1) Drug and alcohol addiction is a horrible thing that can completely ruin people's lives. Addiction can cause one of the worst things that can be inflicted on a person: the transformation of a human being into a semi-sentient brute.
2) Making drugs illegal does not do much to stop the damage they do, and generates a lot of very nasty side effects. Incarceration can often do as much damage to a person's mind and character as an addiction
It is a very common human instinct, when confronted with something that causes so much death and pain, to try to make it illegal. The problem is that the process of 'making something illegal' is very different than what our instincts think it is. Our emotional and social instincts evolved in a time when humans lived in tribes of about a hundred people. In that setting, you can usually accomplish what you want to accomplish by gathering everyone together, talking things over, coming to an agreement, and then monitoring each other for compliance. If the tribe agrees that something should be taboo, then enforcing the taboo is generally pretty easy and effective, and agreeing to make bad things taboo is generally a good idea.
When most people say something like "this should be illegal" what they usually mean is "We should all agree that this is a bad thing that should be avoided." They usually do not mean "Agents of the state should seek out anyone who does this and throw them in a cage with violent criminals, even if they are otherwise blameless and productive members of society." The problem is that in a modern society, 'making something illegal' implies the latter and not the former.
The drug debate highlights the fact that laws have two wildly different functions. The first function of law, the one that economists usually focus on, is altering the costs and benefits for certain kinds of behavior. The second function of law, the one that most people instinctively focus in, is shaping the social and moral structure of society. By passing a law, you are making a strong social statement that certain kinds of behaviors are not acceptable, and trying to shape a society where those behaviors do not exist. We need a way to separate these two functions, so that we can make strong social statements against things without actually imposing large costs on the people who do them.
There are two kinds of drug and alcohol users. Casual users are those who gain some benefits from the drug and do not suffer any major problems from it. The vast majority of Americans are casual users of both alcohol and caffeine. Quite a large number of people are physically addicted to caffeine, which is a mind-altering drug quite similar to cocaine, but the delivery mechanisms in place and the social knowledge of how much to use prevent the addiction from spiraling out of control. It is possible to be a casual user of a 'hard' drug, and it is possible for safe and well-functioning markets in those drugs to exist, as this article demonstrates.
Making a drug illegal harms casual users. They either lose the benefits of the drug, or they are forced to obtain it from criminals and risk being harmed by both those criminals and the state. There is also evidence that making drugs illegal actually increases the risks of casual users becoming addicts, for a variety of reasons. The quality is less predictable, people have an incentive to use stronger versions of the drug, and the social norms that enable safe habits of use are destroyed:
Prescribing heroin, as Switzerland and the Netherlands do, seems to cut the number of users a lot, as dealer-addicts are taken out of the equation, breaking the link between wholesalers and casual customers. Decriminalising the possession of cannabis in Western Australia and Portugal (which decriminalised possession of all drugs in 2001) had no impact on consumption, but saved a lot of money. A study of American states found no link between the diligence of enforcement and changes in user numbers. When Britain reclassified cannabis as a less serious drug in 2004, consumption slumped. (Despite that, the government backtracked five years later.)
Making a drug illegal also harms addicts. They find it very hard to get help with their debilitating problem, and the penalties for their use make the problem even worse. They end up becoming victims of criminals and of their own government, in addition to their condition.
I believe that, in a perfect world, nobody would use drugs. I include alcohol and caffeine in this statement, as well as processed superstimulus foods that can trigger addictive behaviors. Note that I do not think that consuming these things is morally wrong. I just think that the consumption is either foolish, pointless, or only of value in limited situations.*
But I also believe that all drugs should be legal. Attempts to combat the damage they do by making them illegal have all failed miserably, causing huge social problems without any noticeable decline in drug use. We should just learn to accept that there will be damage from addiction, the way we accept the 30,000 deaths caused on our roads each year.
Of course, we should work to minimize that harm, the same way we engineer cars to make them safer. But stopping the harm that drugs do is a very hard problem, much harder than installing seat belts and telling people to use them. The only things that seem to work are instilling self-control and rational thinking in people, and creating a society where everyone knows the acceptable ways of using the substance in question. But that is a lot easier said than done.
*I will consume alcohol if it is served to me in social situations, but I do not buy it or seek it out.