One possibility, of course, is that the general public will come sufficiently to their senses that it will be politically possible to put more focus on rehabilitation. Unfortunately, the likes of Sun Media make it awfully hard to have an intelligent conversation with the average person on this issue, so the "get tough" approach is likely to continue for the forseeable future. But how will society deal with the escalating costs of keeping people incarcerated (not to mention the recidivism rate if convicts' issues aren't properly dealt with while they're on the inside, with is the case now and will only get worse as they incarcerate more and more people). The British found a "solution" to the problem in the late 1700s by setting up penal colonies (most famously Australia, but for a time Bermuda and the American colonies were used for this purpose as well). Of course, that's not so easy to do now that there are no more new frontiers.
Or are there? Recently I came across this story about plans for setting up a Mars colony. What leaps out is this:
Worden's comments prompted speculation that trips to Mars could be only 20 years away. Commentators talked about the difficulties of such a trip because of the cost, estimated at $10 billion US one-way, and the likelihood that the explorers would not be able to ever return to Earth.My emphasis. It would be tough to get people to volunteer for such a mission, but I bet some will suggest sending criminals. You'd still need a few volunteers to run the place, but the general labourers would be virtually free. This idea is explored in D. G. Compton's 1971 novel Farewell, Earth's Bliss, and I don't doubt that it will be proposed in all seriousness in the years to come. It's not my idea of a good solution to the crime problem, but in one way it would be an improvement on previous penal colonies -- at least in this case it wouldn't involve the displacement and destruction of indigenous peoples, since there are none on Mars.