On the first point, I would say the breakdown of morals leads to the later problems, and if you lose that, you lose society.  If you also foster a culture where everyone is led to believe they are supposed to get the best of the best, all you have to do is just "try hard enough" and if you are "good enough" you are guaranteed, or that such is a right, then you will have problems.

On the second point, the issue isn't to make it a great hassle, but to recognize that individuals using drugs can royally mess up their lives, and just like you would have with the ability to drive a car, if you want to do drugs, you need to agree you fully are aware of the consequences, and how you can get addicted and ruin your life, and you assume full responsibility for doing such.  Idea is to take just enough funds to make sure the negative externalities are covered for and people are responsible if they are going to do it.  I would also look to extend the license to the use of alcohol also.  Funds from taxes of it would also cover paying for needed law enforcement anfd so on.   What is happening is people verify they know the risks involved and you still end up making sure the funds covered make up for idiots who happened to get themselves addicted, so they can get off it.  Want to have the free market manage this, so that it is run more effectively?  Fine, but you make sure it is covered by society, and people fully understand what they are getting into before engaging in it.

Maybe. Consumerism isn't a replacement for an actual culture, after all, and in the day of multiculturalism, there is very little other culture left. But I don't think the approach of "work hard and get nice stuff" is nearly as bad as "society owes you, and rich people are screwing you over". Both may be consumerism, but at least the one produces a work ethic, while the other only breeds resentment and eventual class warfare of a very literal sort.

As for drugs, the problem is this: there already exists a well established and very efficient black market. If drugs are legalized but the prices are too high and regulation is too troublesome, that black market won't suffer one bit. Furthermore, drug dealers will cease being seen as predatory scum in the bargain. They'll become something cuter and quirkier instead, kind of like modern day bootleggers: cranks dealing in a product that was once stupidly prohibited in a more puritanical and less enlightened time, whose only real crime is dodging the kind of onerous government regulations we all hate. It's not that I worship the free market or think it's God or anything; it just works because its principles work. Government, meanwhile, has to be properly administrated, but these days it has reached an incredible level of bloat and incompetence precisely because it is so big that it and all its armies of bureaucrats are utterly unaccountable to anyone. It is literally impossible for the left hand to know what the right hand is doing in such a clusterfuck.

On this note, I want to discuss a bit about black markets.  For those who advocate totally free markets, unregulated by any sort and without any sort, where NO ONE can go to the authorities to blow the whistle, how well do they work, particularly regarding something like drugs?  Does having no government oversight, which would come from legalizing them, make them superior to legal products sold? 

Norway - $2.23 Trillion Debt

Denmark - $560 Billion Debt

Netherlands - $518 Billion Debt

Finland - $371 Billion Debt

Very high standard of living, but at a cost. And the US has huge debt thanks to social spending, as well as reckless military spending.

The figure for the Netherlands seems about right for the amount the government is in debt. The other figures are either measuring something else or are just off.

And really holding a decently sized debt isn't such a great cost.

People always believe we spend more on Welfare (Well there is no actual budget line item called Welfare) then we actually do. This is also the case with aid to foreign countries. In 2010 4.375M people in the US received "Temporary Assistance for Needy Families". The amount budgeted in 2010 was $17.5B. 2010 Spending on Defense was $850B. For an FYI Defense spending in 2000 was $359B and TANF spending was $15.5B. So in 10 years Defense Spending has more than doubled and even though this has been one of the worst 10 year periods in job creation and income growth TANF funding went up just about 13% and $500M of that is from the stimulus program which has come to an end.

Oh and at any given month there are about 2 million people receiving TANF in the US. That comes out to on average about $700 per month they receive.

We've just seen looting and rioting on a massive scale in Britain, a society which certainly does not lack for a social safety net. The problem really is a break down of society, of morals, of personal responsibility, and of any sort of culture of internal and external shame. Life was a lot harder decades and centuries ago, and people didn't riot because of it, but a bunch of spoiled kids armed with smartphones and brand new clothes will damned sure riot if society constantly tells them that they've somehow been cheated out of having even more stuff that they haven't earned. Especially if they don't have to worry about being shot either by the police or by an armed and empowered citizenry. It's rather darkly amusing how many governments promise they can take care of you from the cradle to the grave but are unwilling or unable (same difference, really) to carry out even the most basic functions of a government, like, oh, preventing roving packs of brats from burning down whatever they please.

As for the old "legalize drugs but tax the shit out of them and make it a great hassle with lots and lots and lots of regulation!" canard, sounds great in theory but if you tax it too much or make it too great a hassle, you'll probably do nothing to seriously harm the black market while still having the negative effect of removing much of the social stigma against using drugs. Sure, lots of people use illegal drugs anyway, but many more abuse legal prescription drugs and that, in part, is because it's not seen as something "dirty" like smoking crack.

All things are relative in terms of rioting and social action. Just because migrants from the Dust Bowl were glad to get $5 a day from California farmers in the '30s doesn't mean people can't be livid about not getting health benefits on top of $10 an hour on a given farm today

Though these riots in particular had little to do with entitlements, however, and more with the general culture of hooliganism in Britain, which has to be something that runs deeper than any overt social engineering