Make no mistake: The purpose of privatization is to make a profit. The promise of privatization is efficiency. But in its pursuit of both profits and efficiency, privatization creates perverse incentives. It encourages privately managed charter schools to avoid or get rid of “expensive” students” (unless the reimbursement formula makes them profitable to keep); it encourages for-profit hospitals to over diagnose patients and perform unnecessary surgeries; it encourages private preschool providers of special education to misdiagnose children as in need of services to produce profits.
And it encourages private managers of prisons to keep the prison population as large as possible, since an empty cell is a cell that produces no revenue.
Here are some recent examples, drawn from the invaluable website “In the Public Interest,” which reports regularly on privatization of the public sector:
On the tenth anniversary of Operation Streamline, Free Speech Radio News reporter Shannon Young interviews Grassroots Leadership’s Bethany Carson. The policy “significantly increased the caseloads in criminal courts along the southern U.S. border by criminalizing what used to be a civil offense: illegal re-entry into the United States.” Carson says “this is also a policy that has funneled people into for-profit federal prisons, that are segregated prisons specifically for immigrants, with worse conditions, the rationale being that they don’t want to spend money on people who are not going to be coming back into American society and will be deported afterwards. This has also dramatically increased the proportion of Latinos in the federal prison system.”
A new report by the Center for American Progress says “a key factor underlying the explosion in the number of immigrants in custody is the expanded role of for-profit prison companies in the U.S. immigration detention system. (…) The millions of dollars that for-profit prison companies poured into lobbying have paid off in a big way, resulting in an increase in the guaranteed minimum number of immigration detention beds, both nationally and within individual facility contracts.”
The National Journal’s J. Weston Phippen reports on how privatized probation systems victimize and trap the poor and lead to a loss of public control. “In the Mississippi Delta town of Greenwood, a for-profit company promised city leaders it could take over its cash-strapped probation system without any expense to taxpayers. Not only that, but the company said it could actually turn a profit for itself, and the city, by collecting fines. Just eight months later, nearly 10 percent of the town’s 15,000 population was on probation for minor offenses like traffic violations and owing fees to the company.”
Corrections Corporation of America is awarded a new 10-year management contract with the state to house up to an additional 1,000 medium-security inmates at CCA’s Red Rock Correctional Center. The one-bid contract was the subject of a “public” hearing at which “there was not one member of the public at the meeting.” “It was not a public hearing, it was a CCA staff meeting,” said Caroline Isaacs, program director of the American Friends Service Committee—Arizona. “Half the people in the room were in uniform.”
Tucson stands up against an unjust immigration detention system buttressed by the for-profit prison industry. “Asked to describe a case that gave her the most satisfaction, Launius singles out that of her friend Alma Hernandez, a community leader and activist in Corazón de Tucson. ‘She wasn’t (an activist) when she first started working with us, but she was stopped and arrested and held in a CCA (Corrections Corporation of America) prison in Louisiana for months. That turned her into an activist. She was one of our first clients and has volunteered with us ever since.’”
Just eight months later, nearly 10 percent of the town’s 15,000 population was on probation for minor offenses like traffic violations and owing fees to the company.”
Good God. Now there’s a public-private partnership we should all imitate, huh?
How do they petition for relief from this business arrangement, I wonder? Do they need to hire a lobbyist of their own?
The purpose of private nonprofit organizations that provide essential services and receive almost all of their funding from taxpayers and government sources is to make a profit? The IRS begs to differ, but in any case here is a list of institutions in New York City that you may wish to avoid:
The New York, Brooklyn, and Queens public library systems;
Numerous providers of social services, including Citymeals and the Coalition for the Homeless. New York City relies on these and other privately managed nonprofit agencies to deliver about $7 billion dollars’ worth of vital services every year;
Teaching hospitals such as New York Presbyterian, Mount Sinai, and the Hospital for Special Surgery, none of which could function without Medicare, Medicaid, massive governmental research grants, enormous subsidies to train doctors, and so on.
It is strange to me that we can trust “privatized” government-sponsored nonprofits to feed and shelter our fellow citizens, to enrich their minds, and to literally save their lives, but not to educate their children. I wonder what the difference could be.
An informed citizenry.
Diane,
You are correct. My brother has an architectural design business that focuses on kitchens. He met with a man who was setting up a private school to talk about designing the kitchen area. The man’s response was, “Do you mean I have to spend money to feed these kids too? You’re killing my bottom line.”
Kas Winters
This isn’t even the first time this has happened in the US. Anyone can read about the “coal towns” in West Virginia. They were privately owned political subdivisions. They had private police forces, schools, the whole works. They even had a currency. You could exchange it for 75 cents on a US dollar.
Apparently we have to repeat this every 100 years.
There were exempt organization not-for-profit coal towns???
There’s a counterforce to privatization of essential services- “remunicipalization”
This is Germany but there are examples in every country. Atlanta GA actually privatized water and then took it back public. Obviously it depends on having a functioning political system, where elected leaders are willing to admit error and/or aren’t completely, hopelessly captured.
http://energytransition.de/2014/06/remunicipalization-of-hamburg-grid/
Admitting error.
Wish that would happen in NC in regards to lifting the charter cap.
Privatization often requires taxpayers to pay more for services, and the results are no better, and in many cases worse. The worst type of privatization in my opinion are those that purport to provide a social service such as privatized prisons and charter schools. While companies excel at the ever lowering bottom line, they fail at taking responsibility for the ethical implications of their policies. That is how corporations can justify mass incarceration of young black men and “no excuses” discipline in segregated corporate charters. http://www.projectcensored.org/privatization-of-free-market-industry-costs-billions-more-than-public-services/
Tim asked “what the difference could be?” The issue here doesn’t seem to me “privatization,” as such (though I’ll say more in a moment), but “for-profit” privatization. For-profit organizations, corporations, are always motivated by the bottom line. That’s a legal imperative, since they are obligated to their shareholders to provide a good return on investments. Historically that has led again and again to squeezing (and too often defrauding) workers and “clients”–like the incarcerated or students–for the sake of increasing profits. Check out the stories like that of the for-profit Education Management Corporation, to which Sen. Elizabeth Warren referred in her NY Times Op-Ed this morning. Such fraudulent models of “education” are the results precisely of privatization, through which corporate interests gain access to public funds to create private profit for themselves–and in the process defraud students both of an education and of money.
“Privatization” became a kind of Shibboleth under Reagan, who argued that government was always part of the problem, and never part of the solution. That’s bull crap–not to put too fine a point on it. I think part of the point of Bernie Sanders’ campaign is to help Americans get over the ridiculous notion that private profit is always better than public solutions,whether you’re talking about prisons, water, or schools. Yes, governments can be bureaucratic and unresponsive, but is anyone out there going to tell me that private profiteers are necessarily better for water users or prisoners, or students, than public, democratically-elected boards? Such logic leads to the substitution of despots (and not particularly benevolent ones) for democracy.
I agree about for-profit privatization, but keep in mind there are plenty of ways to “profit” off a non-profit. Executive salaries, crony contracts, real estate deals, etc. It’s just that this kind of “profit” doesn’t need to be distributed to shareholders – it can all go into one pocket.
I’ve always been curious, when can a private company “sanction” me. I may grant the state that authority, in order to be a member of society, but when does my libertarian steak flair up and I refuse to pay sanctions to a private enterprise who is a state proxy?
I boycott the city of Chicago because they have outsourced their parking enforcement.
There are many services which IMO just belong in the public sector/domain. Prisons, the legal system, probation, anything that can lead to a criminal sanction against a citizen. All those need to be in the public domain.
And water, water should be a public resource.
What kind of “sanction” has a private enterprise tried to subject you to?
P.S. “libertarian steak flair” is a fantastic autocorrect snafu.
A modern day version of debtors prison where people are thrown into a jail under deplorable, inhumane conditions – justified since they broke the law – with little chance of leaving whole and a real dange of not surviving the whole ordeal.
We treat our animals better.
Yet again, we don’t consider these people as anything but animals – not real human beings.
What’s even worse is the kickback system where the institution and its affiliates earn money by filling their “coffers” with more inmates. Even judges have colluded by sentencing individuals with minor infractions with jail time instead of a fine and community service. That this happens most often to minorities is an injustice which must be addressed.
I don’t want justice to just be blind – it must also be color blind.
washingtonpost.com
By Michael Cohen April 28, 2015
Following is lightly edited and shorter that the full article. It shows the perverse incentives in the for-profit prison industry.
The two largest for-profit prison companies in the United States – GEO and Corrections Corporation of America have a combined annual revenue of about $3.3 billion. According to a report by the Justice Policy Institute the private federal prison population more than doubled between 2000 and 2010 and private companies house nearly half of the nation’s immigrant detainees.
In 2014 the Corrections Corporation of America warned shareholders:
The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through the decriminalization of certain activities that are currently proscribed by our criminal laws. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them. … Legislation has been proposed in numerous jurisdictions that could lower minimum sentences for some non-violent crimes and make more inmates eligible for early release based on good behavior.
Even if actual crime rates are reduced, nearly two-thirds of private prison contracts mandate that state and local governments maintain a certain occupancy rate – usually 90 percent – or require taxpayers to pay for empty beds.
These are called lock-up quotas. According to Mother Jones. three private prisons in Arizona are operating with a 100 percent occupancy guarantee.
The Immigration and Customs Enforcement’s detention budget includes a mandate from Congress that at least 34,000 immigrants remain detained on a daily basis, a quota that has steadily grown each year, even as the undocumented immigrant population in the United States has leveled off. Private prisons have profited handsomely from that policy, owning nine of the 10 largest ICE detention centers, according to a report released this month by Grassroots Leadership.