Criminal Justice in Crisis: From Private Prisons to E-Carceration
Tags: Colbeck, Criminal Justice Reform, Mass Incarceration, Criminal Justice, Private Prisons

8.14.20

The prisoner of the 19th century chain gang wore a striped jumpsuit and shaved scalp. The prisoner of the 20th century wore neon orange scrubs and an identification number. The prisoner of the 21st century will wear a flexible ankle monitor with Wi-Fi tracking, a GPS monitor, and — in case things get dicey — a handy Pursuit Mode.

Perhaps he will wear a body camera. Perhaps he will wear a personal taser device to allow for instant immobilization should he leave his designated travel zone.



The specifics of surveillance and control aren’t ironed out yet, but this much is certain: the 7,000+ concrete blocks in operation today will soon largely become a rarified relic of our past. Why? Because caging millions of our own citizens has become too damn expensive.

A Few Numbers to Ponder

If you’re aiming for a productive society, it’s hard to justify mass incarceration from an economic perspective. Not only do you have to feed, house, and survey this population, but you also have to account for lost income, decimated families, and the likelihood that three quarters of them will likely never find meaningful employment again. While some have argued that prisons are recession-proof businesses that can offer employment relief to former coal counties, most employment gains aren’t localized.



2.2 million are incarcerated. 4.5 million are on probation or parole. Another 12 million cycle in and out of jail each year. In 2016, over 6.1 million people — or 1 out of 40 adults — were disenfranchised due to a felony conviction. Over half of these individuals will never have the right to vote again.



Black Americans, despite accounting for 13% of the general population, represent 40% of those incarcerated. In 2010, blacks were 3.7 times more likely to be arrested for marijuana possession than whites.

The economic and social impact is severe. Not only are state and federal governments shelling out $80 billion a year on corrections facilities and ancillary services, but economists estimate that the reduced employment opportunities for former prisoners resulted in a loss of $78 to $87 billion in GDP each year. This says nothing of the costs incurred by already impoverished family members: transportation and telephone costs alone put 34% of families into debt.



One study, conducted by researchers at Washington University in St. Louis, found that for every dollar spent on incarceration, another ten were incurred in social costs such as interest on criminal justice debt, visitation costs, and the costs of fatal injuries while incarcerated, etc. In aggregate, that accounts for $1 trillion, or 6% of GDP.

The War on Welfare and Drugs

The United States’ prison population rose in proportion to the birth rate from 1920–1980. During the height of the Civil Rights era, the prison population was so small (under 300,000) that you could identify as a “prison abolitionist” and still sound credible. Then all hell broke loose in 1980, and the prison population quintupled in just two decades. Despite crime rates falling by 50% between 1980 and 2014, annual incarceration rates have climbed irrespective of crime.

How did we get here? There were no innocent bystanders in the creation of the prison-industrial complex. The War on Drugs found eager supporters on both sides of the political aisle.

From 1991–2001, federal funding for public housing was cut by $17 billion while funding for corrections increased by $19 billion. Punitive measures were enacted such as the expansion of the death penalty, the introduction of mandatory minimum sentences, and the three-strikes law. The three-strikes law alone basically guaranteed life sentences for “persistent offenders,” including those with two former misdemeanors.

The Rise of Private Prisons

Private prisons get much of the flak for driving mass incarceration, but they only house a fraction of our inmates (9%) and were largely a by-product of overcrowding and the federal government’s attempt to wash its hands of jailing immigrants. One of their main selling points was that if anything went wrong, the company would take the blame instead of the government.



The first private prison, CoreCivic (formerly Corrections Corporation of America), was a hastily repurposed motel that was opened in 1984 to house an overflow of federal immigrant detainees. At the time, it was considered a groundbreaking startup and received early investments from venture capitalist Jack Massey (owner of Kentucky Fried Chicken), the Tennessee Valley Authority, and Vanderbilt University. CoreCivic is now the largest operator of private prisons in the United States, with over 78,000 beds in 19 states. Their top customer in Q1 2020 — accounting for 28% of total revenue — was ICE.



The second largest operator, the GEO Group, is a close competitor with 75,000 beds in 71 facilities. It has more of an international presence than CoreCivic, and operates in Australia, South Africa, and the United Kingdom. After its acquisition of BI Incorporated in 2011, the GEO Group became the leading provider of electronic monitoring technologies in the US. In 2019, over 144,000 low-level offenders were under electronic monitoring.

Growing Divestment Movement

After years of operational scandals, elusive cost savings, and growing public awareness, the federal government started to cut ties with private prisons in 2016 (with the exception of ICE). States and public pension funds have taken action into their own hands. Citing investment risks such as political turnover, negative headlines, opaque information, and humanitarian-based lawsuits, three of the four largest public pension funds in the US (the California State Teachers’ Retirement System, the New York City Employees’ Retirement System and the New York State Common Retirement Fund), divested from direct holdings in private prisons.



In 2017, following the family separation crisis at the wall, a number of NGOs publicly shamed commercial lenders for bolstering the growth of the industry and collecting interest payments based on the number of years people spent behind bars. At the time, they listed JPMorgan, BlackRock, and Wells Fargo among the top lenders. In March 2019, JPMorgan announced that it would no longer lend to private prisons. A week later, Wells Fargo did the same.

Physical Freedom … Under a Surveillance State

Despite the growing divestment movement, the owners of private prisons may not be as imperiled as you think. If there’s one thing they have, it’s foresight. Starting in 2005, The GEO Group went on a buying spree, diversifying its portfolio with electronic monitoring development and private probational services.



One of electronic monitoring’s clearest advantages is that it’s six to ten times cheaper than conventional incarceration. The market for electronic monitoring in North America — including equipment, software, and services — is expected to expand at a compound annual growth rate of 9 percent from $850 million in 2019 to $1.2 billion in 2023.

States that have eliminated cash bail, such as California, intend to use surveillance technologies, like electronic ankle monitors, instead. These devices, as experienced by those in pre-trail or parole, often come with an involuntary “user-fee” ranging from $10-$30 dollars a day.



While electronic monitoring may eliminate some of the worst harms of traditional carceration — namely, the high risk of rape, assault, and all-encompassing social isolation — they do nothing to address the underlying issues of racial discrimination, punitive measures, and a complete lack of rehabilitative services.



There is some hope that private companies, if contracted with the right incentive model (i.e. “pay-for-success”), could be motivated to reach recidivism reduction targets rather than expanding the population under state control. But until there is a radical shift in how we approach incarceration — including who should be controlled, in what sort of environment, and for what end — we will likely see the same underlying issues rear their head once more.

About Colbeck: Colbeck is a strategic lender that partners with companies during periods of transition, providing creative capital solutions to meet their evolving needs. You can reach the team at inquiries@colbeck.com.