America’s sprawling prison-industrial complex has never quite been the darling of human and civil rights activists. But pulling in billions in profit every year for the last several decades, it has long been a favorite of investors looking for high returns.
That, however, may be about to change — as the private prison industry’s ballooning costs, unsustainable levels of incarceration, and growing unpopularity are finally taking a toll on the sector, driving investors to think twice before sponsoring some of the most controversial companies in the country.
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‘The number of people in prison grew by 700 percent from 1970 to 2010.’
Last week, three corporations announced their collective divestment of $60 million from the Corrections Corporation of America (CCA) and the GEO Group, the two largest private prison companies in the US.
While that’s basically peanuts for an industry that pulls in more than $5 billion in annual revenue — with 75 percent going to the CCA and GEO alone — critics of private incarceration see it as an early sign of the industry’s inevitable downfall.
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“We are just starting to turn the corner on mass incarceration. For the past 40 years we have been addicted to incarceration, and the number of people in prison grew by 700 percent from 1970 to 2010 in the US,” Carl Takei, an attorney at the ACLU’s National Prison Project, told VICE News. “It’s going to take a while to wind that back down to a level that’s less insane. But the private prison industry depends on mass incarceration to continue to profit, and to the extent that we are turning away from mass incarceration, that undermines their business model.”
Last week’s announcement came as the result of the National Prison Divestment Campaign, an initiative by the civil rights group Color of Change and 15 other organizations.
‘Black and brown bodies are not for sale.’
The group reached out to more than 150 companies, pressuring them — as well as state governments — to pull their support from a private prison industry it blames with brutality, excessive sentencing, and racial discrimination.
“As part of this massive incarceration crisis that we have in this country, there are corporations that are making billions of dollars from the locking up of primarily Black and brown people, so we started a campaign clearly saying that black and brown bodies are not for sale,” Color of Change’s organizing director Matt Nelson told VICE News. “This is a start, it’s a very conscious turning of the tide on an industry that seeks to profit from suffering and exploitation. I see it as not just a symbol but a really strong beginning.”
The group figured out that the argument that for-profit incarceration facilities with long rep-sheets of abuse and neglect are no ethical investment is hardly convincing to companies more concerned with profit than a clean conscience.
‘If you’re a money manager, your primary concern is to make clients money. If that means investing in guns and kitten crushers — cool.’
Instead, the argument that prisons are actually a pretty shitty investment — financially speaking — is a winner.
“At the end of the day, if you’re a money manager, your primary concern is to make clients money,” a representative of Anonymous Analytics told VICE News. “If that means investing in guns and kitten crushers — cool.”
Last summer, the group released a detailed report to investors, arguing that as states enacted cost-saving reforms and crime rates lowered, the CCA had started descending form its peak, and was turning into a pretty “horrible financial investment.”
The report said the CCA was a “strong sell” — stock to get rid of.
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Since then, Anonymous added, the corporation has continued to underperform.
“Reforms to cut down on prison populations have been well under way at the state level, and now we’re seeing the federal government jump in in bipartisan fashion. If you are an investor, chances are you don’t want to bet against the US government,” Anonymous said. “Appeal to moral considerations only goes so far. The most important consideration for money managers are the financial prospects… No one wants to hold losers.”
To be fair — private prisons are hardly losers, yet. But pressure on them has been mounting.
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Last year, the CCA lost four of its state contracts after reports of abuse and neglect, including one that it had turned Idaho’s largest prison into a “gladiator school” where inmates were forced to fight each other.
The three companies that pulled their investments last week — Scopia Capital Management, DSM North America, and Amica Mutual Insurance — are not the first to want out of the lucrative but questionably ethical business of profiting off mass incarceration.
In early 2012, the United Methodist Church divested its entire pension fund — the largest faith-based in the country — from private prisons. Under pressure from activists that had dubbed it “Jails Fargo,” Wells Fargo divested a third of its holdings in the GEO Group. Universities have also come under increased pressure from students calling for prison divestment.
‘Investment in private prisons and support for the industry is financially unsound.’
But what’s unique about last week’s announcement is that it was reportedly the first to come as the result of financial considerations as much as moral ones.
After decades of throwing money at prisons, states have finally realized that locking up a significant part of their population — more than any other country, both per capita and in absolute terms — is actually not very cost effective.
The prison boom may in other words be getting closer to an end, and as states look for cheaper alternatives to incarceration, investors look at prisons as long-term guarantors of profit with more skepticism.
“Investment in private prisons and support for the industry is financially unsound, and divestment was the right thing to do for our clients, shareholders, and the country as a whole,” DSM President Hugh Welsh said in a statement announcing his company’s decision to divest. “DSM is committed to good corporate citizenship and operating in a way that contributes to a better world.”
The CCA slammed the divestment campaign, criticizing its organizers’ fact-checking and their failure to propose alternatives.
“Our company saves taxpayers millions, helps keep communities safe, and enrolls thousands of inmates every year in reentry programs that reduce recidivism,” Jonathan Burns, a spokesman for the corporation, told VICE News in an email. “It’s unfortunate that a political group would advocate against those benefits without themselves providing any solutions to the serious challenges our corrections systems face. Overcrowding and skyrocketing costs aren’t solved with politics and posturing.”
The GEO Group did not respond to VICE News’ requests for comment.
For the time being, the private companies behind a large portion of America’s prisons — including a growing number of immigration detention facilities that have much benefited from stalling immigration reform — seem hardly bothered by the small divestment.
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If anything, critics noted, they are out to get every possible buck of taxpayer funds, before states turn the tap off.
‘It doesn’t matter who’s in their prison as long as they have bodies.’
“They are really trying to squeeze states for more money, and trying to open up new revenue streams in the worst way,” Nelson said.
These include “lockup quotas” — contracts by which states have to pay fines if they don’t fill a high percentage of prison beds — and extra emphasis on youth incarceration.
“Which is disruptive because there is no incentive for rehabilitation in private prisons,” Nelson said. “And the industry knows that youth offenders who are not given an opportunity to rehabilitate will then likely end up in an adult prison system, so the companies can continue profiting from them.”
The group has also accused the companies running private prisons of lobbying for legislation that promotes incarceration — including, increasingly, the incarceration of undocumented immigrants. The CCA denied the allegation.
“From the perspective of the private prison industry it doesn’t matter who’s in their prison as long as they have bodies,” Takei said, explaining that prisons’ profits are counted in “man days” — regardless of whether those locked up are criminals, minors, or immigrants. “The handing of prisons over to for-profit companies is a recipe for abuse, neglect and misconduct.”
That — and the realization that prisons won’t continue to pay off forever — will eventually bring more divestment, he said.
“Because of all of the information that’s been coming out about what private prisons are doing and their business model, there are more people who simply don’t want to be associated with this industry,” Takei said. “It’s very hard for somebody who looks at the industry and understands how it operates to come away thinking it’s an ethical industry.”
Follow Alice Speri on Twitter:@alicesperi
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