Is this the beginning of the end of the three-decade-long project of privatizing public functions? Ronald Reagan started us down the privatization path in the 1980s, championing the myth that private enterprise is always and forever more efficient than the government. Last week’s Justice Department decision to not renew 13 contracts with companies managing incarceration facilities for the Bureau of Prisons—and phase out of all federal private prisons over time—has cracked that foundation, perhaps irreparably.

Thirteen contracts may seem like too small a disruption to threaten the entire private corrections industry and its $629 million in annual profits. But DOJ’s repudiation has already spurred demands to close other privatized facilities. And the logic of the decision underscores the core truism of privatization, one that citizens are increasingly finding unconscionable: The only way to manage these public operations and skim a profit off the top is to do it deficiently.

The only way to manage a public service and skim a profit off the top is to do it deficiently.

Despite years of bad publicity for the nation’s two leading private prison companies (Corrections Corporation of America, or CCA, and Geo Group), it took a Justice Department Inspector General report to force the government to act. Private prisons only house 12 percent of the federal prison population, roughly 22,660 inmates. But that’s enough to have allowed the IG to directly compare the management of those facilities to those operated in-house by the Bureau of Prisons.

The findings were not pretty. Private prisons experienced more safety and security incidents. They had higher rates of assaults, inadequate medical checkups and compliance, eight times as many incidents of contraband cell-phone smuggling, and often housed new inmates in solitary confinement units, seemingly for lack of space. The report also detailed several grisly incidents since 2008: three riots in one Reeves County, Texas facility in two months; the death of a corrections officer in a riot in Natchez, Mississippi; and the closure of the Willacy County (Texas) Correctional Center, after inmates burned it to the ground.

It’s not hard to figure out why this happens. Private companies win contracts to manage federal prisons by undercutting the Bureau of Prisons’ operational costs. Unlike the government, private prison companies must also take their profit margins out of their budgets. The only way to make that work is to massively drop labor costs, corresponding to a severe degradation of the quality of prison management.