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It seems strange that we should have to choose between criminalization or capitalization of drugs. We need to find better ways to keep the market from driving a service into something we don't want. Once there is legal money in it, a slow creep will lead to a powerful and consolidated industry, like private prisons themselves.
My knee-jerk reaction has long been legalization, but I could see a dark future there, and not because people would abuse drugs more. The dealers would not only be better organized, but they'd have lobbyists.
We regulate liquor, we regulate tobacco. Regulate weed in this way: it is legal to grow, but not to sell as a plant above two inches high (or whatever). You are also allowed to give it away, but not exchange it for money or goods/services.
People have their liberty to acquire and smoke, and this eliminates a lot of the evils of massively sophisticated capitalization. Would not have to be exactly that, but maybe something like it. Government could even get their tax on by making a mandatory license to grow.