Serb-run Trnopolje concentration camp in Bosnia. No one could accuse LM of succumbing to a demand to boo fantasy xenophobes or, for that matter, of being much exercised by real ones either.)

I should declare an interest in having provided minor assistance on Cohen's earlier volume, but none on this. And there is more of value here in understanding the malaise of the Western economies than is to be found among more ostentatiously left-wing critics. Cohen writes little directly about economics; he is an observer of social mores. But he was right and early in understanding that the ructions in US subprime mortgages were not a purely foreign affair. Against this, the old Left rehearses arguments about the failures of capitalism - and thereby confuses the case for economic integration with that for financial globalisation.

The Left has misunderstood the financial system as comprehensively as the free-market Right, which considers asset prices to be prices like any

other.

The proper criticism of finance is that financial markets overshoot, and banks are tied together through the wholesale lending market. By these mechanisms, finance can destabilise the wider economy. But the case for regulating a dysfunctional financial system is not the same as a case for regulating, say, international trade. Huge social advances are achieved through the free movement of goods across national borders, and the process whereby gains in productivity lead to higher living standards.

The great weakness of New Labour in economics was not its appreciation of the liberating power of globalisation. It was instead a failure to recognise that commerce is an interest group like any other. That misconception caused New Labour to be unaccountably docile before the City.

Promoting the interests of financial services has had a terrible outcome

The task of government is to insulate the public space from sectional interests, and to create a framework of rules in which rights are protected and personal liberties maintained. It is a peculiarly destructive mistake to suppose that the task of government is to promote British commerce. That way lies the diversion of public resources to partial causes. And it is a mistake that goes some way to explaining why the global financial crisis has been peculiarly damaging to the UK.

The British economy is skewed to the financial services sector. There is nothing inherently wrong with this: it is snobbery to suppose that manufacturing matters whereas services do not. But the unspoken assumption that it is the responsibility of government to promote the interests of a particular commercial sector has had a terrible outcome. Financial regulation was patently inadequate. Banking supervisors had no conception of the systemic risks posed by the development of complex financial products.

The Left in the advanced industrial economies is thus in danger of inferring exactly the wrong lessons from the financial crisis, as they have from the challenge to liberal values by theocratic reaction. Nick Cohen's is an astringent voice of sanity in dark times.