Private Prison Stocks Continue to Soar

Private Prison Stocks Continue to Soar

Published September 24th, 2019

If there’s one sector that really hit it big when Trump became president, it’s the private prison industry. Just a day after he was sworn into office, private prison stocks jumped up to 43%. And it’s not showing signs of slowing down.

But why would Trump’s victory cause such a dramatic rise in private prison stock prices? The answer lies in how businesses profit off of incarceration in the US.

HOW DO PRIVATE PRISONS WORK?

Private prisons, as the name suggests, are places of incarceration managed by a company contracted by the government. Such contracts typically include operation or construction of the facility or both. Private prison companies also take on any legal liability in case of legal or constitutional disputes.

The main argument for the privatization of prisons is that it saves money. Those who are for it also points out that the system allows poor performing operators to get replaced, something which won’t be easy for government-operated prisons.

So how do private prison companies earn?

In most private prison contracts, the government pays a monthly rate either for every prisoner or for the whole facility (occupied or not). Another source of income for these companies is inmate labor. It’s common knowledge that prisoners get paid almost nothing for the work they do in prisons. Prison companies profit from that cheap labor and, most of the time, exploit it.

Aside from prison labor, private prison companies also earn from various jail services. This includes commissary sales and overpriced prison calls. (See also: How to Make Cheap Jail Calls)

In recent years, many of these companies have been diversifying their interests. They invested in other aspects of the criminal justice system, such as ankle monitors and halfway houses. It’s also viewed as an attempt on their part to strengthen their business model and make it less dependent on the country’s incarceration rate. (Related: The Problem with Private Prison Companies in the US)

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WHAT COMPANIES OWN PRIVATE PRISONS?

In theory, private prison contracts are awarded to the most cost-efficient bidder. In reality, only two players dominate a large chunk of the country’s private prison industry: Corecivic and Geo Group.

Together, these private prison companies hold about 8% of the country’s total inmate population as of 2016. This translates to one in twelve prisoners being kept in private prison facilities. More than just offenders, private prisons are also used to detain thousands of illegal immigrants. In 2017 alone, privately-run immigration detention facilities across the country held 26,249 immigrants. That’s over four times more than 15 years ago.

As of 2015, these two companies’ combined revenue is about $3.5 billion.

WHAT CAUSES PRISON STOCKS TO SOAR?

Trump winning the presidential race couldn’t have come at a better time for the private prison industry. Hillary Clinton had already made pronouncements that she’d stop accepting donations from the industry. She also declared her support for ending the practice of private prisons in the country. Then in August 2016, the Department of Justice handed out a decision to phase out the privatization of prisons. Almost immediately after the decision was released, stock prices plunged.

When Trump came along with his promises of enforcing law and order and a massive crackdown on illegal immigration, private prison companies saw their salvation. The Geo Group even gave $100,000 to Trump’s SuperPAC.

Banking on Trump’s campaign promises, investors are placing their money on private prisons. This drove stock prices through the roof and gave the ailing industry a much-needed boost. Lucky for them, Trump didn’t disappoint. He kept true to his promise of bearing down on illegal immigrants.

But those arrested had to be detained before they get deported, a process which could take months to even years. This gives rise to a huge demand for detention facilities all over the country. With the way things are going, the future for private prison companies looks bright indeed. At least, until Trump is in the White House.

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Judy Ponio an author for GlobalTel

ABOUT THE AUTHOR

Judy Ponio is a firm believer in the power of sharing knowledge. Having extensive experience in the prison industry, she wants to share what she knows with the world. Judy also loves to write about political and legal topics.

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