NOVEMBER 1996 · VOLUME 17 · NUMBER 11

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T H E    N E W    G R O W T H    I N D U S T R I E S

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BOWLING GREEN, MISSOURI, population 2,976, was a town in trouble. Jobs were scarce and developers were passing it by. So the civic leaders of Bowling Green traveled to the state capital to compete against a dozen other Missouri communities for three new state prisons. They showered legislators with buttons, local apples and an $11 million bond issue for utility work. In March 1996, Bowling Green landed a prison.

The $79 million, 1,975-bed facility will bring hundreds of jobs to Bowling Green. Because inmates count as residents for the disbursement of state tax revenues, the prison will also bring $150,000 a year in new state funds. Also in the works: a new housing subdivision, a Super 8 motel and a McDonald's.

Bowling Green's prison courtship is exemplary of a relatively new ritual that is spreading rapidly as rural towns seek to capitalize on skyrocketing incarceration rates in the United States.

Punishment is now a leading rural growth industry. The 1980s saw so many people dragged in shackles from inner city neighborhoods to rural prisons that 5 percent of the national increase in rural population between 1980 and 1990 is accounted for by prisoners.

Prisons have replaced factories as the economic centerpiece of many small towns. Florida officials recently promoted their state's prison-building spree with a color brochure that claimed that an 1,100-bed prison is worth $25 million a year and 350 jobs to a community. Towns responded by lining up for the chance at such bounty.

Gone are the days when communities greeted the prospect of prisons with chants of "Not in my backyard." Prisons do not use a lot of chemicals, do not create noise or atmospheric pollutants and do not lay off workers during recessions.

In an area where the industrial or agricultural base is declining, a new prison may seem like a godsend. Students in one Sunday school class in Texas actually got on their knees and prayed that a new prison would open in their neighborhood.

New opportunities

Municipalities are not alone in seeking to cash in on the U.S. incarceration binge. Private interests, including prison management companies, construction firms and bond underwriters, are booming along with the unparalleled growth in the U.S. correctional population. The U.S. incarceration rate now runs five to eight times higher than that of other industrial democracies.

The United States now has 1.6 million people behind bars -- three times the number in 1980 -- and 3.5 million more on probation and parole. In the course of a year, there are 12 million admissions to secure facilities. Enough people are admitted to prisons and jails every two days to fill the New Orleans Superdome to capacity.

All of this imprisonment involves big money and represents a major business opportunity. It costs in the neighborhood of $20,000 to run a prison cell for a year and about $50,000 to build one.

Nationwide, annual prison construction budgets approached $7 billion over the last decade. California is in the midst of a multi-year expansion budgeted at $5.27 billion; Texas just completed a $1.5 billion project. Contractors will break ground on 26 federal and 96 state prisons in 1996. The prison construction rage may be a huge burden for taxpayers, but it is good for business. Small masonry shops that would just as soon build a school as a jail find themselves laying brick for cell blocks. Giant Wall Street firms like Goldman Sachs, Smith Barney Shearson and Merrill Lynch compete to underwrite prison construction with enormous bond issues. Financial intermediaries buy bonds and securities from private prison companies or state agencies and resell them to investors, a market niche worth about $2 to $3 billion per year.

Curious people can read all about it in new industry publications like Correctional Building News, a glossy industry journal that features a "facility of the month" on the front page and announces which companies have won the latest contracts.

But as much as the construction industry benefits from the money spent building prisons, it is the prospect of managing prisons for profit -- with contracts paying approximately $20,000 per cell per year -- that offers the most exciting prospects for those looking to profit from the incarceration boom.

Private prisons

Private prison companies are a new addition to the U.S. economy.

Eighteen companies currently run more than 100 correctional facilities in 19 states. The industry has grown at a 34 percent clip over the past five years. There are now almost 70,000 inmates incarcerated in private facilities, up from 2,500 in 1984.

Nonetheless, there is still tremendous room for growth: 95 percent of prison inmates are still held in public facilities and the prison population continues to grow by roughly 70,000 per year.

Investors have taken notice. A March 1996 research document from Equitable Securities in Nashville describes the prison industry as "very attractive" and issues "strong buy" advice to investors.

Industry leader Corrections Corporation of America (CCA), the first private prison company to go public, was touted in 1993 as a "theme stock for the '90s" by Ted Goins, an investment analyst at Branch Cabell & Co. in Virginia. Since that time, CCA has moved from the NASDAQ to the New York Stock Exchange and watched its fortunes rise. CCA now has contracts for more than 35,000 beds, a correctional system larger than that of most states. In 1995, CCA stock soared from $8 to $37 per share.

The last few years have been a breakthrough period for CCA. It took 10 years for the company to reach 10,000 beds, and now it is adding 10,000 beds a year, according to company spokesperson Susan Hart.

Prospects for future company growth are very bright, Hart says. "The public is demanding that government do something [about crime] and do it now," she says. Noting "the breakdown in the social setting," the increase in single-parent homes, the fact that "there are not a whole lot of career choices for people -- combined with the reality that people need money to live," "social barriers" preventing many people from getting good-paying jobs and other factors, Hart predicts there will be more than enough crime and public demand for get-tough responses to fuel CCA's growth for quite some time.

Many other firms offer specialized prison services. US West advertises a prisoner telephone service that promises reliable service -- and one of the highest commission rates in the telephone industry. Other phone companies market technologies to track where prisoners place phone calls, disallow prohibited calls and disconnect after the allotted time period. Correctional Cable TV offers video communications in sports, news, music, educational and spiritual programming while granting wardens complete control of TV viewing at all times. OCS Technologies moves prison management into the information age with software that tracks inmate information such as risk classification, visitor scheduling, movement, bed load planning and sentence calculation. If prisoners get sick, Correctional Medical Services offers to care for them in this $3 billion corner of the health care market. Lockup USA offers a series of instructional videos that teach prison guards the latest techniques for disciplining unruly inmates or surviving a hostage situation. Food, laundry and other service contractors also compete for a slice of the prison contracting action.

The attraction of private prison management and service companies is simple: they can deliver the same correctional service as the government at a lower cost, often for 5 to 15 percent below public sector costs.

But much of those savings are due to the private companies paying lower wages to guards and other staff, and failing to provide the services most likely to turn prisoners into productive members of society upon release. Profit-making companies prefer to avoid the costs of drug treatment, group counseling and literacy training. The companies' bottom-line orientation drives them toward sterile, technologized solutions to prison management -- fewer guards, more video cameras -- rather than the labor-intensive human interactions needed to assist the troubled people in their care.

CCA's Hart denies her company's facilities are guilty of these charges. "We want facilities to be as program intensive as possible because it gives the inmates something to do,"making them easier to manage, she says.

CCA's cost savings, she says, come from efficient personnel management, purchasing practices not requiring compliance with bidding and other government regulatory requirements and overall sound management techniques.

The prison-industrial complex: danger to democracy?

Timber companies need trees; steel companies need iron. Prison companies, as Norwegian criminologist Nils Christie, author of Crime Control as Industry, points out, use people as their raw material. The industry grows richer as it ensnares more people.

"The goal of the industry is to keep prisons full. A successful company locks up as many people as possible for as long as possible," says Dr. Jerome Miller of the Alexandria-based National Center on Institutions of Alternatives and a life-long critic of prisons. Miller should know. When he was commissioner of the Massachusetts juvenile corrections system, he tried to close some facilities he considered unnecessary. The staff protested by leaving doors open to promote escapes and calling the press shortly before provoking riots. The ensuing sense of peril made it more difficult to close the facilities.

One constituent of the prison-industrial complex -- prison guards -- is already one of the most vigorous proponents of prison expansion. Some guards' unions have used the punitive political climate -- which they have fostered -- to transform themselves into political powerhouses. The California Correctional Peace Officers Association grew in one decade from 4,000 to 23,000 members. Union President Don Novey boasts that 38 of 44 bills the union pushed in the state legislature under the past three governors were enacted. The union spent lavishly in support of California's three-strikes-you're-out law and spent more than $1 million, the second highest amount in the state, on Republican Governor Pete Wilson's last gubernatorial campaign. Just the endorsement of the presumptively tough union is gold for struggling politicians. The union uses its influence to lobby for tougher laws, more prison guards and higher wages and benefits. The average prison guard in California now earns $10,000 more than the average California school teacher and more than many professors in the state university system. The union also provides seed money to victims' rights groups which also lobby for longer sentences and tougher laws.

In coming years, as the private prison companies expand their operations, the prison-industrial complex's influence over criminal justice policy is likely to grow significantly. Criminal justice policy may someday be as influenced by Corrections Corporation of America as defense policy is influenced by Lockheed Martin and McDonnell Douglas.

Hart says there is no basis for this fear. "We are not policymakers," she says, adding, "There are plenty of offenders to go around. We have more business than we know what to do with."

Yet corporate pressure for further prisonization is a frightening prospect, given the U.S. experience over the last decade. Contrary to popular belief, the nation did not experience an increase in crime during the era of the prison build up. Victimization surveys through the 1980s show slightly declining crime rates. Yet the prison population tripled as the threshold for admission to prison was lowered. Non-violent offenders accounted for 84 percent of the increase in prison admissions since 1980. California's $5.5 billion three-strikes law captured twice as many people for simple possession of marijuana as for murder, manslaughter and rape combined.

With for-profit interests advocating increased prisonization, there is no telling how many people will ultimately be locked up. The National Council on Crime and Delinquency already projects that if current "get tough" proposals like truth-in-sentencing and three-strikes-you're-out were fully implemented, the prison population would leap from 1.6 million to seven million.

Lost opportunities

With industry touting its ability to jail more people for less money, and an array of social forces calling for more people to be jailed, any discussion about how to avoid jailing people altogether is drowned out. Thousands of local initiatives have proven successful at reducing crime. Some neighborhoods plant gardens or open basketball courts; some communities experiment with drug treatment or school-to-work programs.

Vincent Schiraldi, director of the San Francisco-based Center for Juvenile and Criminal Justice, a non-profit organization that contracts with states to manage criminally involved youth in the community, says the problem is one of accountability. "If a kid who has been through my program goes out and commits a crime, people blame me. But if a kid who spent time in the lock-up commits a crime, people blame the kid." Schiraldi says prison companies should be held accountable for their rehabilitative success or failure, just as he is.

To make the private sector more accountable, states could make low recidivism rates a precondition for contract renewal, and they could contract for drug treatment. The states have yet to make such demands.

Instead, the dynamic has been: the more prisons fail to keep people safe, the louder the cries for more prisons. That should keep the prison companies happy, but do little to improve social well-being.