Please explain to me why the emphasis was ever on rehabilitation in the first place. I was always under the impression that the purpose of prisons wasn't to rehabilitate criminals, but to keep them away from potential future victims, at least for a time.
How did you get the impression that they are not (theoretically) for rehabilitation?
Since a sentence tends to have a release date, often after a few years, that would imply that the system hopes that the inmate has in some way changed by the time they are released.
As a deterrent, they are not working so well because, after all, in the States and NZ there are so many incarcerated. Many offended while irrational (angry, wasted, desperate), while not considering deterrents.
Over here, we the "Corrections Department", implying that offenders are in some way corrected. Not all respond, but many do. We have a prison that has a 5% rate of recidivism, not bad eh? Mind you, the population had applied to be transferred there, and were selected by psychologists.
I have no answers, just pointing out that its not as simple as just taking them out of the loop. You'd be building cities of inmates. Its got to be a bit more than that somehow.