To many people, the "war on drugs" sounds like a metaphor, like the "war on poverty". It is not. It is being fought with tanks and sub-machine guns and hand grenades, funded in part by your taxes, and it has killed 28,000 people under the current Mexican president alone. The death toll in Tijuana – one of the front lines of this war – is now higher than in Baghdad. Yesterday, another pile of 72 mutilated corpses was found near San Fernando – an event that no longer shocks the country.

Mexico today is a place where the severed heads of police officers are found week after week, pinned to bloody notes that tell their colleagues: "This is how you learn respect." It is a place where hand grenades are tossed into crowds to intimidate the public into shutting up. It is the state the US joint chiefs of staff say is most likely, after Pakistan, to suffer "a rapid and sudden collapse".

Why? When you criminalise a drug for which there is a large market, it doesn't disappear. The trade is simply transferred from off-licences, pharmacists and doctors to armed criminal gangs.

In order to protect their patch and their supply routes, these gangs tool up – and kill anyone who gets in their way. You can see this any day on the streets of a poor part of London or Los Angeles, where teenage gangs stab or shoot each other for control of the 3,000% profit margins on offer. In Dublin and Limerick, the vast majority of gang killings are drug related. Now imagine this process taking over an entire nation, to turn it into a massive production and supply route for the Western world's drug hunger.

Why Mexico? Why now? In the past decade, the US has spent a fortune spraying carcinogenic chemicals over Colombia's coca-growing areas, so the drug trade has simply shifted to Mexico. It's known as the "balloon effect": press down in one place, and the air rushes to another.

When I was last there in 2006, I saw the drug violence taking off. Since then the victims have ranged from a pregnant woman washing her car, to a four-year-old child, to a family in the "wrong" house watching television, to a group of 14 teenagers having a party. Today, 70% of Mexicans say they are frightened to go out because of the cartels.

The gangs offer Mexican police and politicians a choice: "Plata o ploma". Silver, or lead. Take a bribe, or take a bullet. President Felipe Calderon has been leading a military crackdown on them since 2006 – yet every time he surges the military forward, the gang violence in an area massively increases.

This might seem like a paradox, but it isn't. If you knock out the leaders of a drug gang, you don't eradicate demand, or supply. You simply trigger a fresh war for control of the now-vacant patch. The violence creates more violence.

This is precisely what happened – to the letter – when the United States prohibited alcohol. A ban produced a vicious rash of criminal gangs to meet the popular demand, and they terrorised the population and bribed the police. Now 1,000 Mexican Al Capones are claiming their billions and waving their guns.

Like Capone, the drug gangs love the policy of prohibition. Michael Levine, who had a 30-year career as one of America's most distinguished federal narcotics agents, penetrated to the very top of the Mafia Cruenza, one of the biggest drug-dealing gangs in the world in the 1980s.

Its leaders told him "that not only did they not fear our war on drugs, they actually counted on it... On one undercover tape-recorded conversation, a top cartel chief, Jorge Roman, expressed his gratitude for the drug war, calling it 'a sham put on the American tax-payer' that was 'actually good for business'."

So there is a growing movement in Mexico to do the one thing these murderous gangs really fear – take the source of their profits, drugs, back into the legal economy. It would bankrupt them swiftly, and entirely. Nobody kills to sell you a glass of Jack Daniel's. Nobody beheads police officers or shoots teenagers to sell you a glass of Budweiser. And, after legalisation, nobody would do it to sell you a spliff or a gram of cocaine either. They would be in the hands of unarmed, regulated, legal businesses, paying taxes to the state, at a time when we all need large new sources of tax revenue.

The conservative former president, Vicente Fox, has publicly called for legalisation, and he has been joined by a battery of former presidents across Latin America – all sober, right-leaning statesmen who are trying rationally to assess the facts.

Every beheading, grenade attack, and assassination underlines their point. Calderon's claims in response that legalisation would lead to a sudden explosion in drug use don't seem to match the facts: Portugal decriminalised possession of all drugs in 2001, and drug use there has slightly fallen since.

Look carefully at that mound of butchered corpses found last week. This will keep happening for as long as we pursue prohibition. How many people have to die before we finally make a sober assessment of reality, and take the drugs trade back from murderous criminal gangs?