I do consider myself a part of this society. And it feels a lot like this society has accepted me back in, especially when I pay taxes. So I'm not sure if your solution is very practical. Australia stopped taking in criminals ages ago. And even if you feel strongly about ostracising elements from society you don't think deserves being a part of it...you can't. You're stuck with them. Sure you can babysit them in jail, but as we've already established. Doesn't really work, and is very expensive. You agree that rehabilitation, (ie after prison) works very badly. So what do you think we should do? Execution?
Rehabilitation works so seldom because criminals have very little options once they get out. Especially once they've been convicted. I have a close friend who sat in jail for ... awww ... I forget. He was supposed to be in for 7 years but got out a bit early. Anyhoo. Anyway, once he got out he went legit. That's a long time. And he had a similar background to me. I think he got a woman pregnant and that was that. But he is in a really shitty spot in life right now.
edit: ...my point is that I think a major factor is what you've got to lose. If a person has nothing to lose it might be difficult for them to make the necessary mental shift. All of my old gang and old criminal friends who I today know anything about have all gone legit by now, no matter if they ever got caught or not. At least the ones who haven't died from drugs. So it does look a bit like all that might be needed is growing older. So if just given some patience most guys might come around. And being hard on them will most likely just prolong their criminal "career".
And don't forget that a lot of criminals are morons. Stupid people don't see an opportunity when it bites them in the ass. They could be stupid for many reasons. Extreme low self esteem I think is pretty common among ex-cons.
I read a German scientists research where he established that immigrants are more likely to commit crime because they have an active risk taking gene. The same gene responsible for prompting them to move. Something to do with endorphins. But the same gene is also responsible for starting companies so it's not all bad.