"A nation of junkies" ... drug use is common in Australia's clubs. He continued: "It's for others to explain why they do it and I wouldn't want to be the one who jumps in here and does it. You go first." I was suddenly furious. This was Sydney, not Singapore. Sure, there was an ABC crew filming our exchange for Big Ideas but weren't we free to speak in this country? Hadn't Lloyd earned the right to be absolutely candid by enduring six unnecessary months in Tanah Merah Prison? Yet here he was, as wary of talking as if he were still in the dock. "I've had a lot of fun on drugs," I answered. "I've had a lot of marvellous experiences. I've danced a lot. I've had a great time. I'm not ashamed of it. And I don't see what's wrong with it." Lloyd joked about seeing the story the next day in The Australian. I wasn't in the mood for jokes. "It is a deeply troubling issue of public administration, law and of justice," I said. "It's part, in this country, of a failed effort around the world to stop the drug trade. It fails.

Journalist Peter Lloyd, arrested in Singapore in 2008 for possession of a small quantity of ice. "But why can't we speak frankly about this, frankly from our own experiences and frankly about the impact on the law and this country of what seems to me to be the utterly failed war on drugs?" Lloyd replied: "Take News Limited out of the equation and you probably can talk about it fairly." He accused News Limited newspapers of being "the driving force behind moral panic in this country. Join with them commercial television: Channel Seven, Channel Nine and Channel Ten. I've worked at two of those places. They drive moral panic and the agenda they have is set by The Daily Telegraph and The Herald Sun in Melbourne. Take them out of the equation or stop listening to them – if politicians would stop listening to them – then we wouldn't have the moral panic we're talking about." Ecstasy tablets... the drug is Australia's second most popular choice. Credit:Viki Yemettas I knew at that moment I'd dealt myself back into a story I hadn't covered for years. When I came back to newspapers in the mid-1990s after a long time away in television and writing books, the war on drugs seemed waiting for me: deaths, addiction, corruption and failed attempts to bring calm and good sense to a deeply difficult issue. I'd reported it for a decade.

1994 Though E is for Ecstasy is on sale around the world, the book is banned in Australia. Why? Because new censorship codes are designed to pursue the war on drugs. Books and films can be banned for showing drugs and addiction "in such a way that they offend against the standards of morality, decency and propriety generally accepted by reasonable adults". In any week, a million Australians are smoking, popping or shooting up. The authors warn these figures are almost certainly too low 1994-97 Supreme Court judge James Wood's royal commission lays bare systemic corruption of the NSW Police Force by the drug trade. Wood's cautious suggestions for decriminalisation are brushed aside by then-NSW premier Bob Carr. 1996 Bill Clinton's chief international drugs enforcer, Bob Gelbard, flies in to threaten Tasmania's legal and lucrative poppy-growing industry to stop the ACT going ahead with a heroin trial. The trial never happens. 1999 Cardinal George Pell quashes plans by the Sisters of Charity to open a safe injecting room at St Vincent's Hospital in Darlinghurst.

2001 The NSW Director of Public Prosecutions Nicholas Cowdery, QC, attacks the "law and order auctions" held at every state election: "My view is that the so-called war on drugs is going the way of most other wars. It's costing time, it's costing money, it's costing lives, it's achieving nothing other than creating more crime, which I then have to prosecute." 2005 Australian-raised Nguyen Tuong Van faces execution in Singapore for running drugs. Our hearts are hard. Talkback is loud in its admiration for Singapore. A couple of nights before the kid's death, Roy Morgan Research finds a great swathe of the nation wants Nguyen to die for trying to smuggle half a kilogram of heroin to Melbourne. America began its crusade to rid the world of opiates after it occupied the Philippines in the 1890s and discovered opium smuggling was rife in those islands. A passionate fear of opium had grown up in America during the Californian gold rushes – fear mixed up with distaste for the Chinese who smoked the stuff. Race has always been an element in this enduring moral panic. So, in the first years of the new century, America set out to cleanse the world, especially the white world, of the opiate scourge. At a conference called in Shanghai in 1909, a number of world powers signed up to the American mission. Every one of the dozens of treaties banning drugs since has been, in a sense, a forlorn attempt to make the Shanghai strategy work. The League of Nations took up the cause. In Geneva in the 1920s Australia joined most of the rest of the world in putting cannabis – the oldest continuously used drug on earth – on the banned list. The United Nations took over from the league but America continued to drive the cause of drug eradication. As the conventions grew tougher, Australia kept signing them.

Australia had no heroin problem of its own until the Vietnam War started winding down and the US Drug Enforcement Agency successfully stopped heroin following the troops home. "The DEA in effect compelled the syndicates to sell heroin originally produced for American addicts in alternative markets," wrote Alfred McCoy in Drug Traffic: Narcotics and Organized Crime in Australia. "In short, the DEA simply diverted south-east Asian heroin from the US into European and Australian markets." Heroin washed into Australia. The treaties we had entered into did little to inhibit supply and left us unable to take any radical initiative to cope with the unfolding disaster. Yet we kept on signing these treaties. In 1992 we ratified the UN's Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, which made the most sweeping promises yet to rid the world of drugs. It's not going well.

"The overall number of drug users appears to have increased over the past decade, from 180 [million] to some 210 million people," says the 2011 World Drug Report of the UN's Office on Drugs and Crime. More than 7 million of those people live, work and love in Australia. We know that because the Australian Institute of Health and Welfare conducts a huge survey of our drug habits every three years. The latest results are based on questionnaires completed by 26,000 households in the middle of 2010. Marijuana is by far the most popular drug: more than 7 million Australians have tried it at some point in their lifetime. Ecstasy is our number-two drug of choice: 2 million of us have given it a go and another half a million of us have used the dance drugs GHB and ketamine. By the time Australians turn 20, 37 per cent of us have already tried illicit drugs and that figure rises to a shade less than 60 per cent by the time we turn 40. That's mainstream. In any week, a million Australians are smoking, popping or shooting up. The authors warn these figures are almost certainly too low: "It is known from past studies of alcohol and tobacco consumption that respondents tend to underestimate actual consumption levels." Our enthusiasm for taking drugs does not translate into fervour for drug law reform. "Privately, we are a nation of drunks, junkies and pill-poppers and we always have been," argues Craig Fry, an associate professor at Melbourne University and an expert on patterns of illicit drug use.

"Publicly, the dominant community attitude on drugs in Australia is disapproval and fear, and this feeling seems to be growing." The figures bear that out. The latest Australian Institute of Health and Welfare research shows us as implacably hostile to dealers and suppliers: 80 per cent of us would like even harsher punishment for those caught pushing heroin, cocaine, amphetamines and ecstasy. And support for legalising those drugs doesn't reach double figures. Even though we are as a nation far more relaxed about marijuana, only 25 per cent of us actually want to see it legalised. The default position of the nation remains: drugs are criminal. For a while we were at the forefront of developing harm-minimisation strategies: needle exchanges, methadone, drug courts, allowing smokers to grow a few plants and a safe injection room in Sydney. Much of that was AIDS-driven. But then the reform push stalled in the face of relentless opposition from the Coalition, some churches and tabloid media.

For a time the Greens had a platform calling for legalisation along lines now familiar in Switzerland, Portugal and the Netherlands. But, under continual press attack, it was first watered down and then all but abandoned at the party's annual conference in Hobart six years ago. Scientists, lawyers, police, social workers, doctors and directors of public prosecution are pleading for change but no political party will touch the issue. Public debate on the subject remains as primitive as ever. After all these years we are still dealing with the basics – over and over again. That's no accident. It's what panic does. As I wandered out of the bookshop that night, leaving Peter Lloyd upstairs signing copies of Inside Story, I was counting off in my mind the politicians who have confessed, as I had, to taking drugs. Bill Clinton in 1992 was not the first but remains the funniest: "I didn't inhale." Barack Obama did: "Frequently. That was the point." And in his memoirs the President confessed to using a little "blow" as a young man. These confessions don't end careers in moralising America because drugs cross the party divide. George W. Bush would not tick off on a rumoured long list of substances. He only said: "When I was young and irresponsible, I was young and irresponsible." Then he found Christ.

Bankers and barristers, teachers and journalists can keep silent in public about their good times and bad on drugs. Politicians have to come clean. To be caught lying would be fatal. Who knows – and who can remember – what witnesses there might have been to those tokes at university? Natasha Stott Despoja seems to have the honour of being the first Australian politician to come clean. Answering her own party's "Youth Poll '97", the Democrat senator admitted smoking marijuana but declined to say if she had ever tried ecstasy or speed. The Daily Telegraph reported: "She didn't want to upset her mother with the answer." Politicians in Australia can't, it seems, admit enjoying what they did or own up to anything but dope.

It's still a plus to claim you never inhaled. "In this matter," Tony Abbott said, "Bill Clinton and I have something in common." The list of confessed dabblers among politicians is a long one. It includes former Victorian premier Steve Bracks, the former chief minister of the Northern Territory Clare Martin, the former foreign affairs minister Alexander Downer and the present head of the Greens Bob Brown – but, it seems, only once long ago. Malcolm Turnbull was ready to answer the question the moment he became leader of the Opposition: "Smoked dope? Well, yes, I have." He flushed out Gillard next day. "At university, tried it, didn't like it," said the nation's first female prime minister. "I think probably many Australian adults would be able to make the same statement, so I don't think it matters one way or the other." The Sunday Telegraph took a while to find my chat with Peter Lloyd on the ABC's website. I've no complaints: they gave me the lightest tickle on page three, under the headline "My love of drugs" and a fuzzy snap of me looking heavenwards, perhaps in delusion, perhaps in a state of bliss.

Loading Next week they published this brief letter from me: "The Sunday Telegraph made me sound as though I'm calling for an open slather on drugs. I'm not. I'm calling for an open debate on drug policy, a debate that draws on the experience – pro and con – of the 6 [million] or 7 million Australians who have tried recreational drugs." This is an edited extract from Panic, by David Marr, published by Black Inc., $29.95. Also available as an e-book.