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The American Gulag as the latest form of capitalism (I)

Valentin KATASONOV | 23.11.2012 | 00:00
 

An interesting paper was recently published on «Democracy in America today», and it commented in particular, on an aspect of the American prison system. It mentioned the so-called «commercial prisons»: «In the U.S. this is a thriving» business «, which operates using prison labor. One in 10 prisoners in the country is held in a commercial prison. In 2010, two private prison corporations made about $ 3 billion in profit. This is quite a new social phenomenon in American life and deserves to be described in more detail...

The concept and form of «prison slavery»

Commercial prisons in the United States today hold 220 thousand people behind bars. In American literature, this phenomenon is dubbed «prison slavery». This refers to the use of prison labor. It should be clarified: it is the use of prison labor for profit by private capital (as opposed to, say, such work as cleaning areas and facilities in prison, or the execution of any work in the public interest).

 The privatization of prison labor in the U.S. is carried out in two main forms: 

- The lending of state prison inmates as labor to private companies.

- The privatization of prison institutions, turning them into private companies of various forms of ownership (including stock ownership).

The 13th Amendment to the U.S. Constitution, which prohibits forced labor, contains a caveat: «Slavery and the forcible compulsion to work, except for punishment for a crime properly convicted, shall not exist within the United States». Thus, in U.S. prisons slavery is legal.

The first of these forms («lease» prisoners) was introduced in America in the XIX century - just after the Civil War of 1861-1865 and the abolition of slavery, to directly eliminate the acute shortage of cheap labor. Slaves released into freedom accused of owing their former owners or for petty crime were sent to jail. They were then «rented out» for cotton picking, railway construction, and work in the mines. In Georgia, for example, in the period of 1870-1910, 88% of «leased prisoners» were Negros, in Alabama it was 93%. In Mississippi, until 1972 a huge plantation was operated that employed prisoners under a «rental» contract. And at the beginning of XXI century, at least 37 states have legalized the use of labor for private companies by»leasing» prisoners.

The problems of «prison slavery» in America were explored by Vicky Pelaez in the article «The prison business in the United States: big business or a new form of slavery?» (1) She writes: «The list of these corporations (who» lease «prisoners - VK) includes the « cream «of the U.S. corporate community: IBM, Boeing, Motorola, Microsoft, AT & T Wireless, Texas Instruments, Dell, Compaq, Honeywell, Hewlett-Packard, Nortel, Lucent Technologies, 3Com Intel, Northern Telecom, TWA, Nordstrom's, Revlon, Macy's, Pierre Cardin , Target Stores, and many others. All these companies reacted with delight to the rosy economic opportunity which prison labor promised. From 1980 to 1994, profits (from the use of prison labor - VK) increased from 392 million to 1 billion 31 million dollars».

The benefit of this «cooperation» to private corporations is obvious: they pay «rented» slaves the minimum wage specified in the applicable state. And in some places, even below this level. For example, in the State of Colorado payment is about $ 2 per hour, which is much less than the minimum wage.

The situation of some prisoners of the southern states of America is particularly difficult; where despite the abolition of slavery in the XIX century, they continue to work on the same cotton plantations. Of particular prominence was the maximum security prison in the state of Louisiana under the name «Angola». The inmates of the prison process 18 thousand acres of land, on which is grown cotton, wheat, soybeans and corn. Inmates in «Angola» receive only from 4 to 20 cents an hour for the work. Not only that: they receive only half of the money earned, and the other half is put to the prisoners account and paid to him at the time of his release. It is true that only a few inmates leave» Angola» (only 3%): as most of the prisoners have long sentences, in addition they die early due to ruthless exploitation and poor conditions.

There are other similar prison farms in Louisiana. Only 16% of prisoners in the State are sentenced to agricultural works. In neighboring states - Texas and Arkansas - the proportion of prisoners is 17% and 40%.

The second form of «prison slavery» - private prisons - appeared in the U.S. in the 1980s under President Reagan, and then continued with the privatization of state prisons under Presidents George Bush Senior and Bill Clinton. The first privatization of a state prison in Tennessee occurred in February 1983, by venture capital firm Massey Burch Investment.

The Prison-industrial complex

According to Vicky Pelaez, in the U.S. by 2008, 27 states already had 100 private prisons holding 62 thousand prisoners (for comparison, 10 years previously there five private prison holding two thousand prisoners). These prisons are operated by 18 private corporations. The largest of them are the Correctional Corporation of America (CCA) and G4S: they controlled 75% of all private prison inmates. In 1986 shares of CCA began trading on the New York Stock Exchange. In 2009, its market capitalization was estimated at 2.26 billion dollars.

Private prison companies conclude long-term concession agreements with the government in the management of prisons. In this case, they get some money from the state for each prisoner. Payment for work done by the prisoner is determined by the company themselves, and rates are much lower than the amount paid by businesses that operate on a rental basis (which was the first form of «prison slavery»). Pay rates in private prisons sometimes equal 17 cents per hour. Even for the most skilled labor the pay is no more than 50 cents. In prison, in contrast to industrial companies, there can be no talk of a strike, trade union activities, holidays, or sickness. To «encourage prison slaves» to work the employers promise «early release for good work». However, it applies a system of fines, which can actually lead to life imprisonment.

The U.S. prison industry is based both on the direct use of prisoners labor by private capital (either «leased» or direct operation of private prisons), and indirectly. Indirectly mean that the organization of production is carried out by the prison authorities and the products manufactured by the prisoners are supplied under contract to private companies. The prices of these products are usually much lower than the market price. It is difficult to determine the extent of indirect use of prison labor by private companies in the USA. Here you can find a lot of abuse on the basis of the collusion between state prison administrations and private companies. This kind of business is usually known as «shadow business».

According to the American press, «the prison-industrial complex» began to form based on private prisons. It became prominent in the production of many products in the U.S. Today, the U.S. prison industry produces 100% of all military helmets, uniforms, belts and shoulder belts, vests, ID cards, shirts, pants, tents, backpacks and flasks for the country`s army. In addition to military equipment and uniforms, prisons produce 98% of the market in installation tools, 46% of bulletproof vests, 36% of home appliances, 30% of headphones, microphones, megaphones, and 21% of office furniture, aircraft and medical equipment, and many more.

In the Vicky Pelaez article we read: «The prison industry is one of the fastest growing industries, and its investors are on Wall Street». Referring to another source, the same author writes: «This multi-million dollar industry has its own trade exhibitions, conventions, websites, and online catalogues. It has direct advertising campaigns, has design and construction firms, investment funds on Wall Street ,building maintenance firms, food supply companies, it has armed security, and soundproofed rooms».

The rate of profit in the prison industry in the U.S. is very high. In connection with this, transnational corporations (TNCs) no longer have the incentive to transfer their production from the U.S. to economically backward countries. It is even possible that the process can go in the opposite direction. Vicky Pelaez says: «Thanks to prison labor the United States was again an attractive location for investment in work that used to be the lot of the Third World. In Mexico, an assembly plant which was located near the border was closed and its operations moved to «Saint-Quentin» prison (California). In Texas, a factory fired 150 workers and contracted with private prisons, «Lockhart», which makes parts for electrical companies such as IBM and Compaq. The Representative for the State of Oregon recently asked the Nike corporation to hasten the transfer of production from Indonesia to Oregon, saying that «here the manufacturer will not have problems with transportation, here we will provide competitive prison labor».

Greed as a factor in the growth of the American Gulag

American business started to feel that the use of their own «prison slaves» was a «gold mine». Accordingly, the largest U.S. corporations began to delve into how to format a continent of inmates in U.S. prisons and do everything possible to ensure that there were as many prisoners as possible. We believe that it was the interests of corporate business that contributed to the fact that the number of prisoners in the U.S. grew rapidly. To again quote Vicky Pelaez: «Private hire of prisoners provokes the desire to put more people in jail. Prisons depend on income. Corporate stockholders who make money from the labor of prisoners lobbied for longer sentence periods, to provide themselves with labor. «The system feeds itself», said the study of the Progressive Labor Party, which believes the prison system is», an imitation of Nazi Germany in regard to forced slave labor and concentration camps».

However, even in state prisons, the use of prison labor by the authorities is profitable. In state prisons prison labor rates are higher than in private prisons. Inmates receive $2 - $ 2.5 per hour (excluding overtime). However, state prisons are actually «self-financing»: half of the prisoners earnings are taken from them to pay for «rent» for their room and food. So talk about state prisons in the United States being a «burden» on the country's budget, are simply an excuse to justify their transfer to private hands.

(To be continued)

(1) Global Research, 10.03.2008

 
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Valentin KATASONOV

D.Sc. (Economics), Economist and the chairman of the S.F. Sharapov Russian Economic Society


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