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Incarceration for Profit

Prison Privatization in Israel


n Israel’s desert town of Beersheva, far from the eyes of the country’s self-proclaimed center, a new 800-bed jail is being built as an experiment in prison privatization. While other nations are having second thoughts about prison privatization programs, Israel is determined to press on, hampered only by a petition from the Ramat Gan Academic College of Law. This has pitted the High Court against the Knesset by claiming that this is not just another step in selling off state services, but one that undermines the state itself: it is contrary to Israel’s Basic Law on Government and therefore unconstitutional.

Privatization is not new here. Since the 1980’s, Israel has been selling off state assets and services, from the Histadrut industries that “built the country” to Health Maintenance Organizations. More recently, the national employment services have been partly privatized by means of the so-called Wisconsin Plan. Cost efficiency is the stated motive behind all these moves: the use of private companies, it is claimed, drains less from the national budget, benefiting all tax payers.

Despite ample evidence that this claim is false, the trend seems irreversible. No field has been immune from encroachment by the private sector: education, vocational retraining, even the staffing of military checkpoints in the Occupied Territories. “Out of a budget of 2.3 billion shekels (NIS) for welfare services,” wrote Ruth Sinai of Haaretz in 2007, “NIS 2 billion have been transferred to non-governmental organizations.”1 However, with the privatization of prisons, Israel goes one step further – a step that raises crucial questions about the kind of society we live in.

The issues

There is an ethical difference between the privatization of services that consumers are free to reject and the privatization of services directed toward a literally captive audience.

In the case of prisons, the consumer is not the prisoner. The consumer is the state, which can indeed choose among various service providers. The state is likely to make its choices on the basis of cost effectiveness. In employment services, for example, whenever cost is the main consideration, workers’ rights are violated by government outsourcing.

But the issue goes deeper still. To deprive a human being of liberty is an extreme form of punishment. According to liberal democratic theory, a state has the right to impose this deprivation in order to protect society, rehabilitate the offender and deter others. The state and its representatives are not supposed to have a financial interest in incarcerating people; they must be impartial. The introduction of a profit motive distorts the process, undermining the state’s moral authority to curtail liberty and, in some cases, life. 2 (Should the employees of a private company be allowed to use guns?) Under privatization of prisons, the execution of justice falls prey to private interests.

There are other concerns as well. For building firms, the construction of private prisons may develop into a new market sector with its own momentum and lobbyists, while concessionaires use PR experts to induce a “lock ‘em up” attitude among the public. In the US, for example, private companies have already initiated the building of prisons, which must be filled to be profitable. The crime rate has not changed significantly in the US since the 1980’s, yet the prison population has exploded because of tougher sentencing. Is the tougher sentencing due to behind-the-scenes pressure from those who profit from others’ incarceration? The jury is still out on the question, but this much is clear: under privatization the potential is there. Tougher sentencing has caught on in Israel too, where popular newspapers increasingly advocate “three strikes and you’re out,” American-style.3

In the US, after human-rights organizations exposed the fantastic profits made by concessionaires, there has been pressure to reconsider prison privatization. (In 1995, private investment in prisons was defined as one of the ten best investments on the New York Stock Exchange.) Huge profits mean significant power in the political sphere as well: in the literature, the term “prison-industrial complex” has joined the term “military-industrial complex.” 4 There are fears that private companies will recruit former prison officers and exploit their contacts in order to influence business deals and penal policies, in effect extending periods of incarceration. 5

Inhuman conditions

In Israel, prison privatization first came up for discussion in the 90’s, when prisons were so overcrowded and badly maintained that they seemed unfit for habitation. The following years saw no improvement. In 2005, the Israel Prison Service (IPS) reported that because of overcrowding, conditions were among the worst in developed countries, with up to eight prisoners in a cell and with many having to sleep on the floor. As of March 2008, there were 22,788 inmates, including 9,068 security prisoners (http://www.ips.gov.il). The average space allotted to a prisoner has dropped in recent years from 3.4 square meters to 2.9. By comparison, the figure in Europe is 4.5 square meters. 6

Aerial view of a prison south of Beersheva, pre-privatization. Photo by Saar Yaacov. Courtesy of Israel Government Press Office.

Damoun Prison is a case in point. Established in 1953 as a “temporary” facility in disused warehouses and stables, it was finally closed in the year 2000 because of dampness, leaks, insufficient bathing facilities, no central sanitation system, extreme cold in winter and extreme heat in summer. However, because of a nationwide shortage of prison beds, Damoun was reopened at the end of 2001, mainly to hold illegal sojourners and security detainees—mostly Palestinians. The pressure on the prison system continues. Today, thousands of beds are required nationwide and demand is growing, according to Shmuel Hershkovitz, former Director of the Ministry of Public Security. 7

In March 2004, the Knesset gave final passage to a law allowing the private construction and operation of prisons. 8This legislation, claimed the IPS, followed many months of discussion between the state and various NGOs, including rights and welfare organizations. Human rights lawyer Aviv Wasserman, however, points out that the decision to privatize was taken before the Knesset hearings, and many MKs who voted for the measure did not attend the discussions. 9

According to the Ministry of Public Security (MOPS), Israel is following the “British model,” where the “entrepreneur constructs and operates all systems, including bearing responsibility for the fulfillment of prisoners’ rights.” The state retains supervision and control by “placing in every privately-run facility a comptroller or team of comptrollers who alone exercise the authority to judge and punish prisoners.” 10 (The “US model” goes further, giving private companies the power to judge and punish, while the “French model” is more cautious, keeping security and prison management in state hands.)

MOPS says that the state will retain sole responsibility for classifying and allocating prisoners to the private facility, plus punishment and sentencing. The prison operator will be permitted “no discretion in the granting or withdrawal of benefits to prisoners… beyond what is standard practice in IPS facilities.” Prisoners will still have “the right to appeal to the courts (at no cost) if they feel that their rights have been violated.” The IPS will supervise training and performance, retaining the power to force replacement of staff. All this is in line with the British model. However, there is growing criticism of prison privatization in the UK and New Zealand, as well as the US. Recently, therefore, Israel has changed the emphasis, claiming that its model is unique and specially suited to its needs.

A detailed contract and adequate supervision, say supporters of prison privatization, will ensure that private facilities at least match the standards of the public ones; prisoners’ rights will be respected and rehabilitation will not be neglected just to fill beds.

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If supervision is poor, though, the most detailed contract is meaningless. When we compare the state’s track record in supervising other fields, such as workers’ rights, prospects are bleak. Taken seriously, supervision is likely to become one of the state’s biggest peripheral costs. Moreover, it is strange that the supporters of privatization, so keen on state supervision, turn out to be the very people who justify privatization by citing the government’s ineptitude.

The tender to construct and operate Israel’s first private prison was issued in 2005. The winner was a consortium dominated by Africa Israel Investments Ltd., which belongs to Israeli billionaire Lev Levayev. There was an attempt to keep the details of the tender secret, but the Association for Civil Rights in Israel successfully petitioned the courts for publication. The prison is due to start operating in June 2009; the pilot program will run for 25 years.

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At the end of 2006, a bill to block the privatization of prisons was submitted to the Knesset and defeated. Yet the petition submitted earlier by the Ramat Gan Academic College of Law, including Aviv Wasserman, is still before the High Court. The claim, as said, is that the measure contradicts the Basic Law on Government. The petition also includes a claim that the measure will not lead to cost efficiency and cannot, therefore, solve the problem of overcrowding and poor conditions. The Court has dismissed requests to put the matter on hold until it reaches a decision, and construction at Beersheva continues.

Does the private sector do it cheaper?

The biggest justification for the privatization of prisons, like other services, is cost efficiency. According to MOPS, there is “unanimous agreement among researchers” that the private sector builds prisons faster, manages them at lower cost, and even “catalyzes the public sector” to make itself more efficient. In management, for instance, the government expects savings of 15-20% over an equivalent public facility. 11

If we accept this as fact, we have to ask where the saving is to be achieved. One of the most significant expenses in operating a prison is wages. Studies have shown that in the US, private prison employees earn significantly less than their colleagues in state-run facilities. 12 In Israel, employees are likely to be recruited via personnel (“manpower”) agencies, which pay the minimum wage and provide few benefits. (See this issue, p. 14 ff.) The high turnover associated with personnel firms will reduce the concessionaire’s incentive to invest in training. Along with low wages, the lack of training is likely to affect worker motivation and commitment.

The drive to cut wage costs will likely lead to understaffing. When a walk in the yard or participation in a workshop requires extra personnel or overtime hours, questions of cost will be a factor.

Work is considered an important part of rehabilitation. Prisoners are already exploited by some major companies as cheap labor. They pose no danger of strikes or workers’ committees, and there are no national insurance or pension payments. Such easy labor could be exploited by the prison companies to subsidize their running costs. On the other hand, rehabilitation will hardly be a major priority for a business that makes money from prisoners. Activities designed to promote it are often expensive as well. Such efforts will likely be neglected or reduced.

Compare this with the Wisconsin program in the field of employment. Wisconsin proposes to move people “from welfare to workfare.” Its pilot project in Israel rewarded companies just for taking people off the dole, regardless of whether they were placed in viable jobs. After two years of public protest, the reward structure was changed to emphasize suitable placement. However, in the case of the prisons, one cannot reward companies on the basis of successful rehabilitation, for the measurement of recidivism is difficult and lengthy. The only ready source of profit will be incarceration.

In general, is privatization cost effective? Many researches indicate that cost benefits are negligible. As for prisons, according to Avirama Golan of Haaretz 13, studies commissioned since 1998 by the US Justice Department show no savings at all. Israeli criminologist Uri Timor asserts that when all peripheral costs have been taken into account, such as compensation payments, expenses for supervisory bodies, and the intervention of special forces during emergencies, privatization may be the more expensive option. 14

In March 2008, Haaretz reported on a study by an IPS official. It suggested that the new Beersheva facility could end up being 30% more expensive than a state-operated equivalent. The Finance Ministry responded by claiming that the main goal of privatization was not to save money, rather to improve conditions by the speedy construction of new premises. This amounted to a significant backtrack from all pro-privatization arguments used in the Knesset. In addition, since the original decision, concerns about insufficient state control have led to an increase in the number of planned supervisors, raising the projected cost.

As for speed of construction, Professor Yoav Peled, a political scientist at Tel Aviv University—and an outspoken critic of prison privatization—notes that private firms are not bound by the restraints and long approval processes binding state bodies. Funds transferred to these firms by the state are written off as ongoing operational costs, not as additional development costs; they therefore require no special approval.15 Thus private firms can indeed build more quickly, but without financial transparency.

There is also the danger of “creaming,” that is, putting easier prisoners in privately-run facilities, leaving the government to bear the problems and costs of more difficult cases. According to the details of the Beersheva tender, the new prison is intended exactly for this kind of “elite” inmate. Both the state and the concessionaire have an interest in making things go smoothly at the new facility. They wish to avoid what has happened in the US, for instance, where rioting has been more common in the private sector.

A worrisome new direction

Both academics and journalists have recognized the importance of this issue. Timing is critical: as long as the matter remains in court or before the Knesset, it is within the public-political realm and can be opposed. As soon as private companies get the green light, they will be beyond reach of the voters. The issue is accountability: private companies are accountable only to their shareholders. Already, voters’ wishes are being ignored: in January this year, Globes reported that most Israelis, while supporting privatization in other cases, were against it in the case of prisons.

It remains to be seen whether concerns about prisoners’ rights will be addressed in the small print of the contracts. The same is true regarding wages and working conditions in prison: to judge from the broader labor market, these employees will not get a better deal than the tens of thousands hired via personnel agencies. But the central issue is the rejection of the social contract between the state and its citizenry. It is hard not to see prison privatization as another step in selling off the social solidarity that once accompanied the Zionist myth.

The main beneficiaries of the measure, if the High Court allows it, will be the country’s economic elite and foreign investors. Those who pay the price will be all the rest—behind bars or not. The current program takes yet another bite from the fast-diminishing public sphere. At the same time, it leads privatization in a worrisome new direction, undermining the moral authority of a state that is supposed to serve its people.

In Beersheva, meanwhile, the bulldozers grind away, preparing the ground for 800 lucky inmates. "end"

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