(FORTUNE Magazine) – DRUGS ARE dangerous. Even users agree on that. Yet the U.S. seems to be getting nowhere in its war against them. In frustration, large numbers of Americans, including academics, members of Congress, and some big city mayors, are talking about waving a white flag. Legalize the stuff, some of them say, and be done with it. Let multinational companies take the business -- and the profits -- away from criminals. Stop the gunfights, the car bombs, the street crime, the bribes. Drug barons can sell their fleets of airplanes and go back to stealing cars, or whatever they were doing when all this started. The idea is tantalizing, but simplistic. It addresses only one aspect of drug use -- the prevailing criminality -- without raising the question of how people can be persuaded not to use drugs in the first place. Moreover, legalization would have different effects on the markets for different drugs. At best it is not a solution but a trade-off: lower crime, perhaps, in return for the risk of greater drug use, addiction, and health costs. Still, as Ronald Reagan used to say about the economy when he was running for President in 1980, what we're doing now isn't working. America needs a radical rethinking of its stance toward drugs. There might even be a place for legalization as part -- but only part -- of a carefully crafted policy that seeks to create a legal market for marijuana separate from that for heroin, cocaine, and its cheaper derivative crack. The money and police time freed up by legalizing pot could help pay for a more effective crackdown on hard drugs plus more programs for rehabilitation of addicts. Legalization of all drugs is a last-stand position based not on the notion that hard drugs are good for people, but on the widespread perception that the government has thrown all its resources into the struggle and failed. That perception is flawed. Despite the tough rhetoric, the war on drugs has been less than total. The Administration's most recent policy is Zero Tolerance, which is supposed to mean just that. The smallest pinch of drugs found in a million-dollar yacht would be enough to justify seizure. No holds barred, nobody gets off. The reality is different. Yachts were seized, then given back. Punishment of offenders is wildly inconsistent. A Florida court in May convicted Carlos Lehder, a handsome pilot who looks as if he stepped out of a television thriller. He faces a prison sentence of life plus 150 years for smuggling cocaine into the U.S. About the same time, a judge in Manhattan put on probation a woman convicted of attempting to sell 174 vials of crack. As long as street sellers go free, Carlos Lehder's colleagues in the Colombian cartel can keep on producing and shipping cocaine to the U.S. Nor can it be said that society is uniformly tough on drug users. When traces of drugs were found in the body of a railroad engineer, killed when he rammed into the rear of a standing train last spring in New York, his union resisted the understandable call for mandatory drug testing. Job seekers in other kinds of work aren't so keen on testing either. Probably Americans have no stomach for pushing drug law enforcement anywhere near the max. In Malaysia, after all, drug trafficking is punished by hanging. The task is to develop a policy in line with American concepts of civil liberties and within the limits of U.S. resources. A first step is to decide that a drug-free society should not be the goal of policy. The thinking behind Zero Tolerance, says Dr. David F. Musto, professor of psychiatry at Yale, ''is part of a typically American ideal about the perfectibility of man.'' Total success is unattainable and policymakers who try to achieve it will overlook intermediate measures that may do a better job of helping people kick the habit or keep from developing one in the first place.

One of those steps could be the unthinkable: legalization of marijuana. Since the early 1970s aging flower children have pushed for legal pot on grounds of -- as they would put it -- common sense. They argue that the drug is nonaddictive, widely used, and probably no worse a health hazard than alcohol. This ''Why not?'' approach never got anywhere, because it was easily countered with ''Why?'' Who needed another social problem no worse than alcohol? Now some surprising data from the Netherlands suggest that there might be a more compelling reason to legalize marijuana. Pot has already been decriminalized in some U.S. states, though not completely legalized. Possessing small amounts of marijuana is punishable only by a small fine in New York, Ohio, California, Oregon, and seven other states; it could result in prison elsewhere. In places where the harsher laws remain on the books, police often put a low priority on making arrests for small transactions involving marijuana and hashish, because of limits on the number of cops, courtrooms, and jail cells. The result is de facto decriminalization in much of the country at the local level. Still, the Drug Enforcement Administration (DEA) continues to watch out for marijuana use and U.S. Customs officers might confiscate your car if they catch you bringing in some joints from Mexico. Drug enforcement agents still spend a lot of time and money chasing down foreign suppliers. The importance of a legal market for marijuana is that it could help steer young people away from hard drugs by breaking the connection between marijuana smokers and drug pushers. The chief agent in the descent of people into hard drugs is the pusher. In the inner cities especially, pushers are walking drugstores, selling marijuana and hashish, barbiturates, stimulants, cocaine, and heroin. The first sample is usually free. Data from the National Institute of Drug Abuse show that, aside from alcohol, marijuana is the first drug most young people try. If they are buying pot on the street, as most of them must, then they will be exposed to the rest of the pharmacopeia. THE NETHERLANDS provides a fascinating example of how creating a separate market for marijuana and hashish can help cut heroin use. As hard drugs washed across the world in the late 1960s and early 1970s, many young people in the Netherlands became addicted. A dozen years ago, in an attempt to reverse the trend, the government tripled the jail term for trafficking in hard drugs. At the same time officials declared that they would not prosecute anyone found with less than 30 grams of marijuana and hashish, though laws against the drugs remained on the books. Since then small amounts have been sold openly by operators of coffeehouses in Amsterdam, usually under the watchful eye of the police. ''Because we want separation of markets,'' says ministry of justice drug policy adviser M.A.A. van Capelle, ''we're interested in keeping a small market in soft drugs so people will know where to get it.'' Police don't look too closely into where the coffeehouses get their supplies, but if proprietors start mixing in hard drugs or sell amounts of pot deemed excessive, the place is shut down. The result is that a youngster curious about pot can buy it and use it in a safe place. He won't be arrested and he won't be exposed to pushers of hard drugs. The Dutch worried at first that their new policy would cause a surge in marijuana use. In fact, according to the government, consumption has fallen. This decline may reflect the growing disaffection with drugs characteristic of the post-Flower Power era, but it is no less noteworthy that it occurred in a period of more open availability. The real payoff, though, is that use of heroin, the hard drug of choice in the Netherlands, has fallen too, particularly among young people. In 1981, 14% of heroin addicts were under 22; today the figure is 4.8%. Critics of legalization will argue that the United States is not the Netherlands. Indeed not. The U.S. is a more heterogeneous society, with no institution quite comparable to the friendly Dutch coffeehouse. Americans might not be as comfortable relying on the discretion of local cops in the enforcement of -- or in winking at -- marijuana laws. Another approach here could be to legalize marijuana outright and make liquor stores the point of sale. The age restriction could be the same as for alcohol. The government could tax pot, with the revenue used to finance hard-drug treatment programs. If pot were taxed like cigarettes, it would generate an estimated $11 billion a year. Some $1.2 billion in state and federal money is now spent annually on drug treatment. Legal pot would likely be a home-grown U.S. industry, removing it still further from the criminal elements in the international drug trade. American- grown marijuana now satisfies 25% of domestic demand, up from 9% when Reagan took office. The U.S. Drug Enforcement Administration believes that the U.S. will be the world's largest producer by the early 1990s, and soon after that a net exporter. Marijuana is already the largest cash crop in California. Doctors still differ about the damage marijuana smoking inflicts, though they are beginning to agree that prolonged regular use may be risky, particularly to short-term memory and the lungs (marijuana contains tar, like cigarettes). As does alcohol, marijuana impairs perception, coordination, and memory. Long-term effects on the brain and the lungs are not yet known. The heart works harder, increasing blood pressure, a risk to people with hypertension. THC, the active ingredient, lowers the concentration of reproductive hormones in the bloodstream. But occasional use is unlikely to cause lasting health problems, and most people tend to use marijuana for only a short period of their lives. A larger concern is whether more people would use marijuana if sanctions were removed. No one knows for sure. The ranks of drinkers grew by only about 10% after Prohibition ended. A recent survey of high school seniors across the nation by the University of Michigan shows that while fewer are smoking marijuana, the vast majority (85%) find it readily available. Those who don't probably haven't been looking. The case against legalizing hard drugs is twofold. First and foremost, the possibility of an explosion of addiction is too grave a risk regardless of any supposed benefits. Second, many of those benefits are illusory. One of the arguments for legalization is that the price would drop dramatically with the elimination of the huge criminal-risk premium, and addicts would no longer have to steal to support their habits. Dr. Mitchell S. Rosenthal, president of Phoenix House, a New York-based drug rehabilitation center, disputes that. For many addicts, he points out, crime is the way they earn money for all their needs, not just for drugs; because they are addicts they are unsuited to ordinary occupations. ''If you give somebody free drugs you don't turn him into a responsible employee, husband, or father,'' says Rosenthal. ''A large number of drug addicts have serious underlying problems.'' Some advocates of legalization point to the British system of the 1950s, when heroin was available to addicts by prescription. The number of addicts remained stable for many years, and almost all were known to doctors. The aim was to wean addicts from the drug, but if doctors could not, they gave small doses that prevented withdrawal without producing a high. That ended with the worldwide drug boom of the 1970s. With drugs flooding into the country illegally, doctors could no longer control an addict's habit. Addicts will go for a kick if they can find one. Unable to get enough heroin from doctors, they turned to the illegal market. The prescription system died out. Even if a separate, legal market for marijuana were successful in slowing the growth of hard-drug users, the U.S. would still have to contend with those already hooked. That means continued, even increased, pressure on heroin and cocaine dealers, but with a more balanced effort than the U.S. has been pursuing. The emphasis has been on stopping drugs in the source countries. The huge profits of drug producers have worked against that approach. The drug barons are so rich they have managed to bribe high officials and sometimes whole governments. ''In the long run the real answer to the drug problem is not interdiction,'' says Robert Stutman, special agent in charge of the Drug Enforcement Administration office in New York. ''Even using the military won't make a major difference.'' Peter Reuter, a senior economist at the Rand Corp., points out that since prices are so high, a drug dealer can still make big money even if lawmen seize most of a shipment. But there are some steps the U.S. can take. International cooperation may be the most promising. Countries where drugs are produced once took the view that drug use was an American problem. Now that they are discovering that the number of addicts within their borders is growing, they have become more willing to explore joint action against drug producers and dealers. At home, the U.S. needs a unified, coordinated policy that extends from federal drug enforcement officers down to local judges and cops. Agents from the DEA and the FBI conducted separate undercover investigations into laundering of Colombian drug money. Both operations hit pay dirt, but did there have to be two? More enforcement dollars should be pushed down to the street. New York City officials claim to have had great luck with Operation Pressure Point, which focused police manpower on the streets of the Lower East Side. Says Sterling Johnson Jr., special narcotics prosecutor for the city: ''Pressure Point was a tremendous success in taking the community back, literally, from the drug dealers.'' Mark Kleiman, a lecturer on criminal justice at Harvard University's Kennedy School of Government, says that if police are active in the streets, they can increase the time a drug user must spend to find dope. ''If you are a heavy user and the probability of not connecting is great,'' says Kleiman, ''that becomes a strong argument for getting into a treatment program.'' If an addict looks for a program, however, he had better be able to get in. In New York City, New Haven, and Portland, Oregon, the waiting list for treatment can be several months long. Not every addict would avail himself of help even with limitless facilities, but it is unconscionable that people must be turned away when billions are being spent on interdiction that at most raises the street price of drugs by a few dollars. When a drug user is ready to go for help, he should be able to do so without a long wait. ''One of the differences between drug users and us is time scale,'' says David Turner, director of the Standing Conference on Drug Abuse, based in London. ''We want things immediately, but we can cope with delay. An addict is used to taking heroin and getting immediate relief. It's not surprising that if he is told he can have an appointment in four weeks, he will probably forget about it.'' The best solution to the drug problem is societal change. That takes a long time. A good start is instilling an understanding of the potential hazards of drug use at an early age. Signs are that the numerous school programs across the country are beginning to work. The University of Michigan survey shows drug use among high school seniors down 13.6% since 1982. (The survey excludes teenagers who have dropped out, however, the biggest group of crack users.) The role that education can play is apparent in Massachusetts, which has developed a range of curricula for kindergarten to the 12th grade. ''The program is really one part hard facts about drug education and three parts comprehensive health education,'' says Marianne Lee, deputy director of the Massachusetts Governor's Alliance Against Drugs. ''A fourth of all children live in a home where there is a substance-abuse problem. We teach kids how to deal with that, and how to keep their self-esteem intact.'' Since 1984 the number of high school students who have tried illicit drugs has dropped 11%, vs. a national decline of 7%. The downside is that alcohol use remains high in Massachusetts; 61% of students said they had used it at least once in the 30 days before the survey. IS THE JUST SAY NO campaign helping? ''It's not enough to tell kids to say no,'' says Lee. ''We have to give them a reason to say no.'' Perhaps the phrase has had to bear more weight than it was meant to. Originally coined as a slogan for very young children, it was latched onto as a motto by drug treatment programs of all types. More sophisticated kids are not impressed by it. Some educators worry that legalizing marijuana while continuing a tough stance toward hard drugs might send a confusing message. But American society transmits many conflicting signals about addictive substances. For example, while the Surgeon General rails against smoking, Congress continues to subsidize tobacco growing. A policy of compromise could give an outlet to people who wish to experiment with soft drugs and their small intoxications, deglamorizing those drugs while vilifying those that are deadly. That just might help break the spiral of criminality and violence without throwing open the doors of chemical invention to those who may not be able to resist.