far from a novel idea, especially

since the rise of capitalism. With the United States being widely considered the father of capitalism, it is almost expected to see the privatization of a key component of its judicial system, prison, becoming more and more common. Although the underlying function of a prison as a means of social reform has remained constant since its inception in 1750 BCE with the Babylonian Empire, externalities are beginning to influence a change in the governing bodies of penitentiaries (Roberts, 2006). With governments and taxpayers seeing the opportunities for cost savings, countries throughout the world are beginning to employ private operating models for their penitentiaries, with the U.S. being the primary driver of this change (Trivedi, 2014).

Framework of the Issue

A change in the operating sovereign of a prison, from federal to private, is controversial enough that the effects of this privatization have garnered the title of the Prison-Industrial Complex. The complex is a scholarly attempt to explain the intertwining of the profit-driven agendas of private prison companies and the correlated expansion of the US inmate population. Although cost savings for the government and its taxpayers are argued as beneficial outcomes of prison privatization, there are much greater stakes for society as a whole. The issue of privatizing prisons is especially relevant to a business ethics course because this particular industry does not deal with a simple product or service; it deals with the unique commodity of people. The privatization of prisons completely changes the nature of the stakes, stripping inmates of their innate rights as humans and effectively commoditizing their freedom, all in the pursuit of profit. The broader societal impacts of privatizing such a contentious industry, beyond simple cost savings and corporate profit are


far-reaching and cannot be ignored. This essay will conduct an analysis of the ethical issues and moral conflicts stemming from the privatization of prisons, focusing on the political influences of private prisons, overarching safety concerns, and the immoral revenue generating activities within their walls. An evaluation of the competing interests that various stakeholders have regarding these aforementioned penitentiaries will be present throughout the essay. A particular emphasis will be placed on shareholders, the government, inmates, employees, and civilians, all of whom possess legitimate stakes in privatized prisons.

What is the Actual Purpose of Modern Prisons?

The United States houses the world’s largest prison population yearly, with nearly 2 million inmates within in its prisons. This number is unprecedented with no other society in human history having imprisoned so many of its own citizens (Peleaz, 2014). Housing approximately 25% of the world’s prisoners, despite accounting for only 5% of the world’s population highlights the impact of imprisonment in America, and the potential for a previously untapped source of revenue (Holland, 2013).

Private prisons within the United States, despite their negative reputations, are extremely profitable investment vehicles. The main argument in favor of these penitentiaries is the significantly lower cost experienced by the government, and in turn taxpayers. The private prison industry operates on a contractual basis from the government. This creates market competition within the industry as prison corporations bid to acquire the right to house inmates, thereby significantly reducing the penal system costs borne by the government. The social benefits of cost savings, however, need to be weighed against the negative externalities and ethical issues that result from such a unique economic operating model.

Private prisons, at their very base level, are for-profit organizations with a commitment to their shareholders. Revenues of privatized prisons are derived from two primary sources: inmate housing, and the cheap labour that prisoners provide. With these two sources directly


dependent on high capacity rates, private prisons directly leverage crime levels in their operating model. Strategically driven by profit, as all private companies are, revenues of private prisons are dependent on having prisoners within their walls, making money on a per prisoner basis (Price, 2012). As such, they have a vested interest in keeping incarceration rates high and ensuring longer prison sentences to keep their cells, and wallets, full. This issue is central to the Prison Industrial Complex and its ethical concerns, echoing the sentiments of Friedman’s “Theory of the Corporation.” It begs the question of where prison corporations’ commitments lie: to their investors and private profit, or to the social reform of its inmates?

Lobbying, Corruption, and Bribery as Ethical Concerns

A principal concern with the operating model of private prisons is the potential for judicial and political corruption, unethical lobbying, and bribery arising in order to maintain the high capacity rates needed to drive profits. Lobbying has played an increasingly influential role in policy setting with respect to private prisons. The report, Gaming the System, regarding the political strategies of private prison corporations highlights:

By working to shape the debate on penalties, sentencing, and privatization of correctional services, private prison companies can galvanize the support from policymakers they need to secure private prison contracts for correctional services. (Ashton & Petteruti, 2011)

The most notable of these multi-billion dollar companies is the Corrections Corporation of America (CCA), with a market capitalization of approximately 3.7 billion dollars. The CCA has relied on disputed political strategies, expending hundreds of thousands of dollars on lobbyists to guarantee high capacity levels and, in turn, the company’s continued profitability.

Prison conglomerates also engage in public prison takeovers, with the highest bidder appropriating the rights to the federal prison and its guaranteed revenue base. Since 2012, the


CCA has openly offered to buy public prisons from 48 separate states, on the condition that the state keeps the prison at a 90% occupancy rate for 20 years after the takeover (Wolfe, 2014). If the terms of the agreement are not met and the



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