JOHN FERGUSON has done time in prison. He well remembers the days he spent guarding inmates and mopping floors at a women's jail in New Mexico. Four years ago, he swapped his office for the prison floor to take part in a television series that sent corporate executives to work on the front-lines of their companies. The experience was educational: "Your feet got tired because you're walking around on concrete all the time," he says, with his slight Tennessee twang. "I learned that it's a business that could be very mundane but you can't ever relax-you've got some folks that are spending every working hour trying to figure out how to do mischief".
As head of America's largest private prison operator, the Nashville-based Corrections Corp of America (CCA), Mr Ferguson is responsible for 63,000 inmates in 19 states and Washington, DC-and his potential market is growing all the time. Inmate numbers in America rose by 25% between 1996 and 2004. America now has 726 prison inmates for every 100,000 people, compared with 142 in England, 91 in France and 58 in Japan. With public prisons notoriously overstretched, private prisons have been quietly picking up the slack since the Reagan years.
It is a business prone to nasty surprises. CCA, which had confidently built prisons during the 1990s boom years, was saddled with debt and empty beds after stabbings and escapes at one of its Ohio prisons caused a slump in business. Mr Ferguson took the reins in 2000 and salvaged the firm, but there have still been plenty of bumps. In the past year CCA has weathered riots in Oklahoma (one death) and Kentucky as well as a hostage-taking in Florida-to say nothing of lawsuits following a riot in Colorado in July 2004. "Inmates are litigious," laments Mr Ferguson.
All these problems also afflict state-run prisons. But they are a particular threat to CCA, because many people still find the very idea of a privately run prison faintly immoral. Critics complain that a private company will inevitably treat prisoners simply as inventory. But Mr Ferguson responds that prisons-like any other public service-can be improved by competition and flexibility. For states with a sudden capacity problem, CCA can supply "just-in-time" beds. The company can also build prisons faster than the government-15 months for CCA compared with up to five years for states and eight for the federal government.
The private sector can offer other innovations. After his spell on the front-line in New Mexico, Mr Ferguson came away appalled by the number of hours prison guards spend documenting their movements in a logbook; he is trying to switch to an electronic system. But his real trump card is cost. CCA and its competitors can almost always undercut the state-Florida even obliges the private sector to operate 7% more cheaply than the public sector. The savings owe much to lower staffing costs, and economies of scale. "The public sector has a tendency not to eliminate positions when they're not needed," says Mr Ferguson, who spent four years as Tennessee's finance commissioner.
Only a handful of CCA facilities has unions, which gives the company a cost advantage since the public-sector prisons tend to have powerful unions. Critics of private prisons say that the CCA method poses a security risk, since workers with fewer benefits and lower pay will be less vigilant. But Mr Ferguson has a ready retort: "If that is the case, Southwest Airlines would be having a crash every month," he says, pointing out that his prisons are all regulated and inspected by the government.
If Mr Ferguson can see off his critics, there is plenty of scope for growth. Although CCA's latest quarterly earnings showed no advance from the same period last year-the result of a regrettable shortage of inmates at some facilities-Mr Ferguson expects big new contracts with the Federal Bureau of Prisons. The bureau is already CCA's largest customer, and its projections put it about 30,000 beds short by 2010, according to CCA. Many of the detainees sent to private prisons are illegal immigrants; indeed, a surge in criminal aliens needing beds helped save CCA five years ago. Immigration and Customs Enforcement, another federal bureau, could bring more business if Congress funds the intelligence-reform bill passed last in late 2004.
Mr Ferguson rules out going abroad for new business-one of his first acts upon taking charge five years ago was to ditch CCA's international ventures. A much more promising source of potential business is state governments. Private prisons have footholds in about three-quarters of the 50 states. They are strongest in the South and west-but northern states are beginning to open up as well. Vermont, for example, last year asked CCA to house 700 of its inmates, mostly in a Kentucky facility.
The big prize would be California. So far the Golden State has mostly run its own prisons. But the badly overcrowded public system has huge problems-a federal judge recently mandated reforms to the provision of health care for Californian inmates, after denouncing instances of "outright depravity". Private operators are closely watching Governor Arnold Schwarzenegger's prison policies and union-busting activities. CCA has no contracts yet in California, although in July the GEO Group, CCA's largest rival, was contracted to operate a 200-bed minimum-security facility in California.
Privatisation of existing prisons gives plenty of scope for CCA to expand, without any further increase in the United States' already exceptional level of incarceration. Mr Ferguson fends off suggestions that he longs for a further surge in prisoner numbers, or lobbies for more lock-em-up laws. "It's kind of like saying a heart surgeon's out advocating to reduce anti-smoking programs so they'll have more hearts to work on-we just don't do that." In any case, the trend towards locking up felons for ever longer periods is already firmly established.
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