The Macabees
10-04-2009, 17:36
From my blog (http://economicthought.net/):
By: Jonathan M. Finegold Catalán
The so-called “prison-industrial” complex has been a popular topic, especially in California, over the past decade. The left-wing press has continuously criticized the government for sacrificing the State’s budget allocation towards higher education (that is, the public university system) and instead increasing the prison budget. In a sense, their criticism is correct. The ever-increasing prison budget, stimulated by the growing prison population, is a black mark on California’s reputation. But, they shift the blame from the government to the private prison industry, and therefore to “capitalism”. It is important to realize that the public-private relationship between the government and the prison-industrial complex is not a trade mark of capitalism; these types of subsidizations and corporate welfare are an integrate part of mercantilism. And so, the media’s attacks are misplaced. Although they should target the political entrepreneurs which lead these public-private enterprises, they should call them as such (as opposed to market entrepreneurs), and they should also target government. In the end, it is government which allows itself to be corrupted and allows itself to be lobbied by the powerfully wealthy political entrepreneurs.
Thomas diLorenzo, in How Capitalism Saved America, makes an efficient job of tireslessly explaining the difference:
Anticapitalists of all varieties have always praised mercantilism. As Murray Rothbard wrote, government intervention-minded Keynesian economists “hail mercantilists as prefiguring their own economic insights; Marxists, constutionally unable to distinguish between free enterprise and special privilege, hail mercantilism as a ‘progressive’ step in historical development of capitalism; socialists and interventionists salute mercantilism as anticipating modern state-building and central planning.”
Today, many corporations support interventionist or anticapitalist policies like trade protectionism or corporate welfare because they hope to benefit from the polcies at everyone else’s expense. Mercantilist policies usually backfire, however, as regulations ienvitably create cost burderns on the businesses that initially favored the policies. In some cases, though, large corporations with substantial cash reserves support expanded government regulation of their industries because they understand that costly regulations will harm their smaller competitors more and will deter other potential competitors from entering the business altogether. All corporations make a rhetorical stand in favor of competitive capitalism, but they too often want special privileges and protections from competition.
Adam Smith expressed the dangers of Mercantilism in his Wealth of Nations:
In the mercantilist system, the interest of the consumer is almost constantly sacrificed to that of the producer. In the restraints upon the importation of all foreign commodities which can come into competition with those of our own growth, or manufacture, the home-consumer is evidently sacrificed to that of the producer. It is altogether for the benefit of the latter, that the former is obligated to pay the enhancement of price which this monopoly almost always occasions.
In the case of the prison-industrial complex the higher price is paid through taxes, or through government-induced inflation. As of 1997, California (the state with the largest prison system in the country) had a prison budget of $3.6 billion per year on prison operations and another $500 million allocated towards the construction of new prisons. The question is whether or not this continued prison growth is justified. On average, throughout the United States, one in ten arrests are for violent crimes; only three out of one hundred arrests are for violent crimes resulting in injury. Statistics show that murder and rape rates have remained relatively stable since the 1970s, and therefore growth of the prison population and budget cannot be accounted for by an increase in the rate of violent crimes.
In California, at least, a rise in the prison population can be attributed to the punitive ‘3-strikes’ law, which increases prison sentences for second and third time offenders. For example, by June 2003 it was found that third strikers made up roughly 27.2% of the prison population (an increase from 3.5% in 1994), costing the state an estimated $8 billion more. Furthermore, at the time, 60% of these third strikers were jailed for non-violent offenses (drug-related offenses accounted for over three times the population as murder-related offenses). In short, it has become obvious to most that California’s anti-crime legislation’s positive effects are far outweighed by the negative consequences (an increase in the prison-population, as well as the prison budget, and the decrease of our personal liberties).
The costs for prison expansion have spiraled out of control, and the State has found itself in a position where taxes can no longer gather the sufficient funds to pay for the expenses. As a result, the country’s government has reverted to its age-old backup plan of monetary inflation. Not only have our personal liberties been reduced due to increased taxation, but now the purchasing power of our wage has been threatened. For the benefits of the prison-industrial complex the government is sacrificing the wealth of its citizens. But, again, we should not blame the free-market; we should blame government and mercantilism. The left-wing has blamed the fact that these prisons are run by private enterprises, but I would like to see the evidence that proves that a completely public prison system would be more efficient. Obviously, the suspected benefits of subsidizing it would remain the same, and therefore the costs would be just as higher, or perhaps even higher. A completely private prison system would be, by far, more efficient and cheaper.
Although I am not a wholehearted proponent of public education, I respect the power of compromise. An eliminated prison budget would open funding for the public university net in the state of California, without needing for an increased tax rate (it would actually lead to a decreased tax rate, since the universities do not require as much funding as the prison-industrial complex). Ultimately, in my opinion, this would be just another waste of the private-sector’s resources, but at least it would not be as costly to the American economy and society as the costs of supporting public-private prisons. But, a solution to the mercantilist problem can be found elsewhere; for the purpose of my writing today the only priority is to underline the fact that these types of public-private relationships are not a product of the free-market, they are the result of corruption and government favoritism.
Of course, the prison-industrial complex is hardly the only benefactor of mercantilism. These types of relationships are rampant in the energy market, the automobile market (where it has proven to be deadly for the “benefiting” companies), et cetera. It has only led to the destruction of capital, the theft of resources from the private sector, and to the decrease in the purchasing power of the consumer. As a result, it has had an aggregate detriment to the wealth of the United States (and all governments which follow similar political paths). Mercantilism does not cater to the consumer, as does the free-market; mercantilism caters to the demand of the politician, which normally has to do with political power. It is a tragedy that the left-wing (and right-wing, although perhaps for two very different reasons) has seen this as a fault of capitalism, when in fact it has only to do with their own policies of “big government”.
By: Jonathan M. Finegold Catalán
The so-called “prison-industrial” complex has been a popular topic, especially in California, over the past decade. The left-wing press has continuously criticized the government for sacrificing the State’s budget allocation towards higher education (that is, the public university system) and instead increasing the prison budget. In a sense, their criticism is correct. The ever-increasing prison budget, stimulated by the growing prison population, is a black mark on California’s reputation. But, they shift the blame from the government to the private prison industry, and therefore to “capitalism”. It is important to realize that the public-private relationship between the government and the prison-industrial complex is not a trade mark of capitalism; these types of subsidizations and corporate welfare are an integrate part of mercantilism. And so, the media’s attacks are misplaced. Although they should target the political entrepreneurs which lead these public-private enterprises, they should call them as such (as opposed to market entrepreneurs), and they should also target government. In the end, it is government which allows itself to be corrupted and allows itself to be lobbied by the powerfully wealthy political entrepreneurs.
Thomas diLorenzo, in How Capitalism Saved America, makes an efficient job of tireslessly explaining the difference:
Anticapitalists of all varieties have always praised mercantilism. As Murray Rothbard wrote, government intervention-minded Keynesian economists “hail mercantilists as prefiguring their own economic insights; Marxists, constutionally unable to distinguish between free enterprise and special privilege, hail mercantilism as a ‘progressive’ step in historical development of capitalism; socialists and interventionists salute mercantilism as anticipating modern state-building and central planning.”
Today, many corporations support interventionist or anticapitalist policies like trade protectionism or corporate welfare because they hope to benefit from the polcies at everyone else’s expense. Mercantilist policies usually backfire, however, as regulations ienvitably create cost burderns on the businesses that initially favored the policies. In some cases, though, large corporations with substantial cash reserves support expanded government regulation of their industries because they understand that costly regulations will harm their smaller competitors more and will deter other potential competitors from entering the business altogether. All corporations make a rhetorical stand in favor of competitive capitalism, but they too often want special privileges and protections from competition.
Adam Smith expressed the dangers of Mercantilism in his Wealth of Nations:
In the mercantilist system, the interest of the consumer is almost constantly sacrificed to that of the producer. In the restraints upon the importation of all foreign commodities which can come into competition with those of our own growth, or manufacture, the home-consumer is evidently sacrificed to that of the producer. It is altogether for the benefit of the latter, that the former is obligated to pay the enhancement of price which this monopoly almost always occasions.
In the case of the prison-industrial complex the higher price is paid through taxes, or through government-induced inflation. As of 1997, California (the state with the largest prison system in the country) had a prison budget of $3.6 billion per year on prison operations and another $500 million allocated towards the construction of new prisons. The question is whether or not this continued prison growth is justified. On average, throughout the United States, one in ten arrests are for violent crimes; only three out of one hundred arrests are for violent crimes resulting in injury. Statistics show that murder and rape rates have remained relatively stable since the 1970s, and therefore growth of the prison population and budget cannot be accounted for by an increase in the rate of violent crimes.
In California, at least, a rise in the prison population can be attributed to the punitive ‘3-strikes’ law, which increases prison sentences for second and third time offenders. For example, by June 2003 it was found that third strikers made up roughly 27.2% of the prison population (an increase from 3.5% in 1994), costing the state an estimated $8 billion more. Furthermore, at the time, 60% of these third strikers were jailed for non-violent offenses (drug-related offenses accounted for over three times the population as murder-related offenses). In short, it has become obvious to most that California’s anti-crime legislation’s positive effects are far outweighed by the negative consequences (an increase in the prison-population, as well as the prison budget, and the decrease of our personal liberties).
The costs for prison expansion have spiraled out of control, and the State has found itself in a position where taxes can no longer gather the sufficient funds to pay for the expenses. As a result, the country’s government has reverted to its age-old backup plan of monetary inflation. Not only have our personal liberties been reduced due to increased taxation, but now the purchasing power of our wage has been threatened. For the benefits of the prison-industrial complex the government is sacrificing the wealth of its citizens. But, again, we should not blame the free-market; we should blame government and mercantilism. The left-wing has blamed the fact that these prisons are run by private enterprises, but I would like to see the evidence that proves that a completely public prison system would be more efficient. Obviously, the suspected benefits of subsidizing it would remain the same, and therefore the costs would be just as higher, or perhaps even higher. A completely private prison system would be, by far, more efficient and cheaper.
Although I am not a wholehearted proponent of public education, I respect the power of compromise. An eliminated prison budget would open funding for the public university net in the state of California, without needing for an increased tax rate (it would actually lead to a decreased tax rate, since the universities do not require as much funding as the prison-industrial complex). Ultimately, in my opinion, this would be just another waste of the private-sector’s resources, but at least it would not be as costly to the American economy and society as the costs of supporting public-private prisons. But, a solution to the mercantilist problem can be found elsewhere; for the purpose of my writing today the only priority is to underline the fact that these types of public-private relationships are not a product of the free-market, they are the result of corruption and government favoritism.
Of course, the prison-industrial complex is hardly the only benefactor of mercantilism. These types of relationships are rampant in the energy market, the automobile market (where it has proven to be deadly for the “benefiting” companies), et cetera. It has only led to the destruction of capital, the theft of resources from the private sector, and to the decrease in the purchasing power of the consumer. As a result, it has had an aggregate detriment to the wealth of the United States (and all governments which follow similar political paths). Mercantilism does not cater to the consumer, as does the free-market; mercantilism caters to the demand of the politician, which normally has to do with political power. It is a tragedy that the left-wing (and right-wing, although perhaps for two very different reasons) has seen this as a fault of capitalism, when in fact it has only to do with their own policies of “big government”.