So far, the political dimension of the banking crisis is seen through the prism of the opinion polls. Gordon Brown is up. David Cameron is down. It seems the oscillating fortunes of Northern Rock and its nervous savers made the Government more popular rather than less. Labour's current substantial poll lead may or may not be fleeting. No one knows for sure – which is why some of Mr Brown's allies are advising him once more to hold an autumn election while he is ahead.
While the fuzzy speculation intensifies, a more lasting political consequence of the banking drama is overlooked. Through this single act of intervention, the Government has challenged the fashionable consensus that the state should play no role in protecting companies from the consequences of their actions. What makes the hyper-activity at the centre more significant is that Labour has played a leading part in reinforcing the consensus over the past decade.
It is almost as if, after a long period in the darkness, the spirit of the 1970s is back. Within the space of a few days, Led Zeppelin has announced it is reforming and the Government has intervened to save a company that is in trouble. I could never get to grips with the Zeppelin song "Stairway to Heaven", a regular at parties in the late 1970s. I recall dancing with an awkward intimacy during the slow phase of the song and then never knowing what to do when the tempo intensified maniacally towards the end. While I struggled on the dance floor, governments agonised similarly over how fast they should move in their attempts to save failing industries. They had the same success as my clumsy efforts to dance with girls. The harder they tried, the more disastrous the consequences.
But those disasters brought about an equally extreme response in the 1980s and 1990s. I stopped dancing. Governments stopped intervening altogether. Margaret Thatcher became popular by promising to get the state off our backs. Any mention of state or government intervention and images of the 1970s were immediately invoked. Even the idea of "regulation" was seen as heavy-handed and, as a result, Britain became the lightly regulated financial capital of the world. Fearful of any echo from their vote-losing past, New Labour stood back fearfully too when it won power: Help – we must not touch the railways! If a successful manufacturer is in temporary trouble we wont do anything to save them! It is up to the regulator what happens to mortgages, it's nothing to do with us!
Suddenly, it is everything to do with them. Now the Government intervenes spectacularly, in effect protecting the reckless managers of Northern Rock from their misguided judgements. By implication, they protect other bankers too. I agree with Simon Heffer who wrote in yesterday's Daily Telegraph: "The bankers, as I see it, have carte blanche to take the most awesome risks with the money of their depositors, knowing that if they goof badly the taxpayer will compensate their aggrieved customers". I concur also with Mr Heffer that this act challenges some of the fashionable values from the 1980s, in particular that in all circumstances markets must be left alone.
My difference with Mr Heffer is that I welcome this reality check and note that suddenly, across the political spectrum, there are calls for greater regulation of the banking industry and support for the government intervention. The mood has changed in weeks. Only last month, John Redwood was winning plaudits in most newspapers for advocating further deregulation of the mortgage market in his policy review for the Conservatives. I doubt if the proposal will get very far now. Instead, stronger regulation is back in fashion. There is life in the supposedly dead hand of the state.
The escalating panic after the Government's initial intervention last Friday has prompted much comment about the lack of trust in politicians. I suspect the novelty of the ministerial act had more to do with the scepticism of savers. In the midst of various crises, voters are used to coping on their own as ministers make clear they are not directly responsible. Suddenly last week, small investors were told they could relax as the Government was rising from its slumber to protect them.
But the voters were too used to the slumber. When MG Rover at Longbridge became vulnerable in 2005, the Government did little to prevent the collapse of what was the last remaining British-owned car manufacturer. On a wider front, when trains fail to turn up no one knows who to complain to. So many institutions are theoretically responsible, no one gets the blame.
One of the reasons for the early chaotic attempts to deal with the banking crisis was a similarly blurred division of powers. Mr Brown and Alistair Darling were hyper-active. Yet the supposedly independent Bank of England was in charge. Meanwhile, the Bank of England was seeking to act in a regulatory context determined by the Financial Services Authority, a separate body. Out of political desperation, Mr Darling gripped all the necessary levers, but at first few of the small investors believed this was happening, as it had never happened before. Out there in the big intimidating global market, they feared they were on their own because they so often are.
The tragedy of the 1970s was the excesses of corporatism, the wasteful state subsidies for inefficient firms that did not deserve to stay alive. The extreme reaction to those mistakes was the tragedy of the 1980s and 1990s. In particular, timid New Labour has been too scared to encourage and support manufacturing industry, leaving Britain dependent on consumer debt and speculative activities of the city. Above all, it has accepted the myth that entrepreneurs should be hailed for taking risks when no risk exists. Banks cannot be allowed to go under. Tube lines cannot close even if a private company fails to deliver. Oddly, Mr Brown has recognised the limits of markets in the NHS, pointing out that a government could not allow financially reckless hospitals to close. Yet in other areas Mr Brown has been as keen as his Thatcherite predecessors in calling on the private sector to take the risk, when there was no risk.
Simon Heffer is right to be worried. This is a political moment in which events have propelled the debate very slightly away from the Thatcherite right. The next time you hear a rant against "regulation", do not forget that a light regulatory touch allowed banks to lend money as if there was a limitless supply. Remember also that the state is not always stifling, but can use its financial muscle to intervene effectively. No one wants a return to the 1970s, not least those who remember dancing with me at the time. But that does not mean governments should step back always and never offer a stairway to heaven to those individuals and industries struggling with the eccentricities of the global market.