The United States leads the world in the number of people it incarcerates and government figures show the country's prison population grew by three percent to a record 2.3 million inmates in 2006.

Harsher sentencing policies have put more criminals behind bars and prison management firms such as the Corrections Corporation of America (CCA) and The GEO Group are racing to build new jails or expand existing facilities to house more convicted felons.

CCA, the largest US private prison operator, is spending 205 million dollars to build a new prison in Eloy, Arizona, to house 3,060 prisoners. It is also constructing a 105-million-dollar jail near Natchez, Mississippi, to hold 1,668 inmates.

"As states struggle with overcrowded facilities, growing populations and no meaningful supply of beds coming online, they are finding that private correction companies, such as CCA, can deliver beds more quickly and less expensively than they can develop themselves," CCA's chief executive John Ferguson said in an email to AFP.

CCA's profits swelled to 35 million dollars in the fourth quarter of last year, rising from 32 million in the same period of 2006, as revenues jumped to 382 million dollars.

George Zoley, The GEO Group's chief executive, told analysts on a conference call in February that 2007 had been a bonanza year and predicted that "2008 will be an even better year" as more detention facilities are filled.

A company spokesman declined to comment further on GEO's operations.

Its profits rose 10 percent to 11.5 million dollars during the fourth quarter of 2007.

The GEO Group is expanding a leased detention center it manages in Clayton County, Georgia, so it will be able to house almost 200 extra inmates, and executives have said they are pursuing contracts in Britain and South Africa.

CCA and GEO Group shares have declined as US stock markets have been ravaged by a credit squeeze in recent months tied to an ongoing housing slump, but they have not been singed nearly as badly as some other industries.

Most jails in the United States are run by the federal government or states, but corrections firms are winning more and more concessions.

Tennessee-based CCA; The GEO Group, which is headquartered in Florida; and Cornell Companies, based in Texas, have recruited veteran money managers and former federal officials and lawmakers to bolster their executive and lobbying clout.

William Andrews, the chairman of CCA's board of directors, is also a top executive at Kohlberg & Company, a large private-equity firm, and has held a host of other high-ranking executive posts.

Norman Carlson, a former director of the Federal Bureau of Prisons (BOP), sits on GEO's board, and the resume of James Hyman, the chief executive of Cornell Companies, highlights stints at General Electric and McKinsey & Company.

Private groups guard over 100,000 federal and state prisoners, according to the Bureau of Justice Statistics, but that number is expected to climb higher.

Advocacy groups say the "war on drugs" and changes in sentencing laws, not rising crime rates, explain America's ballooning prison population. A majority of those locked up are racial and ethnic minorities.

Ryan King, a policy analyst with The Sentencing Project, said tougher sentences and a reduction in the use of parole have fueled around a sixfold rise in the US prison population since 1970.

"Generally, we don't believe that incarceration should be part of a business model for profit. This is a public good, it's an effort to rehabilitate, it's an effort to provide public safety and it should be governed by those principles rather than principles of profit," King said.

Whether companies or the government can run prisons more cost-effectively is a difficult question to answer and has stymied some government investigators.

"BOP does not have the data necessary to do a methodically sound cost comparison of its various alternatives for confining inmates in low- and minimum-security facilities," the Government Accountability Office said in a detailed October report.

The GAO judged that without such data it was impossible to say whether private jails are more cost effective than government-run facilities.

Comparisons are tricky because prisons vary in size, have different rehabilitation programs and varying staffing needs.