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The Expanding World of Poverty Capitalism


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The Expanding World of Poverty Capitalism

AUGUST 26, 2014

Thomas B. Edsall

In Orange County, Calif., the probation departments supervised electronic confinement program, which monitors the movements of low-risk offenders, has been outsourced to a private company, Sentinel Offender Services. The company, by its own account, oversees case management, including breath alcohol and drug-testing services, all at no cost to county taxpayers.

Sentinel makes its money by getting the offenders on probation to pay for the companys services. Charges can range from $35 to $100 a month.

The company boasts of having contracts with more than 200 government agencies, and it takes pride in the development of offender funded programs where any of our services can be provided at no cost to the agency.

Sentinel is a part of the expanding universe of poverty capitalism. In this unique sector of the economy, costs of essential government services are shifted to the poor.

In terms of food, housing and other essentials, the cost of being poor has always been exorbitant. Landlords, grocery stores and other commercial enterprises have all found ways to profit from those at the bottom of the ladder.

The recent drive toward privatization of government functions has turned traditional public services into profit-making enterprises as well.

In addition to probation, municipal court systems are also turning collections over to a national network of companies like Sentinel that profit from service charges imposed on the men and women who are under court order to pay fees and fines, including traffic tickets (with the fees being sums tacked on by the court to fund administrative services).

When they cannot pay these assessed fees and fines plus collection charges imposed by the private companies offenders can be sent to jail. There are many documented cases in which courts have imprisoned those who failed to keep up with their combined fines, fees and service charges.

These companies are bill collectors, but they are given the authority to say to someone that if he doesnt pay, he is going to jail, John B. Long, a lawyer in Augusta, Ga. active in defending the poor, told Ethan Bronner of The Times.

A February 2014 report by Human Rights Watch on private offender services found that more than 1,000 courts in several US states delegate tremendous coercive power to companies that are often subject to little meaningful oversight or regulation. In many cases, the only reason people are put on probation is because they need time to pay off fines and court costs linked to minor crimes. In some of these cases, probation companies act more like abusive debt collectors than probation officers, charging the debtors for their services.

Human Rights Watch also found that in Georgia in 2012, in a state of less than 10 million people, 648 courts assigned more than 250,000 cases to private probation companies. The report notes that there is virtually no transparency about the revenues of private probation companies since practically all of the industrys firms are privately held and not subject to the disclosure requirements that bind publicly traded companies. No state requires probation companies to report their revenues, or by logical extension the amount of money they collect for themselves from probationers.

Human Rights Watch goes on to provide an account given by a private probation officer in Georgia: I always try and negotiate with the families. Once they know you are serious they come up with some money. Thats how you have to be. They have to see that this person is not getting out unless they pay something. Im just looking for some good faith money, really. I got one guy I let out of jail today and I got three or four more sitting there right now.

Collection companies and the services they offer appeal to politicians and public officials for a number of reasons: they cut government costs, reducing the need to raise taxes; they shift the burden onto offenders, who have little political influence, in part because many of them have lost the right to vote; and it pleases taxpayers who believe that the enforcement of punishment however obtained is a crucial dimension to the administration of justice.

As N.P.R. reported in May, services that were once free, including those that are constitutionally required, are now frequently billed to offenders: the cost of a public defender, room and board when jailed, probation and parole supervision, electronic monitoring devices, arrest warrants, drug and alcohol testing, and D.N.A. sampling. This can go to extraordinary lengths: in Washington state, N.P.R. found, offenders even get charged a fee for a jury trial with a 12-person jury costing $250, twice the fee for a six-person jury.

This new system of offender-funded law enforcement creates a vicious circle: The poorer the defendants are, the longer it will take them to pay off the fines, fees and charges; the more debt they accumulate, the longer they will remain on probation or in jail; and the more likely they are to be unemployable and to become recidivists.

And thats not all. The more commercialized fee collection and probation services get, the more the costs of these services are inflicted on the poor, and the more resentful of the police specifically and of law enforcement generally the poor become. At the same time, judicial systems are themselves in a vise. Judges, who in many locales must run for re-election, are under intense pressure from taxpayers to cut administrative costs while maintaining the efficacy of the judiciary.

The National Center for State Courts recently issued a guide noting that while the collection of fines and costs is important for reasons of revenue, even more important is the maintenance of the integrity of the courts.

In dealing with more serious crimes involving substantial sentences, the rising costs of maintaining and building new prison facilities has prompted many state governments, and even the federal government, to turn to the private prison industry.

This industry, which began to grow in the early 1980s, now faces significant problems. As incarceration rates drop, and as some states adopt more lenient sentencing practices, the industry is struggling to find new ways to fill vacant cells.

Take the Corrections Corporation of America, which is listed on the New York Stock Exchange and reported revenues of $1.69 billion in 2013. The firm describes itself as the nations largest owner of privatized correctional and detention facilities and one of the largest prison operators in the United States behind only the federal government and three states.

In its 2013 annual report, C.C.A. was clear about the problems facing the company: under a per diem rate structure, a decrease in our occupancy rates could cause a decrease in revenue and profitability. For the past three years, occupancy rates have been steadily declining in C.C.A. facilities, from 90 percent in 2011, to 88 percent in 2012 and 85 percent in 2013.

These numbers reflect the brutal math underlying profit margins in private prisons. The revenue per compensated man-day for each inmate rose by 35 cents from $60.22 in 2012 to $60.57 in 2013. But expenses per compensated man-day rose by 70 cents from $42.04 to $42.74, for a net decline in operating income for each inmate from $18.18 a day to $17.83.

In combination with declining occupancy rates, the result was a dip in total revenue from $1.72 billion in 2012 to $1.69 billion in 2013.

The founders of C.C.A. include Tom Beasley, a former chairman of the Tennessee Republican Party. One of its early investors was Honey Alexander, who is married to Senator Lamar Alexander, Republican of Tennessee. Alexander, according to the Sunlight Foundation, has received in excess of $63,000 from C.C.A. employees and the company PAC since his election to the Senate in 2002.

Poverty capitalism and government policy are now working on their own and in tandem to shift costs to those least equipped to pay and in particular to the least politically influential segment of the poor: criminal defendants and those delinquent in paying fines.

Last year, Ferguson, Mo., the site of recent protests over the shooting of Michael Brown, used escalating municipal court fines to pay 20.2 percent of the citys $12.75 million budget. Just two years earlier, municipal court fines had accounted for only 12.3 percent of the citys revenues.

What should be done to interrupt the dangerous feedback loop between low-level crime and extortionate punishment? First, local governments should bring private sector collection charges, court-imposed administrative fees and the dollar amount of traffic fines (which often double and triple when they go unpaid) into line with the economic resources of poor offenders. But larger reforms are needed and those will not come about unless the poor begin to exercise their latent political power. In many ways, everything is working against them. But the public outpouring spurred by the shooting of Michael Brown provides an indication of a possible path to the future. It was, after all, just 50 years ago not too distant in historical terms that collective action and social solidarity produced tangible results.

http://mobile.nytimes.com/2014/08/27/opinion/thomas-edsall-the-expanding-world-of-poverty-capitalism.html

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What should be done to interrupt the dangerous feedback loop between low-level crime and extortionate punishment? First, local governments should bring private sector collection charges, court-imposed administrative fees and the dollar amount of traffic fines (which often double and triple when they go unpaid) into line with the economic resources of poor offenders.

There are a number of countries in Europe where traffic and other fines are not a set amount but instead based on your income. One case that comes to mind is a wealthy businessman in Switzerland who had to pay a $290,000 (US dollars) speeding ticket in 2010. But Europe in general has always been more forward thinking than the US. Especially when dealing with the poor.

But its always been easier to steal from a bunch of poor people than a rich person.

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But its always been easier to steal from a bunch of poor people than a rich person.

Just like you'd take candy from a baby? How is it that this kind of behavior is justifiable, simply to make money "easily"? The poor often don't have the means to provide much for themselves beyond even sustenance, and you want to take the ONLY thing they have to support themselves for another day? I hope you would consider yourself from their perspective before making those kinds of statements.

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I've never heard of the word "poverty capitalism", from the sounds of it's usage, it shouldn't even be called capitalism, but rather something associated with government redistribution of wealth, siphoning money away from the poor. I suppose given the Michael Brown rant, one's political affiliation would drive them to place some ambiguous blame on capitalism for what governments do.

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Just like you'd take candy from a baby? How is it that this kind of behavior is justifiable, simply to make money "easily"? The poor often don't have the means to provide much for themselves beyond even sustenance, and you want to take the ONLY thing they have to support themselves for another day? I hope you would consider yourself from their perspective before making those kinds of statements.

Nowhere in my statement did I justify or condone it. I was merely pointing out that its been true throughout history. You are reading things into it that arent there.

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I've never heard of the word "poverty capitalism", from the sounds of it's usage, it shouldn't even be called capitalism, but rather something associated with government redistribution of wealth, siphoning money away from the poor. I suppose given the Michael Brown rant, one's political affiliation would drive them to place some ambiguous blame on capitalism for what governments do.

Aren't corporations, especially the ones in America, the defacto government since they largely finance their candidates?
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Aren't corporations, especially the ones in America, the defacto government since they largely finance their candidates?

Financing their candidates is a very vague description.

There are plenty of corporations who don't give money to politicians.

There are plenty of corporations who give money to candidates they know won't raise their taxes to oblivion, or inhibit their ability to freely do business with minimal government interference. I see no problem with this-- it's the same as individuals electing to donate or not donate. Same premise -- their own reasons, using money as a form of speech to vie for candidates.

You know the ones who do. They are the ones who get special favours, bailouts, subsidies -- things anti-corporate liberals are actually okay with in principle, yet don't understand allowing government this authority is a huge slippery slope. Of course, they complain about the slippery slope just ignore the cause of it or flat out find someone politically convenient to blame.

Anyways, "poverty capitalism" is never a term I encountered throughout business school. Again, all it takes is understanding more of what's being said in this piece to see that they're taking government favouritism, i.e. not-capitalism, and turning around and calling it capitalism. Couldn't be a more blatant about agenda. I can't imagine how anyone could live with themselves being so full of crap.

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I've never heard of the word "poverty capitalism", from the sounds of it's usage, it shouldn't even be called capitalism, but rather something associated with government redistribution of wealth, siphoning money away from the poor. I suppose given the Michael Brown rant, one's political affiliation would drive them to place some ambiguous blame on capitalism for what governments do.

Responsible government should address market failure. I don't understand your confusion here...

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There is no ambiguous blame of capitalism. The reality is that of government did not alter markets for the betterment of society, privatized police forces, fire departments, militias, prison systems, debt collectors and even water distributors would exist.

The longer our history within a capitalist society plays out, the more these "fringe" markets become a reality. Money requires augmentation in order for our system to function. Everything grinds to a haunt otherwise.

This isn't an economic argument necessarily, examine history. It's clear as day.

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There is no ambiguous blame of capitalism. The reality is that of government did not alter markets for the betterment of society, privatized police forces, fire departments, militias, prison systems, debt collectors and even water distributors would exist.

The longer our history within a capitalist society plays out, the more these "fringe" markets become a reality. Money requires augmentation in order for our system to function. Everything grinds to a haunt otherwise.

This isn't an economic argument necessarily, examine history. It's clear as day.

Regulation, such as tariffs, were to keep sovereignty of a country. As you can see with multinationals now, they often transcend national sovereignty thanks to governments stepping in and giving them that power. Tariffs was really one of only a few basis for government interference in an economy that's justifiable.

The notion of privatized military and police forces is simply an exaggeration of an argument.

The more government is allowed to step in to control economies (in the pie-in-the-sky fashion you tout, ignoring reality), the more they steer capital to the rich, the more they usurp power from the very people that are supposed to be a check upon them.

Capitalism is often disliked by liberals because it emphasizes market intelligence most of all, and often times simple hard labour. It emphasizes personal empowerment, as well as personal responsibility -- the enemies of liberals who want to have government and others do all the thinking for them while they allow TV shows and distraction politics (hi Michael Brown!) to keep their minds busy.

If anything, both the US and Canada need more capitalism. There isn't enough (left) of it. "Poverty capitalism' as described here is nothing of the sort.

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There are a few corporations who dont give money to politicians directly, but they give it to lobbyists instead. They largely control the political agenda of America, and a lot of them dont pay taxes in the USA.

Government should govern the people and let business direct business. The problem is corporations can basically purchase politicians via the lobbyists and campaign financing.

It's to the point now in the USA where electing a Democrat or a Republican is moot, as the party agenda is the same, reduce corporate taxes and 'deregulate' tax laws, which effectively allow big corps to funnel their profits offshore and evade paying the taxes that they rightfully owe.

It's fine to make money in the US, but the nation that gives these corporations the opportunity doesn't run on rainbows and dreams. Some of that money needs to go back to support the nation's infrastructure. Whenever a behemoth like Google or Apple evades taxes, they are effectively taking a dump in the mouths of the taxpayers.

Unfortunately, corporations do not have the best interest of people at heart, only company profits. This is why corporate money should be outlawed from politics as those representatives do not represent the will of the people.

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Regulation, such as tariffs, were to keep sovereignty of a country. As you can see with multinationals now, they often transcend national sovereignty thanks to governments stepping in and giving them that power. Tariffs was really one of only a few basis for government interference in an economy that's justifiable.

The notion of privatized military and police forces is simply an exaggeration of an argument.

The more government is allowed to step in to control economies (in the pie-in-the-sky fashion you tout, ignoring reality), the more they steer capital to the rich, the more they usurp power from the very people that are supposed to be a check upon them.

If anything, both the US and Canada need more capitalism. There isn't enough (left) of it. "Poverty capitalism' as described here is nothing of the sort.

Right now the government is being controlled by corporate interests. This is why the tax codes were 'altered' to allow so much tax evasion.

I agree that the US needs more capitalism. I mean, if it's ok for banks to make tons of money and use loopholes to avoid paying Uncle Sam, when there's a market crash and they are on the brink of disaster, the government shouldn't be there to give them a bailout with taxpayer money.

Seems to me the US is ok being 'capitalist' as long as those controlling the government are making dough, but they will be the first at the door asking for socialist-style 'stimulation packages' when they hit the red.

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Government should govern the people and let business direct business. The problem is corporations can basically purchase politicians via the lobbyists and campaign financing.

It's to the point now in the USA where electing a Democrat or a Republican is moot, as the party agenda is the same, reduce corporate taxes and 'deregulate' tax laws, which effectively allow big corps to funnel their profits offshore and evade paying the taxes that they rightfully owe.

It's fine to make money in the US, but the nation that gives these corporations the opportunity doesn't run on rainbows and dreams. Some of that money needs to go back to support the nation's infrastructure. Whenever a behemoth like Google or Apple evades taxes, they are effectively taking a dump in the mouths of the taxpayers.

Unfortunately, corporations do not have the best interest of people at heart, only company profits. This is why corporate money should be outlawed from politics as those representatives do not represent the will of the people.

I agree with much of what you say, but as you also say, a company's bottomline is it's profits. That's it.

Hence why it should be expected they try and cut corners.

What's not supposed to happen is that elected officials give the finger to the populace in the fashion it does, while the populace turn around and make them incumbents.. themselves blaming everything under the sun (campaign financing, corporations, money, the gerbil out in the field) but their own vote-casting.

Right now the government is being controlled by corporate interests. This is why the tax codes were 'altered' to allow so much tax evasion.

I agree that the US needs more capitalism. I mean, if it's ok for banks to make tons of money and use loopholes to avoid paying Uncle Sam, when there's a market crash and they are on the brink of disaster, the government shouldn't be there to give them a bailout with taxpayer money.

Seems to me the US is ok being 'capitalist' as long as those controlling the government are making dough, but they will be the first at the door asking for socialist-style 'stimulation packages' when they hit the red.

That's true. In a capitalist economy, the banks would fail.

In the sense of lending, Canadians are more capitalist.

Our government doesn't like backing the big banks or credit issuers.

Hence why credit is so hard to get here. (we also don't have the advantage of abusing the position of a top worldwide reserve currency)

Credit is easy in the US because it's backed by the government. Not because the banks or businesses simply love taking stupid risks (re: subprimes).

This is why government intervention is mostly bad, far more bad than good.

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I agree with much of what you say, but as you also say, a company's bottomline is it's profits. That's it.

Hence why it should be expected they try and cut corners.

What's not supposed to happen is that elected officials give the finger to the populace in the fashion it does, while the populace turn around and make them incumbents.. themselves blaming everything under the sun (campaign financing, corporations, money, the gerbil out in the field) but their own vote-casting.

That's true. In a capitalist economy, the banks would fail.

In the sense of lending, Canadians are more capitalist.

Our government doesn't like backing the big banks or credit issuers.

Hence why credit is so hard to get here. (we also don't have the advantage of abusing the position of a top worldwide reserve currency)

Credit is easy in the US because it's backed by the government. Not because the banks or businesses simply love taking stupid risks (re: subprimes).

This is why government intervention is mostly bad, far more bad than good.

If capitalism is supposed to be about government keeping it's hands off business, then the USA would be more capitalistic than Canada would be. The reason you had the mortgage crisis in the first place was because the laws that prevented it from happening before were taken away. Canada escaped that because it wasnt structured the way it is in the USA for it to happen. The banks and corporations in the USA are also freer to spend whatever they want to influence and control the political system, which makes it nearly impossible for a non-incumbent to compete.
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If capitalism is supposed to be about government keeping it's hands off business, then the USA would be more capitalistic than Canada would be. The reason you had the mortgage crisis in the first place was because the laws that prevented it from happening before were taken away. Canada escaped that because it wasnt structured the way it is in the USA for it to happen. The banks and corporations in the USA are also freer to spend whatever they want to influence and control the political system, which makes it nearly impossible for a non-incumbent to compete.

You have a deep misunderstanding of capitalism, and the underlying causes of the financial crisis.

As far as companies go, less regulations wouldn't compel a company to go and stupidly, recklessly, issue credit to risky people. What would is government backing those risky loans, or incentivizing it, as is the case here.

Just as before the financial crisis of mid-late last decade that led to it, the US government is backing risky loans, and the Fed is helping inject money into the real estate market to create a bubble. They're also keeping interest rates rock bottom to artificially stimulate demand (and now, to artificially try and prevent a necessary economic downturn).

In a capitalist economy, the risk is carried solely by the lenders themselves, and their credit issuance is significantly tighter because they wouldn't have Uncle Sam to run to when they need a bailout -- therefore, regulation or not, lenders who have no government as collateral tend to be less reckless. This is how Canada is. Ever try and get a loan from the major banks in Canada? Ever try to get one in the US? Vastly different, and significantly easier with the US given it's cheap money policy. Cheap money policy cannot be confused for capitalism, it's far less capitalistic than the banking system in Canada, in practice.

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