Commentary: Without question, the profit motive and free markets have transformed human life. It does not follow, however, that profiteering is the answer to every human problem. Without ethical guidance, profit-seeking can lead to perverse incentives. The tragic consequences of one such story are playing out here in New Mexico.
Economic incentives get people to behave in certain ways in exchange for a reward. A perverse incentive is when people find other ways to claim the reward, often with ironic consequences. The iconic example took place in Hanoi under French rule. The city had a rat problem, so the government outsourced the solution by creating a market: you could claim a bounty by delivering a severed rat tail. This policy led to an increase in the rat population, rather than a decrease, because enterprising souls began farming rats to harvest their tails.
There are entire industries that work for inhumane ends because they are profitable. Millions of Americans are employed by the arms industry, so there is an incentive to maintain demand for bombs, rockets, and fighter planes. Perversely, war is an economic necessity. Likewise, if your region depends on extractive industries that cause ecological damage, you are in an impossible situation. Coal is a major driver of global warming and air pollution, but the private corporations that profit from coal can, and do, influence elections and policies that might interfere with their profits. Meanwhile, no mine lasts forever. The coal workers who defend their company today may be abandonedtomorrow, setting off a wildfire of human suffering and economic misery in regions unable to provide other work.
Private prisons make up another industry with perverse and inhumane incentives. This multi-billion dollar enterprise makes its profit in two ways: securing large contracts from governments to house millions of people (more than any other country), and from prison labor. Cheap prison labor boosts profits in a number of industries, from agriculture to apparel to fast food and more. This is called "insourcing," and saves a bundle for companies like McDonald's, Victoria's Secret, and many others. Contracting this cheap labor is a major revenue stream for the private prison industry. These enterprises have every incentive to keep people locked up and influence legislation so as to ensure a continued stream of mass incarceration; and since the 1980s, they have done just that.
Last week, however, the Department of Justice announced it will taper and cease its contracts with private prisons, having concluded that they don't save much money and deliver worse results than publicly run institutions. This follows multiple incidents over many years around the country of these prisons cutting corners on training and professional discipline, maintaining unsafe facilities, and delivering inadequate food and medical care for inmates.
There is a cost to our lack of foresight and humane wisdom, however. The first prison to lose its contract was the long-troubled Cibola County Correctional Center in a region already reeling from the loss of mining jobs. Meanwhile, the Corrections Corporation of America leaves us behind, but don't worry about them. The Obama Administration has awarded them a $1 billion contract to operate a massive detention center for asylum seekers in Texas. Since federal courts have ruled that locking up these people is illegal, CCA is being paid $20 million a month to operate a nearly empty prison.
While the CCA evacuates to make profits elsewhere, hundreds of newly unemployed Cibola County residents join a hungry workforce. Once again, perverse incentives allow a few to become rich while the rest are left behind.
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Algernon D'Ammassa writes the "Desert Sage" column for the Deming Headlight and Sun News papers. Write to him at DesertSageMail@gmail.com.