Drugs policy is one of the few areas where I can really see myself agreeing with libertarians to any real extent.
If marijauna were to be made legal, it would need to have a "trial run" - perhaps legalise it in one place and then set up some government-funded studies (to keep any corporate interests out as much as possible) then look at the statistics to see how many people die from it, how it effects car accidents and so on. If these stats are not dire, legalise it nationwide (as everybody does it anyway), if they are, don't. This would resolve a common complaint about drug legalisation in general, namely "We don't know the side-effects!". These tests will provide the true facts about how dangerous these drugs really are and will provide VALID data to decide whether they are so dangerous that they should remain illegal. There's a lot of misinformation floating around on both sides for this, with the fear-mongers claiming that cannabis will give you brain damage instantly and the druggies claiming that there are fewer deaths from ecstacy than from peanuts (which is true, but there are more people who eat peanuts than take E, presumably).
These tests are absolutely vital to find out the truth about how dangerous these drugs are, and if the drugs ARE shown to be very dangerous, then a swift reillegalisation may be an idea.
The advantages for the government would be additional tax income, as they can tax the hell out of the legalised drugs and still be below street prices (I gave a presentation on the chemistry and pharmacology of the opioids at one point, and medical prices for opioids (including heroin where it is used medically) are SIGNIFICANTLY less than street prices.
The advantage for business is that they could sell this stuff and make money off it, obviously.
The advantage to the users is that they know they're getting the actual pure drug (a particular problem with synthesised drugs, your Es and LSDs, where if something goes wrong in production...) and they can get a uniform dose each time and not risk having nasty ODs (this doesn't really apply to cannabis, but it does for others). Essentially, there would be quality controls, which would make the whole exercise of taking narcotics a lot less dangerous.
The advantage to society is that these drugs are no longer gateway drugs and cannot lead people onto more destructive habits, as you don't have to get your weed or E from the guy who offers you a free first dose of crystal meth.
The advantage to the sick is that these drugs can now be used for their medical uses as well, which is something which doesn't happen now. Look at America, hospitals cannot use practically any drug which is commonly used recreationally (except possibly ketamine? I don't know if that's still used medically). But the fact is that most of these drugs have legit uses too. Marijuana is, obviously, an analgesic and can ease the symptoms of glaucoma. LSD is a very powerful drug (in terms of the dose needed, not the effects, although it's powerful in that respect too) and apparently is showing promise as an analgesic at sub-psychedelic doses (i.e. really tiny doses). Both heroin and cocaine are used in hosptals in the UK (heroin is an analgesic, cocaine is an anaesthetic and a vasoconstrictor). Ketamine was used as an anaesthetic.
The problem is the anti-drug lobby, who don't realise that most of the problems to do with MOST illegal drugs are because they're illegal. They're these guys who make it so that the media has to say "diamorphine" when referring to heroin in the medical sense unless they want to face a shit storm. The people who claim that E is a mixture of heroin, LSD and whatever else they claim is in it.
So, yes, not only should marijuana be legal, but so should most of the currently illegal narcotics, if the legalisation is handled right. (for instance, E is mostly harmless if taken correctly, but it can become dangerous if it's not used right, for this reason, I think that having a license to be able to take psychoactive drugs (including the currently legal ones) is a much better idea than just a minimum age, as proper education is vital. It'd also mean that companies would spring up to supply this education, like driving schools have. Plus the government can milk this cash cow even more that way, which will provide more of an incentive.)
Even heroin would (POSSIBLY, I'm not at all sure myself on this, to be honest) be better legalised, as the main dangers of it are withdrawal and overdose, the risks of both of which are reduced if it is legal. Cocaine and crystal meth, however, should not.
Realistically, I think that marijuana will be legalised, first in Europe, later in the rest of the world, but most of the other drugs probably won't in the forseeable future.
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I think what he means about the economy part is that it will undermine some already powerful businesses. Textile, chemical, pulp, and most of all, alcohol/tobacco and pharmacuetical companies are going to be undermined by legalizing weed. The money of all those forces combined could lobby congress forever.
These are giant companies and it's just as easy for them to profit massively from it as it is for them to lose profits from it.
Looking at pulp to start off with. There are three possibilities:
i) Some of the companies discover that cannabis plants grow quicker than trees and also gets them brownie points with environmentalists. They start to use cannabis in favour of trees, they make more money and their opponents follow suit.
ii) Cannabis turns out to be inferior to what is currently available, so there is minimal impact on the profits of the companies.
iii) Some start up company starts to grow cannabis for this purpose, they are succesful and this impacts negatively on the profits of larger companies. So a bigger company buys them out and the situation is resolved.
Textiles - a similar story, but replace "trees" with "cotton", though I think that ii) would be more likely here.
Alcohol/Tobacco - they just start selling cannabis themselves.
Pharmaceuticals - if they don't start selling cannabis (perhaps in tablets to emphasise the medicinal aspects, or maybe just normally - the company GlaxoSmithKline sells sports drinks on the side here, so not everything is strictly medical-related) then they lose a potential source of income which they didn't actually have to begin with, so no actual loss here. If they do, they sell stuff, they make money. People might grow their own plants which would reduce their potential profits, but that's just reduced profits rather than an actual loss, they still gain money over all. Or they could lobby to have home-growing made illegal.
Any half-competant businessman could find a way to turn a situation like that into his advantage.