This paper examines the interrelationships among criminal activity, punishment, and cycles of the economic system based on the influence of political and economic forces on forming penal policies. Long term differences in black and white incarceration rates between 14 States in the North and 17 in the South are analyzed. Trend models of the growth rate of punishments over time for each group from 1870 to 1980 are estimated. The penal system is viewed as a device by which labor market fluctuations can be regulated. Differences between blacks and whites, and between the North and the South are examined to arrive at this paper's thesis; that race provides the link among economic cycles, employment, and crime. Tabular data and 27 references. (Author abstract modified)