My premise is that privatised prisons are a way of extracting money from taxpayers, aided by the war on drugs and media-fueled hysteria. This is mainly a US problem, but its effects are worldwide because of the global influence that the US has.
With privatised prisons, there is a financial incentive to have as many prisoners as possible because the inmates are what brings in the cash. The size of the prison population is largely controlled by the government through the laws they enact and the enforcement measures they finance. So it shouldn't be a surprise that there is a potential for corruption here.
I could go on, but this story by Catherine Austin Fitts says it much better than I ever could. If you have the time I'd suggest that you read it all, but if not at least read chapters 8 and 9:
http://www.dunwalke.com/contents.htm
Then take a look at this piece in The Independent (a British broadsheet newspaper):
http://news.independent.co.uk/world/...cle2864191.ece
The Independent article could be better. In particular it doesn't cite sources for its figures, and it relies too much on anecdote and stereotype. However, I believe that the overall picture is correct and it is not surprising when the corruption outlined in Fitts' story is understood.
In a word: it stinks. I think that all the people who say "the war on drugs cannot continue because it's not logical" are deluding themselves. The laws do not have to be logical or right when the lawmakers benefit from them being illogical and wrong.