The American Gulag,a barbaric example of market failure

Capitalism is an extremely wasteful system, it doesn't take much effort to see that.  There's the trillions in bailouts, the cost of its predatory wars, the corruption and outright theft, and of course the massive costs the public bear for environmental damage done by industry.

One small example of the waste of financial and human resources is the prison industrial complex or the warehousing of human beings.  The prison industry has been a very profitable one for the 1%.  The prison population has risen rapidly over the last 25 years and the US now has the highest number of incarcerated, some two million people, over 50% of them people of color.

Bloomberg Business Week warns its readers that investing in the prison industrial complex is not so fruitful these days. * I guess the first thing that comes to my mind here is that incarcerating human beings, overwhelmingly workers, should be an investment opportunity;  "The prior decade saw a spurt of speculative prison building", BW points out.  The trends driving this investment opportunity were twofold; overcrowding in state facilities much due to the war on drugs as well as the increased jailngs of undocumented workers. This is not civilization.

The two biggest incarceration outfits are Corrections Corp of America and GEO Group.  But even budding fresh no nothings have taken the plunge.  Municipal Corrections that ran Ocilla jail in Irwin County Georgia  was formed by Terry Obrien who had no connection to the prison system whatever.  All these investors in the US Gulag get help from the taxpayer of course.  Ocilla is failing after the taxpayers borrowed $55 million to have a private real estate developer double the size of the existing jail so Obrien's group could run it.

The jailing of workers, people of color and immigrants in rural communities can provide jobs is the idea. But the moneylenders "forced" the developer in to bankruptcy right before the county was about to sell the failing jail to retrieve $1.6 million in unpaid taxes. Handy things for corporations and speculators bankruptcy courts.

Business Week reports that there are at least ten similar projects that are in bad shape holding some $365 million in municipal debt. More than 50% of the distressed jails on a municipal markets list that tracks such things are in Texas. Hmm! Is Texas executing workers at such a rate that the state is ending up with a surplus of beds in the prison system I wonder?  There are two jails that are completely vacant says BW and are therefore making no money for the owners. In Alabama, an "abandoned" youth prison is falling apart and there's no money for repairs. This institution is owned by a retired judge who formed a non profit to own it. Sentence the kids then send them to the prison I own, no conflict of interest there.  "They don't lock up many juveniles now" he tells BW.  Oh for a return to the good old days.

When the new entrepreneur Obrien took over the Ocilla prison he was able to do so with $14.8 million in loans from the county.  He wanted to enlarge the facility three years later "using $55.million in new bonds" says BW. Bergen Capital, the underwriter for the original 2004 bonds made $716,800 in fees and another $1.7 million on the 2007 issuance. As the owner of the jail Obriens firm, Municipal Corrections made made $5000 to $8000 monthly according to records. Alongside this, another unnamed firm received $21,000 a month to run the jail BW states.

Poor Obrien has not fared well in his venture in to the private incarceration business.  One of the reasons is his size; the big guys, Correctional Corp of America and GEO group have a "national footprint" says BW.  This allows them to bribe politicians to a much greater extent, they call it lobbying. They can get their snouts much deeper in to the public trough.

As for the taxpayers of Irwin County, they are not finished paying yet. County politicians have retained counsel in Nevada to fight for their interests in the matter.

This is but a tiny example of the plundering of public wealth and waste of public resources in the form of bricks and mortar.  Then there is the incarceration of the two million people, most of them potentially productive human beings that capitalism has abandoned, cannot put to work because its not profitable for the 1% to do so. Most of the corporate waste and private sector inefficiency and the cost of this to the taxpayers is hidden as corporations have rights and one of those rights is not to open their books if they don't want to. The public sector with all it's weaknesses and bureaucratic functioning in a capitalist economy is still far more efficient and less wasteful than the private sector. They just can't tell us that now can they.

* Investors Get the Jailhouse Blues: BW 4-9-12