Lonnie, I regret to say that the USA still has capital punishment (not in all states) and it doesn't seem to work at all. Their murder rates are rather higher than ours. Likewise, public amputations in some of the more hardline Islamic countries don't seem to have stopped theft. The truth is, I believe, that it's not the severity of punishment that deters people but the certainty of it. That is, you're only deterred if you think you'll be caught.
The number of murders in London has actually fallen every year for the last five years from 222 to 160 (according to Ken Livingstone - but as far as I can see, Boris hasn't contradicted him on this). New York, which has drastically cut its own murder rate with a policy of zero tolerance for several years, recorded about 500 last year. So perhaps, in fact, our way works?