I guess the issue now is that in most people's minds, "Drugs are bad, mmkay?" (as the guidance counselor in South Park once said).
As long as everyone believes that drugs are bad, then I think we won't escape from the situation we're currently in. We can pour more money into the problem and increase the number of people that are arrested, but that won't solve this.
I honestly think that the best way to solve this "problem" (if it is a problem) is to begin legalizing drug use. I don't know how I feel about the harder drugs, but at the very least, I think marijuana use should be legalized. I mean, really, if someone wants to smoke MJ in the comfort of his own home, I don't care. If he drives while under its influence, then yes, I do have a problem with that. But the fact that MJ is treated as something different from cigarettes and alcohol is, in my opinion, pretty dumb.
If marijuana use is legalized, then the government could spend less money arresting dealers & users... and at the same time, they could control the marijuana that comes into the country and tax it, like cigarettes. So what happens? Government spends less and takes in more money. Fewer people are jailed, and those people have more money to spend (due to not having to pay for bail / lawyer's fees), which will improve the economy. I imagine that the legalization of marijuana might result in more people smoking marijuana. As long as that doesn't bother you, I don't see any other problems.