Economic and political changes occasion change in welfare policy, which then produces changes in the criminal justice system. The welfare state performs three basic functions: it acts as a social regulator for the economy, gives the capitalist state legitimacy by providing certain benefits to the displaced population, and organizes a system of control over the recipient population. The scope and nature of the controls as well as the range of services provided are determined by the overall needs of the system, which change with the evolution of market and social forces. An understanding of policy in the welfare state can be ascertained only by examining all the important variables in decisionmaking. Four important factors guide the formulation of welfare state policy -- costs, political opposition, elite policy, and public opinion. There seems to be a prima facie case for a correlation between welfare state programs and the crime rate. Thus, a concerted decline in welfare state expenditures, with other factors being equal, will lead to increased demands on the criminal justice system. The prison represents a microscope through which it is possible to watch how many of the factors which affect welfare state policy also affect corrections policy. At this time, the state is fortified in its efforts to strengthen the system of control over the surplus population. Footnotes and 17 references are included.