How to conceptualize the recent expansion and activation of the penal state (not only the police, courts, and corrections but segments of the welfare apparatus) observable across the First and Second Worlds? What are their efficient causes and enduring functions? To clear the ground for a theory of the penal upsurge that has accompanied the rise of social insecurity in the age of triumphant neoliberalism, I first present a theoretical and empirical critique of the demonic myth of the "prison industrial complex." Next, I return to the writings of Marx, Durkheim, and Weber to show the centrality of penality in their conception of modern society. Third, I mate these classical principles with insights from Bourdieu, Foucault, T.H. Marshall, and Esping-Andersen to construct a robust concept of the penal state covering structure, policy, and discourses and giving it a central role as a stratifying force and classificatory machinery.