Patterns of crime and punishment in the USA greatly magnify corresponding developments in other liberal market economies – Australia, Canada, New Zealand and the UK – faced with similar broad macro-technological transformations, namely the collapse of Fordism in the 1970s and 1980s and the development of knowledge economies in the 1990s and 2000s. In this article, we set out the case for seeing these differences as largely the product of dynamics shaped by the institutional structure of the US political system. We focus on the exceptional direct and indirect role of local democracy in key policy areas including law and order and beyond that in residential zoning, in public education and in incorporation of suburbs, which has no parallel in the other Anglo-Saxon polities, and which magnifies through residential and educational segregation and concentrated poverty the social problems caused by socio-economic developments.