Paul Vallely: We are all capitalists now - or else

The global economic crisis and the falling value of savings has evoked a fearful sense of powerlessness

For a young man, some things never change. What provisions was he making for his pension, I asked my 26-year-old nephew the other day. I haven't even thought about it, he said. But this was not just the perennial carelessness of a golden youth unable to countenance the idea that growing old might one day happen to him. There just doesn't seem much point, he said with great conviction; it probably wouldn't be worth anything when he needed it. His mother had just disclosed that she had recently heard that the income she could expect from one small pension pot from one stage of her career would just about pay the weekly newspaper bill.

In any case, it is not just the young who are giving up the idea of saving for the future. Last week, no less a bastion of middle-class, middle-aged, Middle England than The Daily Telegraph prominently told its readers that it was now a "waste of time" for them to put their cash into a savings account. Britain's 38 million savers, it said, would do better to invest their money in the stock market.

The logic of that is revealing – and not just for the section of the population which has cash in the bank or building society. The latest official figures show that the cost of living increased yet again in November – to such an extent that it is virtually impossible to earn a real rate of return in any conventional bank or building society savings account. Even government bonds now yield less than the rate of inflation.

Any money you have tucked away in a bank is therefore losing value day by day. If you have £1,000 in an instant-access account, at the current rate of inflation – which jumped to 4.7 per cent last month – your money will be worth around £208 less in five years. For people who have built a pool of capital over their lifetime and want to live off the income, the bank is the wrong place to leave their cash.

What the pundits are recommending to the moneyed classes is that they take a punt on something in the stock market. It's self-evident, the stockbrokers claim, that stocks and shares are yielding more than savings accounts. Shares in the oil giant Shell are producing a 5.1 per cent yield and the insurance giant Aviva offers 6.2 per cent.

Historically, shares have always been the better bet. Even allowing for the Great Depression and two world wars, shares have out-performed cash and fixed-interest bonds as an investment in three years out of four. The FTSE 100 index is currently at its highest level for two and half years, and the economic data from the United States is raising hopes that the world's largest economy might avoid a double-dip recession. Shares can, of course, go down as well as up. And – the enthusiasts' caveat – the past is not a guide to the future, but, well, you just have to accept some degree of risk to preserve the purchasing power of your money.

Maggie, thou shouldst be living at this hour. The Thatcherite revolution is, it seems, at last nearing completion. Though there was, for her, always a tension between traditional Conservative values and an instinct to let the free market rip, it was, in the end, her laissez-faire intuitions that triumphed. Now even those who were her most stalwart defenders find their income cast upon the tide of the unfettered market. The problem is that they don't like it.

Nor have they liked anything much since the triumph of globalised economics ended in the fiasco of a global financial meltdown in which many of Thatcher's most ardent supporters found themselves caught between a Northern Rock and a hard place. The retired were among the hardest hit, as the value of pension funds plummeted and their savings yielded zero interest. Those forced to take annuities by their pension plan discovered they would receive an income that is a mere fraction of what they had been expecting. Declining house prices meant that the homes which they had come to see as cash machines, from which they could constantly withdraw equity, began to fall in value.

The result has been a massive loss of confidence in the financial system and in the idea of making provision for the future. Official data from the Bank of England shows that savers are putting less and less money aside each month. What economists call the "savings ratio" – which measures the percentage of our monthly incomes that we put aside – fell to just 3.2 per cent in the last set of published figures. It was 7.7 per cent at the same time last year. With interest rates so low, it makes sense for anyone with enough spare cash to pay off their credit cards, loans or mortgage in anticipation of the time when interest rates will surely rise again.

But there is more to it than that. The reason we are all watching X Factor in such huge numbers – 20 million saw the final, a staggering figure in these days of digitally fragmented audiences – or are fixated upon the blood on the cobbles in Coronation Street, or absorbed by the latest twists of the Carlos Tevez football soap – is that we would rather do anything than face up to the reality of our economic futures.

Yet diversion is not restricted to the world of escapist entertainment. The prospect of public spending cuts, job losses, a VAT rise, hikes in energy bills and increases in the price of clothing and food is inducing in many ordinary people a sense of "live for today and let the future take care of itself". On several occasions recently I have heard people say that they are just going to spend and, when they run out of money, hope that the state will look after them.

There is a sense of powerlessness abroad. For some, that breeds a resigned, indulgent indifference to the future; in others, it creates a deep sense of resentment which is perhaps most evident among a disenchanted white working class – or, all too often, an utterly alienated benefits class – and which surfaces most unpleasantly in support for the right-wing certainties of the British National Party or, more extremely, the street demonstrations of the English Defence League (EDL), which has 66,426 "likes" on Facebook.

In the face of all that is a political class which seems, across the parties, to have given up the ghost. The ideology of the globalisation of the world economy is now so seemingly unchallengeable that there is no alternative to acquiescence. The only surprise in the face of this vanquishing of politics by the bonus-fuelled bankers is that there has been no recrudescence of socialism, or even communism, as an alternative.

Perhaps that is because – as the enthusiasts for the stock market as the final solution seem to suggest – there finally is no alternative. We must all be capitalists now. Or perhaps – as the violence surrounding the tuition fees protests suggests, and the street thuggery of the EDL sends an even more grim augury – it is only a matter of time. The choice appears to be between the devil and the deep blue stock market. There must be another way.