New Labour's dominance of Britain coincided with the long boom. If you think about its time in government as a reaction to an exceptional period, rather than the result of a coherent ideology, then its contradictions become easier to grasp.

Labour has baffled its critics because it remained a left-wing party even though it has abandoned the Left. Conservatives were right to notice the growing power of the State and the stealth taxation. Those leftists who retained an interest in economics — and it was a feature of the success of globalisation during the long boom that most gave up on serious thought about the organisation of society and veered off into culture wars and arguments about identity politics — were equally right to notice how Labour prostrated itself before business and the City. But to Labour ministers the contradictions made sense. It would tax the profits of globalisation and use them to finance the redistribution of wealth and the new schools and hospitals, which will be this government's most enduring legacy. All governments tax businesses. Social democrats, however, normally retain a suspicion of financial markets. The 1997 Labour government stands out because it lost the centre-Left's traditional inhibitions. High finance, deregulation and the waving through of mergers and acquisitions worked. Britain seemed to be growing at the expense of its stagnating, over-regulated rivals in Europe. 

Looking back on the articles and books I wrote 10 years ago, I still retain a sense of shock at Labour's gullibility. There was scarcely a dubious business organisation in the world that the former admirers of Karl Marx and R. H. Tawney would not embrace. Margaret Thatcher had banned Arthur Andersen, Enron's accountants, from receiving government contracts after it had proved to her it was not a business she could trust. Naturally, Gordon Brown welcomed it back to Whitehall, where it would still be receiving taxpayers' money to this day had it not gone under when Enron went bust. Enron itself sponsored the 1998 Labour conference and persuaded Peter Mandelson to allow it to take over Wessex Water. In this campaign, Labour has made much of the Tory donor Lord Ashcroft's non-dom status. Few have pointed out that for 15 years, Labour ministers have showered favours, tax exemptions and peerages on foreign billionaires living in London and on British billionaires living in tax havens. The completeness of Labour's enchantment was so great that it could not do what even its fiercest critics would expect it to do: regulate the banks.

The point now is not to damn Labour but to show why the British centre-Left is so clueless about what to do next. The greatest failure of financial capitalism since 1929 ought to be an opportunity for Labour as it was for Obama and the American Democrats. But rather than face up to it, and by extension to its own failures in government, Labour has been unable to offer a credible banking reform programme or admit that the recession must bring change. Instead, it carries on as if the tax revenues were still rolling in and Fred Goodwin still pushing up the Royal Bank of Scotland's share price, and it pretends that the old war cries about "increasing investment" and fighting "Tory cuts" still have meaning. The LibDems are in better shape because at least they realised that a long boom built on debt could not be sustained. However, as we saw, they too could not accept the consequences of their insight. 

As for the Conservatives, many people noticed an uneasiness about Cameron during the first leadership debate, a nagging fear visible in his flickering eyes and stilted movement that the times may not be propitious after all. If he isn't nervous, he ought to be. Only the bizarre sight of a centre-left government letting speculators run wild has hidden the problems for the Right. I've had an aide to Boris Johnson marvel to me at how in hard times people turn to the State, as if he was having to relearn everything he thought he knew, and gruff leaders of the Tory Right mutter that Cameron's biggest mistake was not supporting the nationalisation of the banks, as if it were the most natural complaint in the world for a tough-minded Tory to make. The extent of the rethink needed on the Right of politics can be encapsulated in a line. For a generation, Tories have repeated Baroness Thatcher's acid line: "The trouble with socialism is that eventually you run out of other people's money."