PrisonCosts, even if varying in each economy, is a huge cost burden for mosteconomies. The money spent annually for keeping inmates in prisons bears a hugeopportunity cost, as the same money could be invested into the infrastructureof an economy to increase the quality and quantity of Capital, by investmentsin educational facilities to increase the quality of Labour as an example.Annual US Prison Expenditure for the year of 2015 has been estimated to be$42,883,537,590 (Vera, 2015), which I will use as a reliable estimate due tothe fact that the Department of Justice has revealed that US cost of Prisonshas been at a total of $29.5 billion (J. Stephan, Bureau of Justice Statistics2004). Also stated in the data is the case that from 1998 to 2001 costsincreased annually but with a decreasing change of rate.
Itis safe to assume that these costs have increased significantly since 2015 dueto a constant increase in prison population (G. Berman, Prison PopulationStatistics, 2013) (Constantincrease in prison population means constant increases in costs and need forthem working pt.3) The use of Prison Labour would theoretically be apossible solution to such high expenditures. This is due to the fact that thelow cost of Prison Labour would enable producers who make use prison labour tominimize costs in a way that would otherwise not be possible in Developedcountries due to minimum wage rates and costs through standards andlegislations. (talk later abouthow developing countries don’t have that and also that working below minimumwage is debatably acceptable as otherwise workers would not be doing anything) The lower costs to producers benefit producers,as they have higher profits, as well as a possibility of decreasing prices toachieve more competitiveness. This would then lead to a gain for domesticbuyers as the lower prices by Suppliers would increase consumer surplus andenable buyers to make more use of their disposable income.
This extra moneyearned can then be reinvested into facilities or Improvements in Factors ofProduction, which both mean a potential increase in economic growth. Another important effect to notice is an increase ininternational competitiveness, which is desirable due to low world prices thathave been partially caused by the “four Asian Tigers” (P. Krugman, The Myth of Asia’sMiracle, 1994), who have taken over the global market by highly efficientlabour force and the absence of standards and legislation with combination ofvery low minimum wage rates. (difference between Asian Tiger and Bangladeshis that the Asian tigers “keep” the money in their economy which has led totheir success (growth wise as well as infrastructure wise) The improved competitiveness facilitated in lowprices induced by the use of Prison labour would followingly increase DomesticConsumption, as well as encourage spending from overseas.
Relevancy on the globalmarket is highly important as a decrease in domestic earnings could have theeffects of negative growth on the economy, leading to a decrease in Gross DomesticProduct. The main Incentive to keep Domestic consumers to buydomestically is the multiplier effect, which is defined as an additionalincrease in Aggregate Demand caused by an increase in consumer spending (T.Cowen, A. Tabarrok, Modern Principles of Economics, 2010).
This means that aggregatedemand increases more than the initial input of currency, as it cycles throughthe economy multiple times as sellers decide to spend portions of the earnedmoney themselves. The multiplier effect is also in motion when foreigncountries buy products from the country, as more money flows into the economyleading to further increases in aggregate demand and economic growth in thelong run.Even thoughProducers as well as Consumers have the ability to lead to economic growth,Economic Growth also involves improvements and additions to infrastructure andcommon access resources. Both infrastructure and common access resources arenon-rivalry and non-excludable, which has the effect that there are novoluntary investors into such facilities as there is a benefit to everyone, notjust the investor. This is why the government is responsible for theinfrastructure and most common access resources, through which I conclude thatthe government influence is a need to truly achieve economic growth.
One of thebenefits gained through prison labour for the government lies within theincreased domestic consumption, as the government gets a percentage of extrarevenue created as sales taxes, which the government can then use to reinvestinto infrastructure to counter the above-mentioned opportunity cost caused bygrowing prison population.