In 2001, the Portuguese government did something that the United States would find entirely alien. After many years of waging a fierce war on drugs, it decided to flip its strategy entirely: It decriminalized them all.
If someone is found in the possession of less than a 10-day supply of anything from marijuana to heroin, he or she is sent to a three-person Commission for the Dissuasion of Drug Addiction, typically made up of a lawyer, a doctor and a social worker. The commission recommends treatment or a minor fine; otherwise, the person is sent off without any penalty. A vast majority of the time, there is no penalty.
Fourteen years after decriminalization, Portugal has not been run into the ground by a nation of drug addicts. In fact, by many measures, it's doing far better than it was before.