Advantage Capital Strategies Group identifies industries that have detrimental environmental, social, and economic effects and takes action to mitigate risk both through screening and advocating for change. 

The Industrial Prison Industry Explained

The industrial prison sector refers to companies who profit off the operation of incarceration facilities and/or profit off the provision of services to privately owned incarceration facilities.  Companies involved in this industry are largely concentrated in the United States, which contracts private companies to incarcerate and provide services such as healthcare and food to a portion of the country’s criminally-convicted individuals. 

Advantage Capital Strategies Group is screening for companies involved in the prison industry primarily because of the detrimental social effects of this industry and because the industrial prison system is inherently at odds with the purposes of a prison.  From an economic perspective, companies who depend on prisons for maintaining or growing their profits are also dependent on maintaining or growing the current rate of incarceration.

However, if the aim of a prison is at least in part to rehabilitate its occupants back into society with the ultimate goal being to reduce or eliminate recidivism, then it is clear that private prison companies are inherently incompatible with the intended goals of a prison. 

There are currently no private prison stocks on the S&P 500.

The Economic Rationale for Divestment

Companies who provide services to prisons or operate private prisons rely on stable or increasing rates of incarceration, which means that private-prison corporations such as CoreCivic Inc (CXW) and Geo Group Inc (GEO) spend millions to support the prison-industrial lobby, which encourages the government to create stricter laws so that more people are incarcerated, often for ‘lesser’ crimes that in other jurisdictions might instead be punished through non-prison related sentences, such as fines or community service.  These companies are solely dependent on a single customer, the government, for their revenues.  While there is stability in this dependence, growth is limited, thereby minimizing the benefit.

The Social Rationale for Divestment

Recent estimates place the annual revenues of the private-prison industry at around US $4 billion, but that figure does not include the privatized services such as food service and telecommunication provided to prisons, some of which are state-owned. The business of

prisons – often referred to as the prison-industrial complex because of its size – is primarily concerned with the design, building, and maintenance of prisons as institutions, but it also extends beyond this to include companies that provide privatized services to prisons.  Companies that profit off prisons range from food services suppliers to transportation companies to telecommunications businesses.

For example, it is estimated that telecommunications companies make over $1 billion per year off calls prisoners place at in-prison pay phones, a number that is unusually high because of the inflated rates charged to prisoners who have no other option but to pay or not use the telephone at all. These charges, which can go as high as $25 for a 15-minute call, affect not only the prisoner who needs to call their lawyer, but also his or her family. 

Indeed, the prices of telecommunication from prison inevitably increases the emotional and economic impact of incarceration on families who are already deprived of the income of their incarcerated family member and who often also have to supply the incarcerated family member with funds to purchase toiletries such as toothpaste and other basic necessity products that many prisons do not provide in adequate quantities. It is estimated that 82% of families are responsible for financially supporting their incarcerated family member, and of these families, one in three go into debt because of this. Furthermore, this financial burden falls disproportionately on women and minorities. 

Notably, private companies contracted to provide services for prisons often cut corners to increase profits, meaning they understaff the facilities they operate or purchase discounted rotting fruits and vegetables, for example.  This is of concern for the basic human rights of incarcerated individuals, and it is also of concern for the greater public.  Understaffed operations led by private companies have a documented higher rate of prisoner escapees during transportation compared to state-run operations.

According to the World Prison Brief, the United States has the highest incarceration rate in the world, with 655 prison or jail inmates for every 100,000 adults age 18 and older. The US also has the largest overall number of people behind bars. Proponents of prison reform argue that private prisons do not ultimately have reducing recidivism as their primary goal, because to do so would be to act against the interests of their business.   

Prison Labour

The prison-industrial complex also uses its inmates as labourers to increase profits.  Prison labour has been flagged as problematic because it pays extremely low wages – usually less than $1 per hour, and even as low as 4 cents per hour – and does not provide any labour rights for workers or the ability to unionize, meaning the potential for labour abuse is high. 

Critics also question how directly transferable the skills learned by prisoners in any labour position offered by the prison will ultimately serve.  For example, some large retail corporations profit off the prison-industrial complex indirectly, by selling un-sellable product (such as returns, slightly damaged goods, or overstock) to a liquidator, which then has the products “demanufactured” by prison labourers, meaning the product is scrubbed of any identifying marks such as branding or UPC codes so that it can be re-sold at another retail outlet. While most companies have issued statements firmly condemning the use of involuntary prison labour, prison labour is technically voluntary because prisoners are paid – albeit minimally - and made to sign a form stating that their labour is indeed voluntary. However, critics of prison labour often refer to it as a form of “modern slavery” due to the extremely low pay and lack of labour rights.

The Environmental Rationale for Divestment

There are no significant negative environmental impacts associated with the industrial prison industry.  Our primary driver for divestment is social.

Works Cited

The Nation:

The Atlantic:

National Criminal Justice Reference Service: