The economic incentive behind mass incarceration.

It is commonly claimed by certain economists that allowing industries to develop and regulate themselves with little intervention from the state is the most reliable path toward a self-sustainable economy. What this rhetoric fails to consider, however, is the inevitable emergence of morally corrupt (but profitable) industries whose very existence relies on the use of exploitation and legal loopholes. Such a market has developed around the legal process of incarceration, which has evolved into a steady source of income and labor for various sectors within countries’ economies. Yet the issue transcends the confines of the traditional market mechanism, as its very existence is ingrained in the foundations of political, social, and economic systems that dictate a nation’s structure. The phenomenon commonly referred to as the prison-industrial complex (PIC), is described by the Tufts University Prison Divestment as the result of overlapping interests of government and industries that use policing and imprisonment as solutions to economic and social problems.¹ Essentially, the term relates to the vested interests of both the government and firms in increasing arrests and incarceration through legislation. The result is a crisis of mass incarceration that targets specific demographics to ensure the survival of the prison industry.

An analysis of the inner workings and economic mechanisms of the PIC demonstrates the extent to which incarceration has become systematic and self-fulfilling, as well as its importance to the global and national economies. The United States serves as the most prominent example, with an incarceration per capita higher than that of any other country² an approximately 1.8 million people incarcerated on any given day.³ It can therefore be used as a case study on the PIC. One must first understand the origins of organized incarceration to grasp its use as a political and economic tool. It can then be dissected into some of its essential components as an economic market, including its reliance on low-income groups and black people. An emphasis is placed on drug-related convictions, as they have been shown to be “the single most important cause of the explosion of incarceration rates in the United States.” ⁴ Through this nuanced perspective, it is possible to evaluate the importance and mechanism of the PIC.

i. The birth of mass incarceration as a systemic process Incarceration as an economic tool in the US predates the establishment of organized prisons. As it turns out, its roots can be found in the abolition movement and the creation of the 13th amendment of the US constitution. The end of slave labor in the south posed a serious threat to the economy, as plantation owners could no longer rely on slaves as a cheap workforce. The newly-created 13th amendment, however, provided a solution: slavery was not abolished “as a punishment for a crime.” ⁵ Thus, the legal structure allowing the state to lease the labor of convicts to companies at almost no cost was created, paving the way for what would become an indispensable resource.

It was not until the late 1960s that the War on Crime and the subsequent infamous War on Drugs detonated the exponential rise in arrests and convictions. The War on Drugs was publicly announced in 1982 by president Ronald Reagan under the official claim that it would eradicate the crack cocaine rampant in inner-city neighborhoods. Several studies, however, suggest otherwise. In reality, the War on Drugs began at a time when illegal drug use was on the decline.⁶ It has been revealed that Reagan’s administration publicized the emergence of crack cocaine in the 80s as a strategy⁷ and went as far as supporting guerilla armies in Nicaragua smuggling drugs into the country (a fact admitted by the CIA in 1998).⁸ Similarly, the Nixon administration used incarceration to rid itself of political and social threats. John Ehrlichman, Assistant to the President for Domestic Affairs under Nixon, said on the War on Drugs: “The Nixon campaign in 1968...had two enemies: the antiwar left and black people...we knew we couldn’t make it illegal to be either against the war or black, but by getting the public to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities.” ⁹ The real motivation suggested is the desire to maintain social control and racial segregation.

These ‘tough on crime' politics set the tone for the popular attitude towards law and order that deemed it fitting for crimes such as possession to be punished by lengthy prison sentences. In only 30 years, the US penal population increased from 300,000 to roughly 2 million¹⁰ and, despite common belief, most arrests were made on the basis of marijuana possession rather than the more dangerous drug crimes. Marijuana possession accounted for nearly 80% of the growth in drug arrests in the 1990s.¹¹ This approach to imprisonment permeated the structure of the judicial system, and the laws passed during this time enabled the uncontrolled growth in incarceration rates that has continued into the present.

ii. The market of imprisonment The venture from the politically inclined system of mass incarceration into the economically motivated took place gradually. While the use of cheap labor had always been an incentive to boost incarceration rates, it was in the 20th century that imprisonment was turned into an organized market on which multinationals and governments exceedingly depend on. The knock-on effects of the War on Drugs set in motion a process that ultimately created what could be described as one of the most profitable markets in the modern economy.

As Angela Y. Davis phrases it, “private capital has become enmeshed in the punishment industry” which is gaining unprecedented importance within the US economy.¹² The government, wishing to secure and squeeze this source of income, has established over time the necessary protocols that ensure conviction rates remain high. The methods, while political at their core, rely on economic incentives and harness the power of the free market. In her study of the PIC, Michelle Alexander outlines the various ways in which maximum rates of convictions are ensured through subsidies and government spending. The process, she argues, traces back to the 1960s when awarding grants to law enforcement agencies willing to make drug arrests a top priority became a common practice. This, combined with the government’s provision of military equipment (1.2 million pieces only in 1997),¹³ turned the so-called community policing into military policing that strives to meet quotas for arrests on non-violent crimes. The additional authority given to local police to keep the majority of assets and cash seized in arrests and the Byrne-grant laws allowing drug task forces to seize over $1 billion in assets between 1988 and 1992¹⁴ ensured state and local police had a profit motive in ensuring the perpetual existence of mass incarceration.¹⁵

Corporations have simultaneously found a way to profit from incarceration, in a way that is different yet interlinked with that of the state. The obvious example is the privatization of prisons that depend on incarceration remaining high. Through routine lobbying for harsher sentences,¹⁶ private prison corporations such as the Corrections Corporation of America (CCA) have been able to profit from the overcrowding of government penitentiaries and have continuously grown as an industry, exemplified by the 165% growth in the number of federal prisoners in private facilities between 2000 and 2013.¹⁷

Yet focusing solely on the private sector ignores the parallel market that has developed from multinational companies attaching themselves to government-funded prisons. Dozens of Fortune 500 companies (McDonald's, Microsoft, and Dell, to name a few) have moved part of their operations into prisons, a process that allows them to drastically reduce their labor costs and turn “previously unexploitable labor into highly exploitable labor.”¹⁸ The contrast between prisoner wages and the usual minimum wage is substantial, with federal prison wages going as low as $0.12 per hour.¹⁹ Additionally, other companies use the inability of convicts to select the services and goods they can consume to their own advantage. The prison phone industry, for instance, earns an estimated $1.2 million per year by overcharging phone calls of prisoners who cannot turn to competitors as an alternative.²⁰

These structures, led primarily by economic incentives and made possible through government intervention, have become essential to the global economy by becoming intertwined with the corporate conglomerates that have gained power through the process of globalization that gives them international reach. Thus, other countries effectively become complicit in the PIC by consuming the products and services reliant on the prison workforce.²¹

iii. The impact on race and class While the PIC is a form of citizen oppression in itself, it affects different demographics disproportionately. Many believe that the crisis of mass incarceration is an attack on the liberties of the US population as a whole, and while this is true, it fails to encapsulate the inherent connection between the system and the targeted repression of black people and low-income citizens.

The system of incarceration, as discussed in section I, cannot be separated from the historical context in which it was created. Racial prejudice has been implicated in every stage of the PIC. Many argue that even today, the racially motivated origins of incarceration influence the percentage of black people incarcerated for non-violent crimes, with some going as far as to argue that the PIC is in itself a strategically crafted tool to continue the role of slavery and Jim Crow laws as a means of labor extraction and social segregation.²² The usual explanation for the high rates of incarceration of black people focuses on the idea that economic disadvantages and reduced access to education is the primary cause of the discrepancy in convictions of people of color as compared to white people. Nonetheless, statistics would suggest a more systemic mechanism of segregation has withstood the changes in politics and the era of ‘color blindness'. Despite studies showing that all races use and sell illegal drugs at almost identical rates, some states admit black men at rates twenty to fifty times greater than white men.²³ As figure three demonstrates, chances of going to prison based on race and gender have seen an increase for all groups, but those of black and Hispanic people have risen by a far greater amount.

The connection with class initially seems to be an obvious one: lower incomes lead to higher crime rates and therefore higher arrest and conviction rates. The reality is far less straightforward, as there seems to be a direct link between poverty and wrongful convictions with lengthy sentences for non-violent crimes. About 80% of criminal defendants are classified as ‘indigent’ and are unable to hire a lawyer, many of which are not granted the right to a public defense attorney on the judgment that they should be able to afford one.²⁴ The lack of representation increases the probability of taking a plea bargain to avoid further charges in an unfavorable trial. Prosecutors “load up defendants with charges that carry extremely harsh sentences” to elicit admissions of guilt for a lesser crime or obtain testimony for related cases.²⁵ The outcome is thousands of impoverished people confessing to crimes they are innocent of and being imprisoned.

v. An evaluation of mass incarceration effects on the macroeconomy Besides the ethical implications of incarceration as an economic investment and the social injustice of the PIC being built on the incarceration of marginalized groups, there are clear economic impacts of the PIC on the overall economy. The opportunity cost of investing billions of dollars in the building and maintenance of prisons is high; more social welfare could be created by diverting those funds elsewhere.²⁶ Additionally, prison labor is shown to take manufacturing jobs from people outside the system and has allowed governments to bust unions more easily. ²⁷

v. Conclusion From an understanding of the systems that overlap to create the PIC arises the intent to dismantle strategic incarceration being perpetuated. The market mechanism and profit incentives cannot be allowed to dictate the rate of convictions, nor should corporations and governments be able to benefit from this industry. The structures in place cannot be considered fair as long as people benefit from arrests and convictions; it will always create an economic incentive that should not exist within the sector. The market mechanism cannot be allowed to dictate the rate of convictions, nor should corporations and governments be able to benefit from them. It is necessary to implement extensive reform that addresses the problems at the very core of judicial systems in order to fully prevent the underpaid labor of the most vulnerable groups in society from being used as an economic resource and regulate mass incarceration for nonviolent crimes.



1 “What Is the Prison Industrial Complex?” Tufts University Prison Divestment. 2 Saunders, Owen. “Profit and Privatization: The Prison Industrial Complex in the United States.” The Observer 3 Schlosser, Eric. “The Prison-Industrial Complex.” The Atlantic. Atlantic Media Company, June 16, 2020. 4 Alexander, M. and West, C., 2010. The new Jim Crow. The New Press.

5 Gilmore, Kim. “Slavery and Prison — Understanding the Connections.” Social Justice 27, no. 3 (81) (2000): 195–205. 6 Katherine Beckett and Theodore Sasson, The Politics of Injustice: Crime and Punishment in America, (Thousand Oaks, CA: Sage Publications, 2004), 163 7 Alexander, M. and West, C., 2010. The new Jim Crow. The New Press. 8 Alexander Cockburn and Jeffrey St. Clair, Whiteout: The CIA, Drugs, and the Press (New York: Verso, 1999) 9 LoBianco, Tom. “Report: Nixon's War on Drugs Targeted Black People.” CNN. Cable News Network, March 24, 2016. 10 Marc Mauer, Race to Incarcerate rev. ed. (New York: The New Press, 2006), 33 11 Ryan King and Marc Mauer, The War on Marijuana: The Transformation of the War on Drugs in the 1990s (New York: Sentencing Project, 2005)

12 Davis, Angela. “Masked Racism: Reflections on the Prison Industrial Complex.” Colorlines, April 18, 2015. 13 Radley Balko, Overkill: The Rise of Paramilitary Police Raids in America (Washington, DC: Cato Institute, July 17, 2006) 14 Alexander, M. and West, C., 2010. The new Jim Crow. The New Press. 15 Alexander, M. and West, C., 2010. The new Jim Crow. The New Press. 16 Markowitz, Eric, Clint Smith, and Adam Gopnik. “Making Profits on the Captive Prison Market.” The New Yorker, September 4, 2016. 17 De Giorgi, Alessandro. “Five Theses on Mass Incarceration.” Social Justice 42, no. 2 (140) (2015): 5–30.

18 Smith, Earl, and Angela J. Hattery. “Incarceration: A Tool for Racial Segregation and Labor Exploitation.” Race, Gender & Class 15 (2008): 79–97. 19 Thompson, Heather Ann. “THE PRISON INDUSTRIAL COMPLEX: A Growth Industry in a Shrinking Economy.” New Labor Forum 21, no. 3 (2012): 38–47. 20 Markowitz, Eric, Clint Smith, and Adam Gopnik. “Making Profits on the Captive Prison Market.” The New Yorker, September 4, 2016. 21 Davis, Angela Y., and Cassandra Shaylor. “Race, Gender, and the Prison Industrial Complex: California and Beyond.” Meridians 2, no. 1 (2001): 1–25. 22 Smith, Earl, and Angela J. Hattery. “Incarceration: A Tool for Racial Segregation and Labor Exploitation.” Race, Gender & Class 15, no. 1/2 (2008): 79–97.

23 Human Rights Watch, Punishment and Prejudice: Racial Disparities in the War on Drugs, HRW Reports vol. 12, no. 2 (New York, 2000). 24 Laura Parker, “8 Years in a Louisiana Jail but He Never Went to Trial,” USA Today, Aug. 29, 2005 25 Alexander, M. and West, C., 2010. The new Jim Crow. The New Press. 26 Clear, Todd R. “The Prison Industry and the Marketplace.” Dialectical Anthropology 34, no. 4 (2010): 585–87. 27 Thompson, Heather Ann. “THE PRISON INDUSTRIAL COMPLEX: A Growth Industry in a Shrinking Economy.” New Labor Forum 21, no. 3 (2012): 38–47.