The New Cold War - Making Crime Pay

 ABC News reports, "...all this money was making the private-prison boys more hungry still; not content with their piece of the pie, they were pushing to take over entire state correction systems in New Jersey, Illinois, Michigan, and Ohio..." So what happens when prisons fall into the hands of private corporations? Social and behavioral reform?... Not when you're slashing costs to turn big profit.

I found myself driving one day during those first, red-leaved flashes of October and eased my motorcycle around a tight corner. My eyes caught a glimpse of a small blue-and-white one-storey building, a grey rectangular place with a large blue roof. It's not the kind of thing you're sure to miss.

That's when I first saw the prisoners. They were out in the front yard of this small minimum-security prison, their blue-and-white uniforms eerily matching the coats of paint found on the little prison behind them. A few of the guards - almost all southern white males to a man - were about and closely watching the all-black crowd, just in case.

But, dear readers, you don't know the meaning of the word uncomfortable until you have several inmates' eyes bearing down upon you - even the eyes of low-level, non-violent inmates like these - and each bearing that hungry look that begs to be free, to feel the wind on his face as he barrels down the highway . . . to have what you have.

An hour later my work on the privatization of prisons - and the factors that led up to it - began in earnest.

"The Cold War of the 90's"

The Wall Street Journal knows a good thing when it sees it. As early as 1994 that respected bastion of tradition trumpeted what would surely be a gold mine for the hungry entrepreneur; America's greatest source of revenue during the 80's - its mighty military/industrial complex built at the height of the Cold War - was being privatized by the Clinton Administration and used to fight the enemy within.

On May12th of that year it published, "Making Crime Pay: The Cold War of the 90's", informing its readers that the administration was making good on three of its campaign promises in a single throw. Firstly, it was accelerating the closing of military bases and the whittling of gov't contracts with arms builders that had begun under President Bush after the fall of the Soviet "Evil Empire"; secondly, it was making good on its promise to "clean up America's streets" by putting 100,000 new police on the beat and, taking a cue from Republicans, 'getting tough with criminals'.

But it was the fulfillment of the third promise that had the Journal muttering words of praise. The administration would keep its promise to create employment in those areas hit by military base and plant closings by turning the empty bases and large industrial plants into thriving, privatized prisons - which is a very big business, especially to small American towns that had depended almost entirely on the old military/industrial structure for its revenue and jobs.

It was a good sell. The Journal quoted a poll it had taken with NBC showing that, "more than 70% of those surveyed support longer prison terms for violent offenders", even though the most reliable statistics that year had shown that violent crime was declining sharply for the first time in years; but it is also a virtual truism that no candidate for an American office has ever lost votes by being hard on criminals. Waxing poetic, the article breathlessly stated that:

"Americans' fear of crime is creating a new version of the old military-industrial complex, an infrastructure born amid political rhetoric and a shower of federal, state and local dollars. As they did in the Eisenhower era, politicians are trying to outdo each other in standing up to the common enemy; communities pin their economic hopes on jobs related to the buildup; and large and small businesses scramble for a slice of the bounty. These mutually reinforcing interests are forging a formidable new 'iron triangle' similar to the triangle that arms makers, military services and lawmakers formed three decades ago."

Of course even paradise comes with a bad apple now and again. The Journal felt it right to regretfully add the findings of a Justice Department study taken that year showing that, "[many] federal prisoners are guilty of low-level, nonviolent offenses - such as possession of small quantities of illegal drugs - but are serving lengthy sentences under mandatory minimums set by Congress." These 'mandatory minimums' were enacted by the then-Democratic Congress and quickly signed into law by President Ronald Reagan in the mid-80's as a finishing touch to his "War on Drugs" (though how involved 'the Gipper' really was in this 'war' is hard to say; only six months after the war had been officially declared by he and wife Nancy in a rare dual televised address to the nation in 1984, he quietly slashed much of the war's budget in half, fueling speculation that whatever he did after that moment was little more than a glorified photo-relations opportunity).

In any case, the Journal said, the writing was on the wall; prisons are big business, and privatization was the wave to catch. "Parts of the defense establishment are cashing in, too, sensing a logical new line of business to help them offset military cutbacks", the Journal continued. "Westinghouse Electric Corp., Minnesota Mining & Manufacturing Co., GDE Systems Inc. (a division of the old General Dynamics) and Alliant Techsystems Inc., for instance, are pushing crime-fighting equipment and have created special divisions to retool their defense technology for America's streets . . . Many lesser-known companies already are doing well fighting crime. Esmore Correctional Services Inc., the biggest U.S. maker of police electronics, recently was taken public by Janny Montgomery Scott."

Don't be mistaken; the private prison business had started back in the mid-80's, and by '94 rolled around it was already a huge, fledgling business with about 30-35,000 prisoners in its care by the time this new development showed its head; still, this is the moment many consider the defining one for the new, money-laden industry; it was officially being seen as the next powerhouse for American defense dollars. The 'iron triangle' had landed straight into the private prison lap.

This new 'iron triangle' wasn't lost on several in the loop. Many of America's largest monied firms, such as Goldman Sachs, Merrill Lynch, Prudential, and Smith Barney Shearson were each fighting for a piece of the pie. They were at the vanguard of this attack on America's newest menace, competing savagely to underwrite prison construction where it could with private, tax-exempt bonds - thereby bypassing a public vote on the matter (prisons usually need public approval for gov't bonds to be issued covering costs), just in case. Failing that, these businesses could easily - and legally - build a prison and lease it out to their parent company, a move which kept much of the actual costs off its books - and hence made them very attractive to investors. For their trouble the private investors usually won big, netting for themselves a significantly higher rate of interest on their investments than the public bonds state & federal governments provide.

Brad Sprague, an investment banker with the Columbus, OH office of A.G. Edwards Company, summed it up well when he bluntly told reporters, "[Private] prison bonds are a good investment; I put my own kid's money in them. You get individual investors, bank trust departments, mutual funds, insurance companies - they all know [America] isn't going to go out of the prison business anytime soon."

And it wasn't just gov't officials and the best & brightest in the economic sphere who were on to what was happening; one open-eyed academic was quoted in the Journal piece as saying, "With the population in private prisons growing at four times the rate of the general prisoner population, growth for the private-prison industry is virtually guaranteed. If you were in the hotel industry, you'd think you died and gone to heaven."

And 'heaven' continued; in 1995 "Prisonfest" - a convention held annually by the American Correctional Association (ACA) to further the profits to be made by both states and private investors in the fast-growing prison industry - hit Cincinnati, OH. Nearly 5,000 prison guards, halfway house operators, administrators, educators, and probation and parole officers flowed into that fine city to throw the jailhouse bash of the year. Attorney General Janet Reno was kind enough to take time from her strange personal vendetta against right-wing nuts & Cuban children to speak at the convention, & presumably to speak for the Clinton Administration as well. In her keynote address, she told those there that, "You see the meanest, most vicious among us, and you protect us from them . . .well, I'm here today to tell you how much this nation owes you."

And, if those selling everything at the convention from "razor wire . . . and restraint beds to inmate phone services and modular cells that can be assembled like Lego blocks" (as one local reporter put it) continue in their ways, the nation will come to owe quite a pretty penny indeed.

"Business is great," gushed Cathy Perry, an account manager from Access Catalog of St. Louis. The catalog sells clothing, television sets, stereos and other personal items to inmates by mail order. Typical of those who sell their goods or services to the mighty prison beast, Access pulled in roughly $5 million in sales during '94 alone.

But then again, it's not too hard for a private industry to make quite a pile of money from selling to prisoners; as one gung-ho businessman recently put it to me, "It's not like . . . they're [really] going anywhere too soon", so it's pretty hard for them to shop around for items. If you're an inmate you deal with what vendors the prisons provide, and if you don't you go without.

But going with the structure can be a very expensive endeavor for the prisoner. For instance, in some states like California, phone companies such as MCI and AT&T have been selling phone time to prisoners often at three times the market rate; and, since prisoners must call collect in order to place any call, this ensures a tidy little bundle for them as well as for the prisons, to which MCI will often give a cut of the profits made by this price gouging in exchange for giving the lucrative prison contract to the happy phone company. How much they, like anyone else selling goods or services in prisons, can actually charge depends entirely on what the state or federal regulators will let them get away with.

The Journal did report that not everyone on the outside is jumping for joy at this surge in prisons, or their privatization. Niki Schwartz is a Cleveland attorney who pointed out that in 1982 Ohio spent only one-sixth of what it spent on higher education to build & maintain its prisons; by 1993, the budget had bloated to a full third. "Soon", Schwartz exclaims, "we'll be spending more on corrections than on higher education, and that's crazy".

Indeed. Now prison spending not only outstrips education (money is now commonly diverted from education and welfare spending to fund our need for prisons, like former NY Governor Cuomo's raiding of his state's welfare funds to fuel the building of prisons some years ago; according to the Atlantic Monthly, he now calls that move 'stupid'); it has also risen three times as fast as our military spending over the last 20 years.

"The juiciest pork in the barrel"

Politicians are an amazing breed. They usually achieve precious little & seem absolutely incapable of doing anything else but pontificate on subjects most of them know nothing about, all the while parroting solutions most would never really fight for if given the honest chance; & yet they have somehow convinced each and every one of us that we simply can't do without them.

"If you carefully examine the members of Congress and theexecutive branch, you will discover that precious few of them have ever run a business, made a payroll, grown corn, or engaged in any activity where profit [or the good of others] was paramount.

This means that our country has found a way to keep our less-than-able occupied. Who is to say that these ungifted people might not have fallen by the wayside - or worse, descended into a life of crime?

I believe our treatment of our president . . . and representatives is proof positive that this is a compassionate and Christian nation."

Rita Mae Brown

It is also virtually a truism in journalistic circles that you can always count on certain politicians to say precisely the wrong thing at precisely the wrong time - which is, of course, precisely why we reporters so love to cover them.

Dan Feldman, New York City assemblyman & chairman of its criminal-justice committee, couldn't help but gleefully admit to WSJ just as it was investigating the whole privatization business that prisons were becoming "the juiciest pork in the barrel", as far as he was concerned.

And, like all properly-timed political mistakes, it couldn't be moreilluminating as to what is really going on in the prison business.

CONTINUE