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Crunch time for capitalism? I don't think so
...Since then, however, I have heard it everywhere, this notion of my old foe. The idea is that the financial crisis vindicates the left-wing critique of capitalism. We are, apparently, at one of the most significant points in the ideological debate since the early years of Thatcher or since the fall of the Berlin Wall or something. The years of free-market triumphalism are over. The State is back.

I've heard it so often, in fact, that I can't let it go any more. The problem is - I am really not sure what all these people mean, what all this talk of vindication and new eras, and resurgence of the Left is really all about. And it's hard to mount a fierce rebuttal of an argument that never really takes shape. ...

...In 1983 Labour wanted to set up a national investment bank “to put new resources from private institutions and from the Government - including North Sea oil revenues - on a large scale into our industrial priorities”. It also wanted to force banks to grant mortgages to lower-income groups and favoured Labour causes.

These policies were accompanied by a threat both vague and menacing: “We expect the major clearing banks to co-operate with us fully on these reforms, in the national interest. However, should they fail to do so, we shall stand ready to take one or more of them into public ownership.”

In other words, what the banks did imprudently during the recent housing boom - lend to those to whom it was not sensible to lend - Labour in 1983 insisted they do as a conscious policy of the State. To describe the recent financial woes of the banks as a vindication of this programme is perverse. And maybe Mr Livingstone meant it to be so. ...

...Let's try a vaguer formulation of the “new era” argument, one that doesn't involve banks or intervention. Gordon Brown and Lord Mandelson both argue that the case for “active government” has now been made. In a lecture earlier this year, Mr (as he was then) Mandelson stated boldly that “government is making a comeback”.

Really? Has it been away? I hadn't noticed. I'd have bought it a welcome-home card.

Throughout the period of free-market triumphalism that is now supposed to be passing, the State spent 40 per cent or so of GDP, provided welfare to those down on their luck and participated in national and international schemes to prevent an economic crisis. This seems like quite active government to me.

In so far as the recent events have changed the argument, they have made it hard to see how government spending can keep on growing at such a pace and they have made a strong case for the State to be reorganised to be sure that it can afford its commitments. The borrowing mess suggests that government has been too active, rather than not active enough.

So Lord Mandelson has made a comeback. But government? I think not.