You'd have to get rid of the mystique of gang culture. A lot of people forget that in that culture there's this idea that you can somehow make it big. Like in high school football--maybe if you're good enough, you'll make it into the NBA. Dreams of gold and ice, Scarface fantasies, that sorta thing. That kind of tinkering tends to be based in media and culture, so I do not know how possible that level of manipulation is period. If for the sake of the hypothetical questions laws and money did not matter, I'd probably put a fact finding center on every block, take middle schoolers through the economics of gang activity. The third chapter of the book Freakonomics takes an in depth look at the economics of crack cocaine dealing and the rather poor working conditions of the crack cocaine dealer.
I think there would have to be positive incentives to avoid gang participation. For instance, if you really wanna sell drugs, then join a state sponsored dispensary. All your cocaine, methamphetamine, heroin, marijuana, LSD, DMT, mushrooms, PCP, sass, ecstasy, molly; whatever you want it the government's got it. Hell, they'd have it purer and better than most of the stuff you can find if you know the right people to look for, not George Gangster with skunk weed and real dirty acid. There would even be literature in the form of friendly pamphlets about organizations available in case you feel you might have a problem, where you can get your clean needles, the whole nine yards. Smiley faces everywhere. As Nihil mentioned, I believe that regulation and legalization of drugs would be beneficial.
@ Light The Fuse: give the gang members jobs in the dispensaries with strict inventory controls and security. Not only are you bringing them into society by giving them jobs but you are also giving them work history and capitalizing on their expertise in the field towards sales. They will bring customers with them to purview this potentially more expensive product that comes at a much higher quality with an assurance that there will be no hot doses. It seems like the best option for me.
@ BlisteredBlood: let me be frank--I find the majority of blood sports distasteful. Mostly because it's wasteful. If these people have an inclination towards murder then let's put them in a place where we can use that. The military. You want to kill people? Fine. Military training and rigors, or intelligence wetwork, and then you get to go out and kill for Uncle Sam. I've read that a lot of soldiers have a hard time killing as they are not sociopaths. These gangbangers who already have experience with guns and a willingness to end another's life would be a great way to add efficient, competent force in military engagements. Again, we are providing valuable life skills and bringing them into the fold by taking note of their interests and skills and turning that to our advantage. It's important to have a win-win situation!
After all, why waste valuable man power? That definitely does not meet the bottom line.
A side note about prison gangs: a lot of it is, surprise surprise, politics. A lot of it is racial politics. Say you have a prison with four main groups; Bloods, Muslim Brotherhood, M13, Aryan Brotherhood. We'll have a few smaller groups as well; NWA, bikers, anarchists, lifers, ect., ect. Even then we move onto the microgangs which are in all reality groups of friends who band together for protection. So there are a lot of different reasons for prison gangs; cultural, economic, security. You want to break up prison gangs? Again, incentives are important. But what incentives are important? What is important to a prisoner?
1) Respect.
2) Freedom.
What do we want to instill in a prisoner to reduce the rate of recidivism?
1) The want to integrate into society in a positive role.
Here's what we do--we'll radically alter the social and architectural structure of prisons. Let's have four tiers of prisoners. The very first tier will be made to wear something humiliating. I think Hello Kitty armbands would be sufficient. The second tier, higher up, would be made to wear Mickey Mouse hats. The third tier wears bright pink jumpsuits. The fourth tier is given a range of options of what to wear as long as it meets certain guidelines of neatness. You go up in tiers by taking part in vocational training and by not participating in violent activity. Even encourage them to form up monitored clubs and form initiatives such as farming, automotive mechanics, engineering, mathematics, literature, pop culture, politics, fashion, fitness, band, choral; things that will let them do something constructive and give them ways to relate to others in a positive manner.
If, at the same time, we can ingrain skills that will make them more economically viable all the better. It will, of course, be important to provide work opportunities after prison to help get them into something resembling the mainstream. For the majority of people, should they have a stable profession or career path they will gladly never steal again. The risk-reward ratio is no longer in their favor to steal if they have something they can do for steady work.