There's a powerful new piece of evidence that, the way it is being fought, the war on drugs on the Mexican-American border is a lost cause. It comes in a report issued by the Council on Foreign Relations, a highly-respected foreign policy think tank, that recommends that, as an experiment, the federal government allow states "to legalize the production, sale, taxation and consumption of marijuana." The report says authorities should redirect scarce law enforcement resources to stopping the importation of more dangerous drugs like heroin, cocaine and methamphetamine.

A spokesperson points out that the council takes no position on the reports it publishes by the people it calls "our experts," in this case Professor David A. Shirk of the University of San Diego, a scholar on U.S.-Mexican relations and a former fellow at Washington's prestigious Woodrow Wilson International Center for Scholars. But the spokesperson adds that in her four years with the council she cannot recall its issuing any other report recommending legalizing marijuana. The report also recommends a commission to study the advisability of legalizing drugs generally.

The report is scathing in its criticism of current U.S. and Mexican drug policy. It says "a state-driven, supply-side and penalty-based approach has failed" to curb illegal drug production and consumption, and that "The assumption that punishing suppliers and users can effectively combat a large market for illicit drugs has proven to be utterly false. Rather, prohibition bestows enormous profits on traffickers, criminalizes otherwise law-abiding users and addicts, and imposes enormous costs on society. Meanwhile, there has been no real effect on the availability of drugs or their consumption."

The report calls for a rethinking of U.S. drug policy to include more security cooperation with Mexico, including appointment of a presidential special assistant to coordinate it; a more serious focus in the U.S on drug demand, organized crime, firearms and money laundering, and more economic aid to Mexico; and Congressional appointment of an independent commission to study the "the fiscal and social impacts of drug legalization as well as other alternative approaches to the war on drugs." How much difference any of that would make, and how much is feasible, is another story.

Back in the present world, the latest approach to the problem came last week, in a hastily-called summit between President Obama and Mexico's President Felipe Calderon. To hear their gushing public statements, all that was missing from the meeting was a mariachi band and margaritas all around.

Obama professed "nothing but admiration" for his guest's and Mexico's "extraordinary courage" in combating the drug cartels which have turned parts of that country into killing fields, with 35,000 deaths since the Mexican leader took office and declared war on drugs in 2006. Calderon responded with gratitude to the U.S. president he called "a good friend to Mexico."

Obama acknowledged that this country must "take responsibility" for providing the world's biggest market for Mexican drugs and most of the guns used by the cartels.

In fact, the meeting was called because relations between the neighbors have reached a low point, with Calderon telling the Washington Post that WikiLeak's release of U.S. embassy cables critical of Mexico's war on drugs had caused "serious damage" to Mexican-American relations.

Calderon even complained to Obama that he'd lost trust in the American ambassador to Mexico, Carlos Pascual, author of some cables, including one that disparaged the Mexican army's "refusal to move quickly" to arrest a major drug trafficker, which "reflected a risk aversion that cost the institution a major counter-narcotics victory."

Other embassy cables were much harsher. One on Jan. 29, 2010 suggested that despite the fact that he "aggressively attacked" the cartels, Calderon was losing the war, "vulnerable to criticism that his anti-crime strategy has failed." "Official corruption is widespread," it added, noting: "Prosecution rates for organized crime-related offenses are dismal; two per cent of those detained are brought to trial."

Last month's murder of an American federal agent in Mexico made the summit atmosphere even worse. The gun used to kill him was smuggled from the United States. And came the revelation that the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives lost track of hundreds of guns it had allowed smugglers to get their hands on in ATF's effort to trace them to cartel higher-ups.

The situation in Mexico is horrendous and has been getting worse since Calderon launched his drug offensive in December 2006, that now includes 50,000 soldiers and thousands more new policemen. Government statistics show 2,826 people were killed in 2007; more than twice that number, 6,837, in 2008; an additional forty per cent, 9,614, in 2009; and almost sixty per cent more, 15,273, last year.

The 2010 victims included a dozen mayors and a candidate for governor. Although two-thirds of these homicides are concentrated in only five of Mexico's 32 states and fewer than 10 per cent of its communities, the spreading danger has heightened people's fears throughout the country and caused a terrible loss of faith in government.

Mexican officials say that the vast majority of the dead are drug gangsters, an assertion veteran American reporter Charles Bowden calls "preposterous." "Most of them are nobodies...They're men, women, kids, poor people in barrios," he says. The viciousness of the traffickers knows no bounds. Mass graves and dismembered body parts, including severed heads have been found in many places -- including the head of a baby, in the middle of a street. In December 2009, Mexican marines shot and killed druglord Arturo Beltran Leyva. One marine was killed in the operation. Hours after the serviceman's funeral, the gangsters took revenge on his family -- killing his brother, sister, aunt -- and his mother.

The situation is worst in Ciudad Juarez, a city of 1.3 million people, a drug smuggling and gang strife center just across the border from El Paso, Texas. More than 3,000 people were killed in Juarez last year, and 2,763 the year before, "a number that exceeds the combined annual totals for New York, Chicago, Los Angeles and Washington D.C.," according to the council report.

In February 2009, narco-gangsters forced the police chief -- a retired army major -- to flee the city to avoid being killed. He left town after the gangs threatened to kill a police officer every 48 hours until he quit. They made their threat good by killing his deputy, three other officers, and then another cop and a prison guard. Following the chief's flight, the federal government ordered in 5,000 soldiers to take over Juarez's notoriously corrupt police department. That was in addition to several thousand military men and federal police already there. Today there are 11,000 soldiers and police in Juarez. As their numbers have increased, so have the killings.

According to Charles Bowden, that is no coincidence. In his recent book about Juarez, entitled Murder City, Bowden charges that rather than fighting the cartels to stop the drug trade, police and the army -- both corrupt from top to bottom -- are battling the gangsters for their piece of the action. Mexican and American governments and media present a mythical war ON drugs, Bowden says. Rather, "the war is FOR drugs; the police and the military fight for their share of the profits."

There is certainly ample evidence of military and police corruption. Top law enforcement officials arrested include the federal police chief, two former heads of the organized crime division, and the ex-director of Mexico's Interpol office.

As for the army, at least five Mexican generals -- including the country's top anti-drug official -- were jailed in the late 1990s on drug corruption charges. Corruption reaches into the ranks. On March 1, 13 soldiers were ordered to stand trial after allegedly being caught transporting more than a ton of methamphetamines and 66 pounds of cocaine. Bowden writes that "The Mexican army is a government-financed criminal organization," and says in interviews that while hundreds of police have been killed by the cartels, "the army has lost maybe 100 people."

These days many Mexican reporters rarely write anything critical of the military. Bowden writes that when one of them, Emilio Gutierrez, reported citizen accounts of soldiers robbing people he was summoned before an army general who called him a "son of a whore" and threatened: "you'll be sent to hell." In 2008, after writing other stories suggesting soldiers might be killing innocent civilians, he fled to the U.S. after soldiers raided his home and he got death threats.

The drug war has been hard on journalists generally. Mexico's Human Rights Commission says 66 were murdered between 2005 and 2010 and another 12 disappeared. One Mexican reporter spoke for many others, telling Editor & Publisher online: "We just don't cover the violence anymore. It's too dangerous for us." Worse, Mexico's justice system is a farce. According to the council report, three out of every four crimes go unreported because Mexicans lack faith in the system. Justifiably so. Like the embassy cable, the report speaks of "widespread criminal impunity, with perhaps two out of every one hundred crimes resulting in a sentence." Bowden says that in Juarez in 2009, the 2,763 murders resulted in only 30 arrests.

Mexico's drug business is huge. Estimates run from $30 to $50 billion, up to five per cent of the country's $1 trillion GDP. The drug trade provides employment and income for almost half a million Mexicans. That is one reason that change will be difficult. But if Mexico continues on its current path, with the government losing its battle with the cartels, some warn it may become -- or is already becoming -- a failed state. The council report denies that is happening. But a worst case assessment by the U.S. military Joint Forces Command was that Mexico could suffer a sudden collapse into a failed state in the near future. And that assessment came in 2008. The situation has gotten a lot worse since then.

We worry about Afghanistan and Pakistan as failed states. They are thousands of miles away. Mexico is right next door.