TWELVE months to the day since the collapse of Lehman Brothers, it is starting to look horribly like the bankers of the world are not only entirely unchastened but, well, laughing all the way to the bank.

The City and Wall Street are currently telling themselves that they have gotten away with the most monumental con trick in the history of political economy. Not even pausing for penance or reflection after a three-decade party came crashing to a halt, they simply got the state to clean up the beer cans strewn all over the floor and the overflowing ashtrays, and have now kicked off festivities all over again.

Governments the world over have meekly acquiesced in sustaining rapacity. Lectures will inevitably prove ineffectual. Obama can urge ‘common sense’ all he likes; this is about the one commodity to which the average investment bank has no exposure.

In this country, a new dividing line has appeared between New Labour and the Tories, with the voters to be asked to choose between caring cuts and nasty cuts. As a Labour Party member, I can only urge readers and voters to back the guys who will chop schools and hospitals with reluctance rather than with gusto; I suspect it is going to be a hard sell on the doorstep.

Nobody in the political mainstream questions the idea that reducing real services for real people for the next 20 years is unavoidable if the state is to recoup its outlay on saving capitalism’s skin. So who will articulate the sense of grievance that must and therefore will accumulate in the face of such patent injustice?

True, the world economy does look tentatively poised for some sort of recovery. Economists and others debate its shape – which they variously liken to a V, U, W or even the square root symbol – but the consensus is that things are on the mend. An increasing number of countries are now technically out of recession.

Some commentators still inject a note of caution, arguing that the massive fiscal stimulus applied to OECD economies over the past year is in the nature of an economic ‘sugar rush’, which will wear off in short order. The neoclassical argument is that inflation will ensue; the rest of us will be keeping our fingers crossed that Keynesianism was the right approach.

But a rapid return to the champagne years – champagne years for some, anyway -  seems unlikely. Any reading of the last 12 months that goes beyond superficial concentration on the undoubted excesses of the financial sector points to structural issues in the world economy that will have to be rectified.

In particular, the economic perpetual motion machine represented by low-wage China’s ability to lend the US the money to buy its goods will be difficult to put back together on the same scale.

What has not kicked in yet is public anger. The mood has been largely one of quiescence. Keep you head down, at least you’ve got a job. Even if UK GDP has turned the corner, unemployment is continuing to rise, and the pain may drag on for years.

Factor in a government – Labour or Tory – actively out to reduce aggregate demand and introduce sharp reductions in public services even as the City Boys are out there largin’ it, and you have a recipe for social tension.

Predictions from Scotland Yard chiefs earlier this year of ‘a summer of rage’, complete with middle class riots, proved somewhat wide of the mark. Now TUC general secretary Brendan Barber – not a man much given to alarmism – has invoked the memory of Toxteth, predicting that the inner city poor will institute a 1981 revival. Maybe. But why should the rich care if the ghetto get thrashed?

The real danger is that New Labour and the Conservatives will speak as one in insisting that this is the way things have to be, while a marginalised far left retains a level of popularity that has left Britain with quite literally more practicising Satanists than organised socialists. When a brand of politics becomes less popular than Devil worship, its adherents really should get the hint.

That opens the way for a populist hard right on a small state platform that can juggle banker-bashing rhetoric with attacks on benefit scrounging chav scum and opposition to immigration, in line with the wider mood.

Imagine a Daily Mail editorial writ large as manifesto, and you have one direction in which British politics could head after 2010. Whether the scenario comes about or not, it is quite clear that the political consequences of the bank bailout have yet to play themselves out.

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1. Liberal Conspiracy

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2. Liberal Conspiracy

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3. Nell Boyd

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