Profit Maximization and the Prison Industrial Complex

Many thanks to Solangel Maldonado, Frank Pasquale, Kaimi Wenger and the Concurring Opinions crew for the invitation to guest blog in this space.

As I prepare to teach Dodge v. Ford in my Business Organizations course tomorrow afternoon, the seminal case that stands for the proposition that U.S. corporations exist to maximize profits for its shareholders, my mind is drawn to private prison corporations and the prison industrial complex.  Each semester that I teach Bus. Org., I often ask my students to imagine themselves in the shoes of a particular corporation’s member of the Board of Directors as we study the decisions that led a company into a particular dispute or lawsuit.  When teaching the Dodge v. Ford case, I challenge the students to think through how they would react as Ford Board members to Henry Ford’s repeated decisions to consistently lower the price of his vehicles in an early 1900s era where his car sales dominated the American auto industry.  They are to consider Ford’s decision to lower prices against the required goal of the Ford Motor Co. to work diligently to increase profits for its shareholders (in this case the Dodge Bros. were significant shareholders in Ford Motor Co.).  Often this exercise will situate the students around an imagined large boardroom table during a Board meeting, as Board members debate, discuss, argue, cajole, and conceptualize how the corporation can better increase profit streams, open new markets, streamline products and delivery mechanisms, and run more efficiently.  One can imagine that the Ford Board might have considered raising the prices of its cars that were selling very briskly, building additional factories and plants to manufacture additional cars and parts, inspiring its labor force to work more diligently with steadier pay, etc.

After carefully reading “The New Jim Crow” by Michelle Alexander last year, referenced in this blog space by Frank Pasquale, I find myself constantly thinking about Mass Incarceration from the perspective of the prison industrial complex and the corporatization of the prison industry.  In Alexander’s tour de force, she persuasively makes the case that Mass Incarceration is the civil rights issue of our generation.  She argues that the War on Drugs has functioned as a re-subordination of African American and Latino men, a new Jim Crow of sorts, that continues to lay waste to urban city centers and the families of those that are incarcerated under our onerous drug policies in the United States.  As I go into the classroom to teach “profit maximization” tomorrow, I find myself wondering about what happens exactly during the Board meetings of the Corrections Corporation of America (CCA) and the Geo Group (formerly Wackenhunt), the two largest private prison corporations, as they engage the process of increasing profit streams, opening new markets, and running the business more cost effectively.  Is it possible, that the Board of Directors of private prison companies, sitting around that boardroom table, are literally strategizing ways to increase the prison population in the United States?  To effectively increase profits for shareholders, are private prison companies not only cutting services to prisoners as a way to increase profits, but are they now drafting policies, lobbying politicians, and actively debating ways to ensure that a steady stream of “clients” continues into the private prisons  that are proliferating across the United States (now over 25% of prisoners are housed in private prison facilities)?  Emerging evidence appears to suggest that the answer to these questions is yes.  The thought that incarcerating more and more American citizens may be a policy goal for private prison companies is to me, a chilling and immoral conceptualization.  In future posts this month I will detail the emerging evidence that appears to support the proposition that perverse incentives are actively influencing the private prison company executive and Board member.

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7 Responses

  1. Shag from Brookline says:

    This post brings to mind the new PBS documentary “Slavery By Another Name.” Consider the racial aspects of the current prison populations. Coincidence?

  2. A.J. Sutter says:

    Sorry to comment on a tangent: in what sense exactly is Dodge a “seminal” case? Its value as legal precedent is limited. Is it simply that it stands for a proposition that is provocative? one that many people believe, albeit erroneously, to be the law of the land? Is it that it gets lots of attention nowadays in corporations class? I took Corps 30 years ago, and I don’t recall a big deal having been made of it. Does its current salience reflect some kind of victory for Milton Friedman’s outlook, one that was still just getting consolidated in the early Reagan years?

  3. Bob Sloan says:

    Today many have become aware of the fact that as crime rates in the U.S. have declined since 1990( http://www2.fbi.gov/ucr/cius2009/data/table_01.html), rates of incarceration have exploded more than 400% (http://en.wikipedia.org/wiki/File:Incarceration_Rate_in_the_United_States_1985,1990-2008.png). This disparity is directly related to concurrent increases in private prison pursuits by CCA, Geo Group and other similar corporate endeavors over the same time period.

    The recent political contributions in Florida that led to lawmakers attempting to privatize 27 state prison facilities and peripheral services, is an indicator that your thoughts that incarceration may be a corporate policy goal are correct. Since 1980 proponents of privatized prisons have submitted reports, articles and materials with skewed data appearing to indicate privatization saves taxpayers dollars. Now report after report have been released showing that is simply not the case. More and more the disinformation is tracked directly back to corporate rhetoric spread in such a manner as to popularize privatization of incarcerated American’s for profit.

    Looking to the SB 1070 fiasco in AZ. over the past two years provides substantiation that incarceration for profit is a goal and when “normal” crime is down, corporations look to new forms of criminalization to keep beds full and money streams at capacity.

    Bob Sloan
    Prison Industry Consultant

  4. Frank says:

    Great post. On a related matter, some news on another mode of keeping order:

    http://digbysblog.blogspot.com/2012/02/drones-and-military-industrial-complex.html

    “[T]he drone plane manufacturing industry is writing the legislation that governs their use in the United States. . . . [T]he Association for Unmanned Vehicle Systems International (AUVS), a drone trade group, actually doubled its recent lobbying expenses. Today, we report on a PowerPoint presentation put together by top AUVS lobbyists … The lobby group — which maintains an official partnership in Congress with Reps. Buck McKeon (R-CA), Henry Cuellar (D-TX), and dozens of other lawmakers — was the driving force behind the domestic drone decision passed last week. In the presentation obtained by Republic Report, there are several fascinating concerns raised by the lobbyists.”

    “The drone industry eagerly anticipates that civil drone use, including use of drones for “suspect tracking” by law enforcement, will soon eclipse military use of drones. Under a section called “Challenges facing UAS,” the lobbyists listed “Civil Liberties.””

  5. It’s worth emphasizing the point Bob touches on–the role of private prisons in the immigration policing context. While the economy has pushed some state legislators to tighten their imprisonment belts, funding for immigration prisons continues to grow steadily. (See http://crimmigration.com/2012/01/24/report-crimmigration-enforcement-funding-and-prison-rates-rise.aspx)

    Congress appropriated $2.051 billion to DHS for custody operations in fiscal year 2012 to fund 34,000 immigration prison beds (see http://www.fas.org/irp/crs/RL32369.pdf). The Obama Administration’s budget request released last week asks for funding for fewer beds (32,800), the fewest number since FY 2008, but still enormous by historical standards.

    Plus, Congress has in the past imposed a minimum. For FY 2012, Congress requires DHS to “not less than 34,000 detention beds.” (see U.S. Immigration & Customs Enforcement, Dept. of Homeland Security, Congressional Budget Justification: Fiscal Year 2012, at 33 (2011))

    Much of these, as Tom Barry chronicles in his new book “Border Wars,” are owned and/or operated by CCA, GEO, or other private prison corporations (see page 11). According to CCA’s financial reports, its revenue increased in the third quarter of 2011 in part due to $188.4 million it earned from the federal government compared to $186.3 million received from the federal government in the third quarter of 2010 (see http://ir.correctionscorp.com/phoenix.zhtml?c=117983&p=irol-newsArticle&ID=1625 258&highlight=). Though CCA’s announcement doesn’t specify how many immigration beds it operates, the Detention Watch Network says it’s about 6,200 of the 16,000 held in privately-run immigration prisons (http://www.detentionwatchnetwork.org/privateprisons).

    Meanwhile, the drones that Frank mentions are becoming more common in immigration policing. This even though the FAA doesn’t normally allow drones in domestic airspace because they’re too dangerous. Too dangerous except on the border. (See http://www.gao.gov/assets/100/97733.pdf)

  6. andré douglas pond cummings says:

    a.j. sutter:

    perhaps the better description of dodge v. ford is “famous” (or “infamous”) rather than seminal. still, the fact remains that corporations exist to maximize shareholder profit.

  7. andré douglas pond cummings says:

    bob and césar:

    thank you for providing links that support the notion that private prisons are working furiously to increase the number of imprisoned Americans. This is an underappreciated dilemma that must be brought to greater light and addressed by scholars and legislators.