Is there something inherently wrong with entrusting a private company to run a prison? Might this even be unconstitutional? As far as I'm aware, no court in Europe or the United States has entertained this question. When and if one does, there will now be a precedent to cite: a potentially historic 8-1 ruling just handed down by the Supreme Court in Israel that overturned a 2004 Knesset amendment permitting the establishment of such prisons.
In an opinion rightly hailed as a "bombshell" in Haaretz, Israeli Supreme Court President Dorit Benisch did not deny that privatizing prisons might potentially save money. She simply determined that incarceration infringes on such fundamental liberties that only the state should carry out this function, not least since the alternative is to turn prisoners into a means of extracting profit. "Economic efficiency is not a supreme value, when we are dealing with basic and important rights for which the state has responsibility," ruled Benisch.
The ruling is not without its ironies, among them the fact that Israel doesn't actually have a written constitution, only a set of Basic Laws that are supposed to serve as a guideline for legal rulings. There is also the fact that, as Yonatan Preminger noted in this fine article in the magazine Challenge a year ago, the conditions in Israel's state-run prisons have often been abysmal, with prisoners and security detainees (mainly Palestinians) crowded into cramped, squalid cells bereft of adequate beds and toilet facilities.