If you had asked me a few days ago who I would suggest you open a retirement account with, I would have said Vanguard. I have a Roth IRA account with them, and was super happy with their low cost investing approach. I’m now in the midst of an ethical dilemma because I learned this week that Vanguard is the largest supporter of modern slavery, or for-profit prisons.
History of For-Profit Prisons
The first privatized prison was started in Louisiana in 1844. The company that owned the prison used it as a factory and “employed” the inmates to make cheap clothing for slaves. Seeing the Louisiana company’s success using this new labor pool, Texas followed suit and opened their own private prison. Five years later, the Texas penitentiary was the states largest factory, and they became the main southern textile supplier west of the Mississippi.
In 1860, slavery was abolished by the 13th amendment, but there was a loophole. Slavery was no longer legal “except as punishment for a crime.” Thus, the private prison boom began in the South. The state would lease the inmates (like property) to companies. Prisoners (mostly black) were kept on these companies’ private plantations and labor camps, and forced to perform hard labor such as mining coal and laying railroads. The companies would then give a portion of their profits to the state for leasing these inmates to them.
These private companies were driven by the same thing private companies are driven by today, profits. This desire to squeeze out every bit of profit possible caused the companies to resort to extreme measures. Unlike with free labor, torture could be used to force inmates to perform. Whipping was common, and wasn’t outlawed in Arkansas until 1967. That is correct, not 1867, but 1967. Since the companies didn’t own the inmates but just leased them, they had even less incentive than they did with slaves to keep the inmates alive. This led to an annual convict death rate in the South of 16–25%.
The southern companies who used the free inmate labor became wildly successful. Average revenues were nearly 4 times higher than the cost of running the prisons, and the profits from inmate leasing made up 10% of some states’ budgets. Seeing the success of the private prisons made states jealous, and in the early 1900s…