Berlin: The world spends hundreds of billions yearly to punish offenders, with little return beyond more crime and less hope. DW examines how private contractors, organized crime gangs and inmates exploit prison for profit. Crime may not pay, but prison does. Behind the locked doors and razor wire, a parallel economy thrives. But who’s really cashing in?
According to Deutsche Welle, governments worldwide spend hundreds of billions annually to keep more than 11.5 million people behind bars – mostly men. The exact global cost is unclear, but in the United States alone – the world’s biggest jailer – the prison budget is $80.7 billion per year, versus Brazil at around $4 billion. India, with the world’s fourth-largest prison population, spends nearly $1 billion.
The private sector has been muscling into prison management since the 1980s, with the US, United Kingdom, Mexico, and Brazil increasingly outsourcing operations and services to for-profit firms. Most European, Asian, and African countries have so far resisted privatization, with some emphasizing the importance of public accountability.
The US government spends over $3.9 billion per year on private prisons, whose operators earn billions more from other services, including prisoner food, healthcare, and telecommunications. These US prison essentials, known as commissary, are marked up by as much as 600%, while phone calls can cost families up to $16 for just 15 minutes.
While Indian prisons are entirely state-run, Brazil’s pay-per-prisoner scheme is criticized as perverse, as it incentivizes private operators like Umanizzare to maximize inmate numbers rather than rehabilitate, leading to prison overcrowding and violence. This was seen in multiple prison riots throughout Latin America, including the 2017 riot that killed nearly 60 people at a packed prison in Manaus, the capital of Brazil’s Amazonas state.
Private companies also build and manage entire prison facilities, supply surveillance tech, run prison labor programs and transport inmates between jail facilities and court. They tend to strip costs right back by understaffing facilities, which reduces inmate services. The results have been mixed.
One of the private sector’s major successes is a prison run by British prison operator Serco in Auckland, New Zealand, which claims that just 13.6% of inmates reoffended within two years of release, local media reported in January. This is lower than the 34% rate for government-run prisons and even surpasses Norway’s recidivism rate of 20%, considered the global standard for prison performance.
“[Private firms] tend to run prisons more efficiently than the state,” Benjamin Lessing, a political science associate professor at the University of Chicago, told DW. “But they’re not a panacea and require thorough oversight.”
While private prisons get a bad rap for profiting from punishment, state-operated prisons struggle with mismanagement, security threats, and inefficiency. One example saw a New York judge threaten to reduce a man’s sentence for tax fraud to home detention if he were to be sent to a federally-run prison in Brooklyn. The judge described the conditions inside as “barbaric” after several killings, stabbings, and severe beatings.
Beyond bureaucracy, a darker economy thrives behind bars. Organized crime gangs have embedded themselves deep within the prison system. These groups run drug trafficking, extortion, and violence both inside and beyond the gates. Smuggling contraband like drugs, phones, and weapons into prisons is a major source of income. Brazil’s PCC gang sells drugs at 10-20 times their street value and smartphones for up to $1,500 on the inside, making millions each year.
Gangs sometimes run the prisons better than the state. Lessing said that when the Brazilian government tried to crack down on gangs, it led to higher incarceration rates and the building of more prisons. Ironically, those new prisons also came under gang control. “In Brazil, the gangs didn’t start as mafia families or drug cartels,” Lessing explained. “They began in response to brutal conditions in prisons.”
In overcrowded cells, inmates have built an informal marketplace driven by necessity. Everyday items become currency in a system where survival often hinges on trade. Across many prison systems, a brutal borrowing rule applies among cons: take one, repay two or sometimes three. This system can quickly trap inmates in cycles of debt and violent retaliation.
Prison labor also helps cut operational costs, with US inmates paid as little as $1-$4 per day for work. In Indian jails, inmates can earn as little as $0.10 per day, while Brazilian law ensures inmates receive at least 75% of the minimum wage, which is $10 per day. US prisoners’ families, meanwhile, spend $2.9 billion a year on groceries, phone calls, and other expenses related to their loved ones’ sentences, according to the Prison Policy Initiative.