Britain's free market economy isn't working

According to the economic orthodoxy that has prevailed for the past four decades, none of this should be happening. The theory was that a good, solid dose of market forces would clear out the dead wood from the manufacturing sector; financial deregulation would ensure that funding was provided to young, thrusting startup firms; and free trade would ensure that British industry remained on its toes. Industrial policy would no longer be about "picking winners" but involve an open door to inward investment and low corporate taxes.

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This approach has proved a complete dud... They have sat back and watched as the economy has stumbled from one housing-driven boom-bust to another. They have now arrived at the stage where house price inflation is running at 10% a year; the current account deficit in the latest quarter was 7% a year; and manufacturing is in recession.

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A new paper for the Fabian Society by the former Labour MP and leadership contender Bryan Gould believes there should be a twin-tracked approach: a 30% depreciation of the currency accompanied by a focus on credit creation for investment. This, he argues, could happen either through the existing banking system under the direction of the Bank of England or, if necessary, through a national investment bank. Gould says this is not about "picking winners" but about setting the parameters for possible good investment opportunities.