This article argues that to explain American penal exceptionalism, we have to consider America’s exceptional levels of punishment together with America’s exceptional levels of violence and disorder, while understanding both of these as outcomes of America’s distinctive political economy. After specifying the multiple respects in which American penality is a comparative outlier, the article develops a new theorization of modes of penal action that reveals the extent to which the US has come to rely on penal controls rather than other kinds of punishment. This over-reliance on penal controls is viewed as an adaptation to the weakness of non-penal social controls in American communities. These social control deficits are, in turn, attributed to America’s ultra-liberal political economy, which is seen as having detrimental effects for the functioning of families and communities, tending to reduce the effectiveness of informal social controls and to generate high levels of neighborhood disorganization and violence. The same political economy limits the capacity of government to respond to these structurally generated problems using the social policy interventions characteristic of more fully developed welfare states. The result is a marked bias toward the use of penal controls.