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Are Prisons Competing With Private Businesses?

Leonard Gilroy
April 27, 2009, 7:19pm

A recent FoxNews.com piece discusses Maryland's new law reqiring flags purchased by state agencies to be made in the U.S. The legislation essentially codifies existing practices, as the vast majority of current state-owned flags were purchased from the Maryland Correctional Enterprises, an independent arm of the state Division of Correction that trains and employs inmates to produce furniture, license plates, food products, and flags, among other products. What struck me in the piece was this:

In order to avoid competing with private businesses, Maryland Correctional Enterprises only sells to state and local government agencies and nonprofits. In fiscal year 2008, Maryland Correctional Enterprises recorded sales of approximately $51.5 million.

This is faulty logic. If MCE did not exist as a state-sponsored enterprise, then that $51.5 million in sales last year would have likely gone to private sector businesses to provide those same goods, generating tax revenue and additional spending in the economy. A dollar spent on a prison-made flag is a dollar not spent in the private sector on flags. Of course MCE is in the business of competiting with private sector business.

In a related example, an electronics recycling coalition is clearly seeing a threat from prison business enterprises:

Some federal prison inmates spend their days tearing apart cellular phones and dismantling computers recycled in Arkansas. The prisoners, working as part of the Federal Prison Industries, salvage copper and other materials later sold to metal dealers. Last year alone, the prison industry had $10.5 million in net sales.

Unicor, a part of the Federal Prison Industries, uses 876 inmates in seven federal prisons to do the electronic recycling work, according to a company financial statement. Most of northwest Arkansas' recycled electronics go to the federal prison in Texarkana, Texas. [...]

However, using prison labor has drawn the ire of private companies in the recycling business. Barbara Kyle of Electronics TakeBack Coalition in San Francisco said the practice undercuts companies that are more environmentally responsible. Within the last two years, states such as Illinois, Michigan, Minnesota, New Jersey, Rhode Island and Washington have banned the practice of using prisoner labor to recycle in most cases, she said.

Policymakers in states operating corrections-led business enterprises have clearly made a policy trade-off, opting to promote such policies with the intention of targeting recitivism by providing skills and jobs training. But let's be clear that this is indeed a trade-off, and the cost of such policies is government competition with private sector businesses, taking away opportunities to provide private-sector jobs and shift some spending back to the taxable sector.


Leonard Gilroy is Director of Government Reform


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