The most astute commentators on the credit crunch tend not to be part of the mainstream, Anglo-American, free-market consensus. For example, the economist Nouriel Roubini, widely credited with predicting the crisis, was born in Iran to Jewish parents; the hedge-fund manager and philosopher George Soros was living in Buda­pest when the Nazis invaded Hungary. Meanwhile, the Financial Times journalist Gillian Tett brings an academic background in social anthropology to bear on her observation of bankers, as well as the experience of living and working in Japan during its long battle to extricate itself from a deflationary slump.

Graham Turner is also one of the outsiders. In his view, the Japanese experience offers a frightening glimpse into our future, with deflation, where the prices of assets such as houses and shares are locked into a downward spiral, becoming entrenched. If that happens, conventional policy measures, such as reducing interest rates and pushing through huge increases in government spending, can fail, as indeed they have in Japan.

We are not quite there yet, but how did we end up in the state we are in? Rather than dwell on the complexities of derivative debt instruments, Turner examines the way in which globalisation has worked to the benefit of capital and the detriment of labour, identifying it as one of the prime causes of the crisis. As companies roamed the globe in search of cheaper workers, policymakers paid far too little heed to stagnant or falling wages. The median wage in the US was no higher in 2008 than it had been eight years previously, and the situation in the UK was little better.

With the failure of governments to recognise the imbalance of capital and labour as being at the heart of the collapse, policymakers were too slow to come to the rescue of homebuyers in the US and the UK with interest-rate cuts and bank bailouts. Locked in their ivory towers, and lobbied to perdition by the PR machines of Wall Street and the City, they were oblivious to the plight of ordinary people. Turner argues that when capitalists cast around for ways to put excess capital to work, funds are driven into speculative or fictitious ventures. And we saw that pretty clearly in the boom, with its highly leveraged private equity deals and its questionable mergers and takeovers.

Turner's view that the capitalist system, rather than greedy or foolish individuals, is to blame, puts him in improbable agreement with Sir Fred Goodwin, the former chief executive of the Royal Bank of Scotland. Sir Fred told the Treasury select committee of MPs: "If you want to blame it all on me and close the book, that will get the job done very quickly, but it does not go anywhere near close to the cause of all this." Goodwin was talking about the sudden drying up of liquidity, rather than the underlying contradictions within capitalism. But Turner agrees that Goodwin, however reprehensible his conduct, is not the bogeyman and was right to blame the system.

The promise in the subtitle of Turner's book - that he will tell us how to put things right - is hard to fulfil. With interest rates close to zero in the UK and the US, the options available to governments are limited. In Turner's view, Barack Obama could embark on more quantitative easing and should nationalise the banks wholesale, at least temporarily, so that they can be compelled to get credit flowing back through the economy, instead of trying, in clandestine fashion, to rebuild their own balance sheets. Many orthodox economists would regard such prescriptions as extreme and dangerous, but Turner is surely right to point to a democratic deficit that leaves us powerless to hold banks and large multinational companies to account.

As employees, and as owners through our pension funds, we should all have a say in how big businesses are run. We do not, because workers are denied representation, and because the large investors to whom we delegate most of our voting power fail to take their respon­sibility as owners of companies sufficiently
seriously. Turner argues that we urgently need a thorough rethink of the shareholder model that blindly chases short-term profit and denies a voice to workers - and, indeed, to small investors. And you don't have to be a Marxist to think he has a point.

No Way to Run an Economy: Why the System Failed and How to Put it Right
Graham Turner
Pluto, 240pp, £12.99

Ruth Sunderland is business editor of the Observer

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