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Implications of Privatization: Prisons for Profit An Introduction to Privatization Privatization in a simple sense is "relying on private institutions of society and less on government to satisfy people's needs" (Savas, 2000, p. 3). Privatization is the process of transferring ownership of business from the public sector to the private sector. In a broader sense, privatization refers to transfer of any function normally performed by a government agency to a private for-profit entity. Although privatization is highly contested and subject to controversy, it seems evident that it serves as a necessity in today's economy. "It is now a worldwide practice, adopted in democracies and dictatorships, developed and developing nations, and communist, socialist, and capitalist countries" (Reason Public Policy Institute, 2006, p. 25). It would be safe to say that privatization is practically everywhere and will become increasingly more wide spread in the future. "When the cost of government activities is rising but the public's resistance to higher taxes is also rising, public officials seek any medicine that promises to relieve this fiscal stress" (Savas, 2000, p. 5). Although recent events such as President Bush's movement to privatize social security were met with cynicism, the problem of rising government costs will promote future administrations to ultimately produce a more privatized system (Reason Public Policy Institute, 2006). As previously mentioned, privatization is often met with much cynicism. It has been stated that privatizing government functions and delegating the sovereign powers of government to private contractors is a threat to democracy (Verkuil, 2007). It is also a concern that the private contractors are in business to make money and not necessarily to preserve quality in the services provided. When a private company is contracted by the government does it become a natural monopoly and therefore not subject to competitive forces further jeopardizing the quality of service? Does cost cutting in a for-profit organization jeopardize the quality of service? These and many more questions arise when human services are privatized. Although privatization is spread over many government agencies and many diverse services, a closer look into the privatization of prisons provides an insightful glimpse of the concerns and benefits of removing public control in areas that are so critical and largely concerned with the health and well being of citizens. In examining the role of privatization on the cost of the generally government provided service of prisoner housing, it is evident that there will be opposing ideas. "When private actors perform 'quintessentially governmental' roles, critical and sometimes controversial issues of public policy emerge" (Blumstein, Cohen, & Seth, 2007. p. 3). The privatization of prisons is a quintessentially government performed function that fits this description is riddled with controversial issues. History of Prison Privatization "To understand the current debates about the privatization of prisons, a short historical review of private prisons is presented" (Shichor, 1995, p. 19). In general, privatization is not a new concept. It has been around since the early American colonies, when government was decentralized and criminal justice was administered on the local level (Shichor, 1995). Under the English rule, it was much more desirable to hold a private prosecution than to involve the English government. Although this may have been some type of basis for prison privatization, it isn't necessarily what one would consider as prison privatization by today's terms. An initial attempt at privatization was made in the 1950s with a lease program. Inmates were leased out as laborers to private corporations and the money was placed in the state budget to help with costs of running public prison facilities (Price, 2006). This attempt failed due to corrupt practices, only to rise from the ashes about twenty years later (Price, 2006). The ground work for prison privatization as we know it was initiated in the 1970's, and would start an expanding trend that remains in effect. Due to public out cry in the 1970's, the justice system shifted to a tougher approach on crime. With the governments "war on drugs" and stiffer penalties for repeat offenders, the population in the prison systems on both the federal and state levels skyrocketed (Rio Grande Foundation, 2003). The boom in the prison population was so explosive that by 1986, most states were in excess of ninety five percent capacity (Rio Grande Foundation, 2003). With the overcrowding issues haunting most states, courts began to intervene in accord with complaints that the facilities violated the Constitution. Quick answers were sought to provide relief for the heavy laden state penal systems. A partial answer to the problems of prison overcrowding and high costs was to privatize a portion of the public prisons by opening the door to corporate run facilities. The Corrections Corporation of America (CCA), based in Nashville, Tennessee, and founded in 1983, is considered the corporate pioneer in prison privatization (About CCA, n.d.). The first private prison contact was signed in 1984, between Hamilton County, Tennessee and the Corrections Corporation of America (About CCA, n.d.). Prison privatization was born and has been growing at a rapid pace. "From 2000 to 2005, the number of private facilities increased from 16% (264) to 23% (415) of all institutions. About two-thirds of all private facilities were under contract to state authorities and a third were under contract to the Federal Bureau of Prisons" (Stephan, 2008, p. 1). "Since its inception, CCA has maintained its market leadership position in private corrections, managing more than 50 percent of all beds under contract with such providers in the United States" (About CCA, n.d.). Although privatization brought quick relief to the state's overcrowding burden, it can be considered only a partial answer. This answer is surrounded by controversy and criticism which has stemmed many new questions about the validity of private prisons. In general, proponents to privatization claim that it is an important measure that has created cost savings for public budgets and taxpayers with no lose of quality of service. The opponents claim that the cost benefits are virtually non-existent and a fabrication of shifty accounting practices and that quality suffers immensely as the private corporation cuts corners to maximize profits. Controversy: Two Sided View "The original promise was that prison privatization would increase service quality" (Gaes, 2005, p. 1). Additionally, "competition would be free to effectuate cost reductions, and implicit costs attributable to public production could be circumvented" (Sellers, 1993, p. 13). The motivation for privatization is that the private corporation can improve quality and lower costs, essentially passing savings on to the public all while making a profit. Although there is a vast array of studies which both refute and support these ideas, there is insufficient evidence to confirm that the latter holds true. Opponents and proponents can't seem to agree on the reports because each have their own vested interests. "Only objective analysis will settle this question that plagues policy makers and tax payers" (Price, 2006, p. 40). Looking at the facts objectively requires that both sides of the coin be examined. Initially, the views of the proponents for privatization will be portrayed, followed by the argument of the opponents. The major players on the proponents' side are the corporations that are currently operating in the private prison industry. On the other side, the opponent's major players are comprised of public correctional employee unions. Each side has their own vested interests as well as data to support their claim. After each case is presented, a more objective approach will be presented in an attempt to sort out the details to reach an impartial analysis. For organizational purposes, the following two issues will be addressed with respect to each sides view point, and the objective view will follow up on these stated issues: 1) Quality of Service. 2) Cost Measures. It should be noted that the data and information provided is subjective in nature and may be biased by those compiling the reports. Proponents view The push for privatization claims that the private sector can do the job of housing prisoners more efficiently and pass the savings on to state budgets and ultimately to the taxpayers. The purpose of privatization is to improve the quality of a service provided without increasing costs. Additionally, private corporations can improve the quality of service and cut costs while maintaining a higher level of safety for the public, the institutional staff, and inmate population. This is the stance that most proponents for privatization take proclaiming an utter dominance in performance of private run facilities over the public run facilities. Other recent studies on private prisons have recognized that "[p]rivatization can offer increased innovation, access to expertise, improved quality, and enhanced accountability" (Blumstein, et al., 2007. p. 7). Quality of Service: Claims of proponents for privatization argue that the mere introduction of competition into an operation where there are monopolistic conditions should result in a higher quality of service. "There is growing anecdotal evidence that public sector employees respond to and/or learn from competitors when they exist" (Blumstein, et al., 2007. p. 7). Competition promotes innovation and technological advances that increases efficiency. The idea is that because there is a level of competition, both private and public employees will do a better job. "Choice fosters competition because public prisons currently operate under monopolistic conditions; this is why they are inefficient" (Price, 2006, p. 16). Another argument is that more private organizations are accredited by the American Correctional Association (ACA). "Independent accreditation by the ACA is designed to show a facility meets nationally accepted standards for quality of operation, management, and maintenance" (Reason Public Policy Institute, 2002, p. 18). By receiving accreditation, the prison facility has met the standards set by an impartial party on the important issues such as health care, management, maintenance, and operational activities (Reason Public Policy Institute, 2002). Proponents of privatization base their debate on the private sector's ability to improve quality and lower costs. Private prisons cite ACA accreditation as a testament to their superiority in the area of quality and efficiency (Price, 2006). Cost Measures: Cost being the main argument for the cause of privatization, the initial stance is that it is cheaper and easier for private facilities to be built (Espejo, 2002). Private firms can construct prisons in about half the time it takes the government to do so (Rio Grande Foundation, 2003). Additionally, numerous studies have been completed on expense of construction of prison facilities and virtually all of "them found private prisons to provide significantly lower costs-on average between 5 and 15 percent" (Rio Grande Foundation, 2003, p. 5). Another direction towards cost savings is presented by the proponents of privatization. This contention is "government lacks management flexibility because of union constraints on decision, which would reduce the number of workers, better using existing capital" (Price, 2006, p. 16). In a recent study by the CCA the results were that "yes" we do it better. The fundamental conclusion of the study is that, over the six-year period 1999- 2004 (the period for which appropriate data exist), states that have some of their prisoners in privately owned or operated prisons experience lower rates of growth in the cost of housing their public prisoners. That finding is generally statistically significant at the conventionally accepted 5% level. (Blumstein, et al., 2007. p. 7) Private corporations have produced many studies to support their cause. It appears that most of the reports generated compare public and private prisons on a wide scale of variables. Generally, all the studies conclude that the quality of service is on the same level or higher in the private facilities. Opponents View "The most prevalent argument against private prisons stems from the notion that prisons are, by nature and extension of law enforcement, generally considered a primary government activity that should not be contracted out" (Alabama Public Policy Institute, n.d., p. 7). Many who are opposed to prison privatization feel that the burden is on the state and shouldn't be passed on to the private sector. "This idea is reinforced by the experiences of states that have used private prisons in the past. The prisoners were farmed out to the private sector administrators as individual servants" (Price, 2006, p. 5). This and other unfair treatment was the initial downfall of the privatization and remains a concern in today's arena. The most pretentious thing that concerns the opponents to privatization is the ability to save tax payers money without sacrificing quality of care and security. "The major charge against privatization is that quality and security are sacrificed by reducing costs" (Reason Public Policy Institute, 2002, p.18). Quality of Service: The main objective with the opposition to privatization is that the cost cutting objectives sacrifice the quality of care within the private prisons. Much of the cost savings comes from employment of fewer officers. Additionally, the officers that are employed are less trained and less qualified to handle the sensitive nature of the inmate population. These accusations alone can jeopardize quality if it is based upon the safety and security concerns. The opponent's view of quality generally is focused on the prevention of internal problematic situations such as assaults on staff, riots, and escapes (Shichor, 1995). Another major concern is that the private companies will have a vested interest in keeping their prison filled. Recidivism is a major concern for most public prison systems. Many of the public systems have programs designed to reduce repeat offenders. These programs are a part of the costs incurred in the public facilities (Shichor, 1995). Efforts to reduce the recidivism rate are not seen in the private system as frequently due to the for-profit companies needing to maintain their facilities at capacity (Shichor, 1995). Cost Measures: The rebuttal to the private prisons claim to operate with lower costs is "that public facilities can be operated more cheaply than private ones because they do not have to make profits" (Shichor, 1995, p. 136). The profit motivation creates a conflict of interests as the purpose is to save the taxpayers money with privatization and not make a marketable product at the expense of inmate's livelihood. Moreover, the government is left with costs to subsidize and regulate the private prisons, which leaves questions about the ability of private corporations to manage prisons more cheaply without the government assistance (Price, 2006). Studies by criminal justice groups have shown that correctional officers at privately run prisons are paid less well, receive less training, and experience higher turnover rates than those at prisons run by government agencies. This can lead to greater rates of assaults on staff, inmate on inmate assaults, and escape attempts. (State Corrections Officer Police Benevolence Association Publications, 2006) Opposition to privatization claims that the cost savings are not present and that the information disclosed by the private corporation is not a true representation of cost savings due to the presence of hidden costs not included in the yearly analysis (Shichor, 1995). Hidden costs are generally items such as insurance premiums, and maintenance, to name a few. The absence of "these factors made the cost-benefit analysis comparisons even more favorable for the private contractor's side" (Shichor, 1995, p. 161). Objective View Now that the two sides have been presented a more objective approach will be explored. When privatization occurs, a certain level of opposition is expected. In a sensitive area such as law enforcement or military, the level of opposition is much greater than the opposition for privatization of services such as garbage collection or waste water treatment (Savas, 2000). In the case of human service and the fair and humane treatment of human beings, the tests for quality and measures of accountability seem weak to say the least. Although each side of the privatization issue presented above may have very pertinent information, one can merely formulate an opinion as to the validity of each side's viewpoint and not make an educated determination of the absolute choice. "The arguments regarding the superiority of private prisons are made without the support of research, and it is ironic that such arguments are accepted as putative" (Price, 2006, p. 23). In general, people just want a quick fix to the problem. Overcrowding and rising costs of public prison operations has spurred the government to act. It is imperative, politically, to offer solutions to the problem, and privatization, moreover, shifts the focus from the public sector to the private sector. The failure to react to the public's demands by the politicians would possibly be considered career suicide. The two traits of quality and cost were selected as a basis of this research as the two go hand in hand in that when corners are cut, quality usually suffers. It is ironic to think that a for-profit company is not in business to maximize profits. The opponent for privatization really has very little stake in the failure of privatization within the industry; it is the very high stakes for the "profit takers" that drives the industry and political agenda. Quality of Service: Quality is premised on the different views of proponents and opponents which are fundamentally distinct. These distinct views offer little in the way of a road map for quality. Although quality is difficult to quantify, examining certain internal functions can be used as a measure of quality. A major comparative study of public and private facilities, "tried to operationalize quality and effectiveness by examining factors such as physical conditions of the facilities, escape rates, security and control procedures, physical and mental health of inmates, adequacy programs for inmates (e.g., education, counseling, training, and recreation), and indicators of rehabilitation mainly in terms of reincarceration" (Shichor, 1995, p. 167). These matters incur costs and when corners are cut, limiting these factors to create profit, the quality of service is jeopardized. Private corporations are profit oriented and cut personnel to the minimum to lessen costs (Shichor, 1995). Looking at what costs are cut can refute that quality isn't jeopardized by these actions. Counseling programs such as drug dependency counseling, HIV/AIDS counseling, sex offender counseling, and job seeking counseling are all offered at lower percentage rates in private institutions than in public institutions (Stephan, 2008). The same story applies to education programs where the ninety-two percent of all public facilities have some type of educational program versus fifty-nine percent of all private institutions (Stephan, 2008). This alone is evidence that quality is lower on some level in the private institution. "Evidence from studies concerned with privatization does suggest that when an agency must compete with a contractor, its productivity can increase and even match the contractor's performance" (Price, 2006, p. 17). Competition is generally positive when efficiency is sought. "Most important is recognizing that cost savings from privatization are themselves a product of competition, and that competition has beneficial effects on the entire system" (Reason Public Policy Institute, 2002, p. 6). The dynamics of competition are to achieve better practices to out perform rivals. In this regard, competition brought on by the introduction of privatization has improved both the private and public operational practices. The issue of ACA accreditation as a means to quantify quality is refuted by the fact that ACA doesn't actually fail to accredit any institution. The ACA will review standards and upon finding problems will make recommendations for the institution then allow time to correct the problems before a reevaluation is conducted (Price, 2006). ACA accreditation is in-fact an attempt to audit the quality of service and is by all rights a positive component fostered by institutions that demonstrate the intent to maintain high standards of quality. A higher percentage of private prisons carry ACA accreditation than public prisons and when considering quality these efforts should be noted. Accreditation by the ACA is not an exact measure of quality; additionally, the ACA's legitimacy can be questioned as it is not a government agency charged with evaluation of prison operations (Price, 2006). Cost Measures: The claim that private prisons can be built more rapidly than public facilities is an undisputed fact. The bidding process and red tape involved with public built facilities is a time consuming event (Pollock, 1997). "Private corporations can do this work with their own funds or with funds that they can raise from private sources without waiting for appropriations from the legislature or government offices" (Shichor, 1995, p. 140). Private corporations most likely can build prisons with a greater ease and with a greater cost savings. Land acquisition for the public facilities and the bidding process is much slower and ultimately more costly than the process private facilities endure. Looking at both sides of privatization objectively can render a clearer picture as to the benefits of privatization. "Comparing costs between private and public institutions may disguise important differences in the type and extent of services rendered" (Pollock, 1997, p. 391). Each side takes a stand to create the appearance that their approach is the best. The two sides have very different approaches in determining the costs involved in housing inmates. It is highly unlikely that all the variables can be distributed in such a way as to obtain an accurate measurement. Items such as different accounting practices, maintenance costs, and health costs all vary from one institution to another. "At first glance, the evidence clearly establishes the economic advantages of privatized corrections, but a thorough analysis of the reasons purported for such advantages exposes a number of multifaceted and subtle factors that contribute to cost savings" (Price, 20006, p. 27). One reason for the cost savings is that private corporations shy away from managing the more costly inmates, such as maximum security and unhealthy inmates. When management problems arise, the problem is handled by shipping the trouble maker back to the public run facility. "Cost savings from private prisons results in large part from the ability of private vendors to reduce certain personnel costs, such as retirement benefits" (Cobb, 2000, p. 7). According to the Bureau of Justice Statistics 2005 Census of State and Federal Correctional Facilities, the ratio of inmate to officer in the public sector is 5.6 and the private sector is 7.1 (Stephan, 2008). On average there are two less officers per inmate in the private facilities; a large portion of the cost savings from privatization is due to this limited staffing of facilities. Additionally, public employees enjoy a higher standard of employee benefits at lesser costs. For example, public employee health insurance plans are generally offered at a lower premium than private employees. The public prison system shares a greater portion of these costs. Many employee benefits are simply cut for private employees or offered with most of the cost passed on to the employee and not the corporation. Ultimately, "the argument to support privatization because it increases efficiency or saves money has not been settled" (Price, 2006, p. 20). "The review of this issue has not shown overwhelming evidence that the privatization of prisons would save such a substantial amount of money for the authorities and ultimately for the taxpayers that the risk of mismanagement, lack of government control, increased opportunities for corruption, government dependence on private corporations, and so on could fully justify the operation of prisons by for-profit corporations" (Shichor, 1995, p.163). As for effectiveness, the United States Criminal Justice Institute has reported that private institutions outperform public counterparts on many important issues (Price, 2006). The U.S. General Accounting Office has reviewed many studies concerning the way the conclusions are made (Shichor, 1995). "It noted that the private-public cost comparison was made by using the private company's expenditures as a basis and estimating from them how much the same service would cost under public management" (Shichor, 1995, p. 161). Discussion: The Political Economy of Prisons "The privatization of prisons has been politicized beyond comprehension" (Price, 2006, p. 109). When dealing with the issues of overcrowding and rising expenditures associated with prison operations, politicians used privatization as a means to solve the problem at hand. At look at the equation from a different angle, politicians may have been searching for ways to sneak privatization into the prison systems due to vested interests, and the overcrowding issues paved their way. No matter the means or the method, "A political issue arises in that, prison-business interest groups may lobby for longer sentences, stronger penalties, stringent parole standards, or attempts to redirect social policy like "deinstitutionalization." So as to gain higher prison numbers" (Sellers, 1993, p. 51). Lobbyists now push their agenda to pass laws to make prison stays longer in an effort to increase profits. "Laws like mandatory sentencing keep prisons full and increase the labor supply in the name of maximizing profits" (Price, 2006, p. 18). An alarming thought on the subject is that although the crime rate dropped over a ten year period, for-profit prisons grew their market (Price, 2006). Many private prisons under contract are guaranteed a certain number of prisoners. In the event that the quota is not met, the prison will still get paid for the same number of inmates (Price, 2006). It is the agenda on the political level that allow such practices to occur, and as the strength of the private institutions grow the problems will only multiply. Is it morally or ethically proper to trade people or should the government be the only means to utilize when dealing with the socially undesirables? Some argue that it is just outsourcing for the government. There is a difference, however, in discussing the outsourcing of say customer service agents, which replaces domestic representatives with international ones, and physically outsourcing human beings to serve their incarceration abroad. It seems justifiable to say that privatization could be considered a form of slavery, in that people are basically sold for the profit of another. Additionally, "imprisonment is one form of legal punishment that, by definition, involves the deliberate causing of suffering for a convicted offender by the criminal justice system representing the state; it raises questions about the authority and legitimacy of the state and morality of punishment" (Shichor, 1995, p. 45). In the material above, there is a great emphasis on quality of services. How is quality measured? When the product is essentially human beings one could argue that anything less than a normal existence would be considered cruel and inhumane. What are we trying to accomplish with the act of incarceration? Are we simply providing a warehouse for humans that are socially undesirable, or are we trying to rehabilitate these individuals to re-enter society and become functioning contributing members? As a whole, it appears that the private system is in the business of taking advantage of people. It wouldn't make any sense for the private corporation to promote rehabilitation, as it is an industry that feeds on repeat offenders. While public facilities push for improving the quality of life for offenders and maintain hopes to rehabilitate, the private practice usually cuts the expense and receives the profits with hopes that once released the inmate will be a loyal customer that returns for additional services. How much sacrifice will the private company take to make a buck? Ultimately, they will take what is necessary to maximize profits. References About CCA. Retrieved March 12, 2009 from http://www.correctionscorp.com/about/ Alabama Policy Institute (n.d.) What to Do about the Prison Problem? The Pros and Cons of Privatized Prisons in Alabama. Birmingham: Johnson K.A. Blumstein, J.F., Cohen, M.A. & Seth, S. (2007) Do Government Agencies Respond to Market Pressures? Evidence from Private Prisons. Vanderbilt Law and Economics Research Paper No. 03-16. Retrieved April 2, 2009 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=441007 Cobb, L. (2008, March). Private Prison Review. Publication No. 99-39, Tallahassee: Office of Program Policy Analysis and Government Accountability Espejo, R. Ed. (2002). American Prisons: Opposing Viewpoints. San Diego: Greenhaven Press, Inc. Gaes, G.G. (2005). Prison Privatization in Florida: Promise, Premise, and Performance Criminology & Public Policy, 4(1), 83-88. Pollock, J.M. (1997). Prisons: Today and Tomorrow. Gaithersburg: Aspen Publishers, Inc. Price, B.E. (2006). Merchandizing Prisoners: Who Really Pays for Prison Privatization? Westport: Praeger Publishers Reason Public Policy Institute (2002, January). Weighing the Watchmen: Evaluating the Costs and Benefits of Outsourcing Correctional Services. Las Angeles: Segal, G. F., & Moore, A.T. Reason Public Policy Institute (2006). Transforming Government through Privatization. Las Angeles: Leonard, C. G. Ed. Rio Grande Foundation (2003, March). The Pros of Privately-Housed Cons: New Evidence on the Cost Savings of Private Prisons. Tijeras: Mitchell, M. Savas, E.S. (2000). Privatization and Public-Private Partnerships. New York: Seven Bridges Press, LLC. Seller, M.P. (1993). The History and Politics of Private Prisons. Cranbury: Associated University Presses, Inc. Shichor, D. (1995). Punishment for Profit: Private Prison/Public Concerns. Thousand Oaks: Sage Publications, Inc. State Corrections Officer Police Benevolence Association Publications. Retrieved March 12, 2009 from http://www.scopba.org/lieberman.htm Stephan, J.J. (2008). Census of State and Federal Correctional Facilities, 2005 Publication No. NCJ 222182, Washington DC: U.S. Department of Justice Bureau of Justice Statistics. Verkuil, P.R. (2007). Outsourcing Sovereignty: Why Privatization of Government Functions Threatens Democracy and What We Can Do About It. Cambridge: Cambridge University Press. |
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