A Critical Perspective on Prison Privatization

April 6, 2015



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 worlds 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 worlds prisoners, despite accounting for only 5% of the worlds
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 Friedmans 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 companys 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 occupancy of these prisons falls
below the set rate, the state is required to reimburse the CCA using its own tax dollars. This
aforementioned practice presents a predicament for society. The notion of guaranteed
occupancy rates presents a troubling conflict of interest within the justice system. In this
sense the justice system, with its fundamental purpose being to lower crime rates and provide
social reformation, has allowed privatization to implement a required minimum number of
prisoners that the state must sentence yearly. This illustrates how the Prison Industrial
Complex rears its ugly head, readily corrupting the judicial system through the promise of
revenue, commoditizing its citizens freedom to the highest bidder.
The final trepidation with the political and judicial practices of privatized prisons is the
potential for bribery. There are numerous examples of private correctional facilities illegally
compensating local judges in exchange for heightening the sentences of petty
crimes/offenses. The most notable example is the Kids-For-Cash scandal in Pennsylvania.
Two corrupt judges, Mark Ciavarella and Michael Conahan, were sentenced to 28 and 17
years in jail respectively for accepting $2.5 million dollars in bribes and kickbacks from the
co-owners of several privatized prisons. In exchange, they were responsible for the criminal
sentencing of 3000 juveniles for reasons as trivial as trespassing in vacant buildings or
creating fake MySpace accounts (Democracy Now, 2014).
Scandals such as Kids-For-Cash have appalled a country founded on the principles of
freedom, revealing that a colluding group of individuals within the private prison industry
could marginalize citizens for private profit. Privatized prisons with their associated political
lobbying, and vested judicial interests pose a slippery slope for the future of societal rights
and freedoms.



The Paradox of Cost Cutting and Safety as an Ethical Concern
The practice of cost cutting is a central tenet of privatization. Given the competitive nature of
the private prison industry in the US, private correctional facilities must constantly explore
options to decrease costs and bolster margins in order to be profitable. However, it is crucial
to determine, whether the improved financial stability of these converted prisons is being
achieved at the expense of operating efficiency (United States General Accounting Office,
1996). If the reduction in operating costs is resulting from compromising the essential
services within the penitentiary, it indisputably results in negative externalities to the inmates,
employees, and society as a whole. This trade-off between cost cutting and basic safety is
central to the Prison-Industrial Complex as the improper balance of the two can prove to be
fatal. Cost cutting in private prisons presents several dilemmas, focused on the jails ability to
ensure the safety of citizens as well as the well-being of its inmates.
As the privatization of prisons has become more frequent in recent history, so too have the
accusations of inhumane conditions, and increased violence within their walls. Cost cutting
activities in private prisons are often focused on essential services, namely the quality and
supply of nutrition, lowered standards of sanitation, and the understaffing of employees. Cost
cutting behavior becomes an ethical issue when it begins to infringe upon the basic human
rights which even inmates are entitled to. Matthew Zito, a former private prison guard reveals
in a tell-all article that:
Conditions for prisoners were appalling and often lead to death due to a combination of
poor food and water, insanitary conditions, disease, accidents, overwork, lack of medical
care, and beatings at the hands of the guards. (Zito, 2003)
In the specific case of the East Mississippi Correctional Facility, prisoner suicide was not
uncommon. Inmates were subjected to live in a rat-infested cesspool, lacking everyday living



requirements, with inmates denied the access to physical and mental healthcare (Filipovic,
2013).
Cost cutting has directly resulted in the culture of fear and violence within private prisons.
Privatized prisons are renowned for being understaffed, experiencing high employee turnover
due to low wages. The guards at these institutions often lack proper training and are notorious
for breeding the violent culture within the walls. It is commonplace for guards to use fear to
motivate inmates, allowing inmates to fight one another and engaging in physical and sexual
abuse of prisoners (Associated Press, 2014). A penal system that endangers the individuals
within it, treating inmates as less than human, is counterintuitive to the principles of justice
and reformation on which the system was founded. A historical study conducted by the
United States Department of Justice exploring the violent nature of private prisons disclosed
that frequency of assaults was significantly higher than in public, government-run prisons.
Inmate-on-guard assault was 49% higher and inmate-on-inmate assault was 65% higher than
in the public penitentiaries (U.S. Department of Justice, 2001). Private prison corporations do
not have the monetary resources to operate their prisons in an ethical and safe manner.
Whether it is the inhumane conditions or the culture of violence, the negative externalities
accompanying private prisons cannot be neglected in the pursuit of profitability.
Revealing the dangers and concerns that lie on the inside of private prisons is only half of the
problem of conducting operations at minimal cost. The laissez-faire nature of private prison
security lacks the ability to safeguard citizens to the standards of public prison, putting
society at an unnecessary risk. Despite prison escapes decreasing in frequency in todays
society, every escape from a private penitentiary has been the result of overstretched
operational capacities. According to a U.S. Department of Justice report, the CCA frequently
accepts inmates that are above the security capabilities of their facilities. To demonstrate the



ramifications of this practice, one can examine a particularly disturbing example of a CCA
prison in Youngstown, Ohio:
Under the terms of the contract, all inmates transferred to the facility were to be classified
no higher than medium security. However, maximum security inmates were transferred to
the facility. (U.S. Department of Justice, 2001)
This institution consequently experienced a series of assaults, escapes, and homicides. This
occurrence epitomizes the lack of equilibrium between profit and safety demonstrated by
private prisons, highlighting their aim to meet operational cost quotas, thereby prioritizing
financially interested stakeholders.
Prison Labour as an Ethical Concern
The third and final ethical issue pertaining to private prisons happens to be the main driver of
revenue, contracted prison labour. The low cost operating model associated with the PrisonIndustrial Complex is one of the fastest growing industries in the United States, drawing the
attention of large corporate companies along with their investors on Wall Street. To date, 37
states have legalized private prison corporations to offer labour contracts to companies. The
benefactors of this legislation include companies such as IBM, Boeing, Microsoft, and
AT&T (Peleaz, 2014). Prison labour represents an opportunity to earn pure and unadulterated
profit, in amounts previously thought unreachable, due to the lack of wage regulations within
the walls of private prisons. However, this labour is in no way, shape, or form ethical and can
actually draw parallels to slavery. According to an article in Global Research Newsletter:
[Private prison corporations] dont have to worry about strikes or paying unemployment
insurance, vacations or comp time. All of their workers are full-time, and never arrive late
or are absent because of family problems; moreover, if they dont like the pay and refuse
to work, they are locked up in isolation cells. (Peleaz, 2014)



With respect to wages, in privately run prisons inmates receive as little as 17 cents per hour,
with the highest recorded compensation at CCA institutions where inmates receive
approximately 50 cents per hour.
In the exploitation of the prisoners lack of freedom for internal profit, private prison
corporations have marginalized a group of people in the same fashion as the era of slavery.
The private contracting of inmates for labour provides incentives to keep prison capacity and
incarceration rates high. Private prisons rely on this income and external companies depend
on the inexpensive labour made available, incentivizing corporate stockholders to lobby for
extended sentences, thereby guaranteeing their workforce. This perpetual cycle of corruption
feeds itself and is manifested in the Prison-Industrial Complex.
Stakeholder Analysis: Who Cares About Private Prisons?
The privatization of a public service is an indisputably controversial issue and, as such, elicits
naturally opposing views surrounding the complex. Shareholders, the government, inmates,
guards, and civilians all possess legitimate stakes in privatized prisons. These stakeholders
and their vested interests can be categorized into four distinct basis groups: financial, legal,
rights-based, and interest-based stakes.
The shareholders of private prisons (the investors and third party companies who benefit
from the labour within the walls) are financially interested in these institutions. Stakeholders
of this nature are solely concerned with the return on their investments, adopting a
consequentialist dogma in the pursuit of profit, even lobbying immoral policies to attain their
goal. The U.S. government is also financially motivated by cost-savings to ensure the
continued operation of privatized prisons. In addition, these facilities legally agree to bear a
portion of the financial burden created by the worlds largest and most expensive penal
system. Guards within the private prison industry can be classified as interest-based
stakeholders, being as private prisons provide them with employment. The guards are, to a



lesser extent, also financially impacted by the operations of their employer and often
beleaguered by higher than normal turnover rates. Inmates have by far the most to lose as a
result of the Prison Industrial Complex with rights-based stakes of health, safety, and liberty
threatened by the private prison industry. The privatization of this industry, if done
improperly, can strip prisoners of their most basic human rights and commoditize their
freedom, for sale to the highest bidder. With legislation aimed to increase the severity of
prison sentences, inmates are effectively condemned to the culture of fear and violence
associated with private prisons. Given that time spent in prison represents time removed from
family, friends, and greater society, prisoners are also classified as interest-based
stakeholders, interested in receiving a fair, and safe incarceration. Society as a whole is the
final stakeholder in the issue of prison privatization, with civilians holding rights and interest
based stakes. Outside civilization is interested in the preservation of its safety, without a
misguided private prison system interfering with said right.
It comes as no surprise in a free market economy, driven by profit, that financially inclined
stakeholders have taken precedence thus far. Shareholders have persuaded prisons to
immorally compromise the non-codified human rights of inmates in order to leverage the
cheap labour they can provide. This worrying trend must change going forward since rightsbased stakeholders have the most at risk in privatizing such an integral part of the justice
system.
Future of the Prison Industrial Complex
The future of the Prison-Industrial complex remains bleak. As long as the privatization of
prisons is increasing in America, so too will incarceration rates. With private prisons,
incarceration is no longer about preventing crime and reforming criminals; it is now about
making money (Wolfe, 2014). Privately contracting prison labour fosters an incentive to
incarcerate citizens for petty crimes, with prisons and third party companies depending on

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this controversial income. Financial stakeholders, who prosper as a result of prisoner labour,
actively lobby for longer sentences to expand their workforce and drive revenues. This
flawed and immoral system is perpetual in nature, feeding into itself. However, it will not
take an act of divine intervention to fix the corruption within this industry. A conscious effort
and commitment to corporate social responsibility is the remedy needed. The corporations
must be willing to sacrifice some of their profits, embracing a Rawlsian corporate citizen
approach to improve the safety measures and conditions of private prisons, thus ensuring a
fair and just treatment of a historically disadvantaged group. This is the most immediate and
feasible way to influence the negative externalities associated with private prisons without a
complete overhaul to their operating model. From the perspective of Carrolls Pyramid of
Social Responsibility, these companies must incorporate more than just economic factors into
their culture, strategy and decision-making processes. Only then will the overall welfare of
society be accounted for, as well as the expectations of all stakeholder groups, not just those
who are financially interested.
While there are some undisputed financial benefits of private prisons, there is significantly
more at stake for prisoners and greater society. When the privatization of an industry
commoditizes citizens freedom and effectively ostracizes a group neglected the opportunity
to defend themselves, it cannot simply be disregarded for the attainment of profit. The private
prison industry is travelling down a slippery slope laden with unethical behavior, prioritizing
profits over social reform and thus encroaching on the rights and freedom of inmates and
society as a whole.

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