I don't know why it's still illegal today, but I've a pretty good idea why it was made illegal in the first place.
All the way up to the early 1900s, hemp (Cannabis Sativa) was used in nearly every culture. Fabric from hemp (aka 'Canvass'), for instance, was one of the few fabrics that wouldn't be immediately destroyed by sea salt, thus paving the way for the age of sail. Hemp oil was popular as a base for paints and varnishes, or for fuel. The seeds an excellent source of protein... and of course, the buds and leaves for psychoactive enjoyment (buds/leaves being now known as marijuana). About the only not-immediately-useful part of C.Sativa was the woody stalk, which was either simply burnt as fuel or tossed away. Around the turn of the century, someone came up with a plan on how to process the stalk into a pulp, which could be used as a base for a durable and fine quality paper, as well as yield a number of commercially valuable chemicals.
William Randolph Hearst, turn of the century 'media mogul', was a major player in the US in the early 1900s and has been immortalized by unflattering portrayal of him in 'Citizen Kane'. Among other things, he made a great deal of money as a publisher, and a great deal more providing base grade pulp paper to other newspaper printers. The paper itself was quite crappy, and would turn a dingy shade of brown-yellow not long after final manufacture (giving rise to the term 'yellow journalism' as a term of derision). Of all things that Hearst was, he was no fool; he immediately recognized the threat that hemp paper would yield to his paper business.
Additionally, times were getting tough. The great depression was coming on, people were struggling, and when times get tough the old hatreds come out to play. Everyone (read: every white man) was looking for a scapegoat, someone to blame lack of jobs and economic hardship on: Minorities. The Chinese were pilloried for thier drug of choice, opium, which was considered to be their 'secret ingredient' that kept them working for hours on end in tedious manual labour and manufacturing jobs. Blacks were fond of cocaine, which had the alarming (alleged) ability to:
Quote:
Originally Posted by Negro Cocaine 'Fiends' New Southern Menace (NY Times, Feb 8 1914)
... The list of dangerous effects produced by cocaine just described-hallucinations and delusions, increased courage, homicidal tendencies, resistance to shock is certainly long; enough. But there is still another, and a most important one. This is a temporary steadying of the nervous and muscular system, so as to increase, rather than interfere with, good marksmanship.
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Which brings us to the mexicans, and their love of marijuana as immortalized by Poncho Villa's marching song 'La Cucharacha':
Quote:
Originally Posted by La Cucharacha - the ORIGINAL words
La cucaracha, la cucharacha,
ya no puede caminar,
porque no tiene, porque le falta,
marijuana no fumar.
"The cockroach, the cockroach, no longer can walk, because it does not have, because it lacks, any marijuana to smoke."
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Hearst had a particularly personal axe to grind with the mexicans. Mexico (specifically, the aforementioned Poncho Villa) had nationalized his forest holdings in the country costing him a great deal of money, so anything he could do to screw the mex was icing on the cake... in fact, he was widely believed to have more or less single-handedly triggered the spanish-american war of 1898 in order to stimulate newspaper sales. Thus, it was easy to begin a campaign to demonize marijuana (and by extension, mexicans).
Additionally, in the 1920's the DuPont company developed and patented fuel additives such as tetraethyl lead, as well as the sulfate and sulfite processes for manufacture of pulp paper and numerous new synthetic products such as nylon, cellophane, and other plastics. At the same time other companies were developing synthetic products from renewable biomass resources--especially hemp. The hemp decorticator promised to eliminate much of the need for wood-pulp paper, thus threatening to drastically reduce the value of the vast timberlands still owned by Hearst. Ford and other companies were already promising to make every product from cannabis carbohydrates that was currently currently being made from petroleum hydrocarbons. In response, from 1935 to 1937, DuPont lobbied the chief counsel of the Treasury Department, Herman Oliphant, for the prohibition of cannabis, assuring him that DuPont's synthetic petrochemicals (such as urethane) could replace hemp seed oil in the marketplace.
Needless to say, when you have the country's most powerful newsman, combined with one of the country's most powerful chemical corporations that has deep ties to big oil, all bucking for a pot ban, they're gonna haves them a pot ban. Racism and the depression provided the 'cover' to allow the big boys to play on unimpeded.
On the plus side, history does show how much of the petrochemical-based plastics and so forth currently produced could be developed from hemp. I suspect that if oil becomes prohibitively expensive, you'll see a resurgence of hemp usage in arenas where governments hold less tyrannical control.
