Punishment or rehabilitation.

Photographer: John Moore/Getty Images

America's Rocky Relationship With For-Profit Prisons

Stephen Mihm, an associate professor of history at the University of Georgia, is a contributor to the Bloomberg View. Follow him on Twitter at @smihm.
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The Department of Justice announced last week that it would end its reliance on for-profit prisons run by companies such as Corrections Corporation of America and Geo Group. The decision followed an internal study, which found that private prisons tended to be less safe and poorly administered, and provided limited long-term savings for the federal government.

Shares of CCA and Geo Group initially fell, losing 40 percent of their value. They have since rebounded, driven by the optimistic view that the decision, which only affects 195,000 prisoners in federal facilities, won’t spill over to the privately run state and local prisons and jails that house more than 2 million prisoners.

Shareholders of these corporations, along with advocates of privatization, shouldn’t shrug off the federal decision so hastily.

They should remember what happened the last time that prison privatization became popular, and that proponents sought to turn incarceration into a business, claiming it was cheaper, more efficient, and could even achieve better results than public control.

This belief foundered on the reality that privately-run prisons often failed to turn a profit, and when they did, those profits often came at the expense of the inmates’ well-being. These failures and abuses eventually led to a repudiation of private prisons, with the business of punishment and rehabilitation monopolized by the state. Another shift may now be at hand.

The prison is a relatively modern invention, born of a profound change in thinking about the methods and ends of incarceration. In the late 18th century, Enlightenment thinkers argued for an end to the bloody, dramatic punishments of an earlier age, and in favor of long-term incarceration and rehabilitation. Kept apart from the general population, transgressors would be put under surveillance and steered toward penitence -- hence the “penitentiary.”

Many of these thinkers also believed the new institutions could be self-financing: that prisoners could be put to work building projects that would yield revenue. This was not the same as privatization, however: The British state would control these ventures and reap the benefits. The prison, in other words, was on the public account.

At first, that model carried over to the U.S. According to the sociologist Mark Colvin, several states, including New York and Pennsylvania, used the public account system, putting inmates to work, splitting the profits with prisoners. These early experiments rarely delivered on the dream of a self-financing prison. By the 1820s, disgust with crime and public disenchantment led to a new system, named for the Auburn State Prison in New York.

Under the new regime, the state turned over its convict population to private manufacturers, who would tap the labor. This invited private companies inside prisons, but still maintained some pretense of state control. Then, in 1825, Kentucky surrendered the entire state-run prison to Joel Scott, a textile manufacturer. Scott invested money in the prison but also managed to turn a significant profit.

Emboldened by this success, other states quickly followed suit, particularly in the West and the South. In some cases, the shift to private management yielded solid results; other times, though, it ended in disaster. When California hired a crooked entrepreneur named James Estell to build and maintain its new San Quentin prison, the new penitentiary soon earned a reputation for corruption, lax management and cruelty toward prisoners.

Estell, who forced prisoners to make bricks, refused to invest in necessities -- such as a wall to keep the inmates within the prison. Convicts routinely escaped, even after the state grudgingly built a wall, and while under private control, some 47 inmates escaped each year. When the state took over the prison in 1865, that number dropped to four.

Nonetheless, with rare exceptions, the contract system continued to flourish. This was particularly true in the South, which used the convict lease system to institute a de facto slavery for a prison population that was overwhelmingly black. Throughout the region, state prisons turned over their inmates for work on railroads, turpentine plantations, roads and other projects. 

The incompetence and brutality of these for-profit prisons was staggering. In Texas, for example, almost a fifth of the inmates escaped in 1876, and more than 6 percent died, and another 10 percent was listed as “missing,” but were not known to have escaped. Similar scandals plagued other Southern for-profit ventures.

In the end, these abuses gave ammunition to a coalition of critics. Humanitarian reformers argued that the for-profit prisons made a mockery of the idea of rehabilitation. Federal officials who studied prison businesses discovered that prison contractors kept dying industries alive through subsidies of cheap labor. Labor unions, which hated competition from prison labor, agreed.

The first major defeat for private prisons was in 1887, when Congress passed a law forbidding the contracting of any inmates in the federal prison system. With private enterprise banned from the national penitentiaries, the battle shifted to the individual states. After a pitched battle, New York curtailed then completely banned private contractors in the prison system by 1897. Massachusetts followed suit, as did Pennsylvania.

The pro-profit prison industry fought back, but eventually state after state banned for-profit arrangements with contractors, moving prisons on to the public accounts. This shift was accompanied by the return of another, older idea: that prisons could help rehabilitate inmates, not merely punish them. If reform was the primary purpose of penitentiaries, profit necessarily became a secondary concern. The decline of the private prison was gradual and halting, but it would eventually receive federal sanction with the passage of the Ashurst-Sumners Act, which made it illegal to transport prison-made goods across state lines.

Eventually, though, the tide would turn yet again. In 1979, President Carter signed the Justice System Improvement Act, which laid the foundation for the Prison Industries Enhancement Program. This lifted the ban on interstate commerce in goods made by prisoners, and helped usher a new age of prison privatization, spearheaded by corporations such as CCA.

These companies have thrived as the nation’s prison population skyrocketed, with many inmates incarcerated for non-violent drug offenses. As unease over this situation has grown, voices on both sides of the political spectrum have begun to agitate for prison reform. And that has gone hand-in-hand, much as it did over a century ago, with growing attacks on the marriage of punishment and profit. With the federal government taking the lead, much as it did back in 1887, the U.S. might be on the cusp of another revolution in thinking about the appropriate relationship between prisons and profit.

If history is any guide, it may well take decades for the states to follow, but eventually they will.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Stephen Mihm at smihm1@bloomberg.net

To contact the editor responsible for this story:
Max Berley at mberley@bloomberg.net