October 2008: the banks are collapsing and Blair’s boom is turning to Brown’s bust. Amid all this, one of the most thoughtful Labour backbenchers is setting out for me the central task facing his party: “The question is, can we make this a Labour recession?”

I am sure that already he could hear the last rites being read for his government. The consoling hope was that Labour could set the terms of the debate about the nature of this economic crisis, and how to fix it.

July 2014: that MP is now a key player in Team Miliband and, as of Friday’s statistical releases, Britain’s record-long slump is over. And I believe we know the answer to his poser.

The Labour party has surely had the worst crash imaginable. It hasn’t voiced a penetrating analysis of the things that have gone wrong in our economy, let alone come up with convincing strategies to put them right. Instead of ideas, there is a vacuum; in place of an alternative, we have a dispirited consensus.

Early in the banking crisis, Gordon Brown claimed: “The failure of self-regulation in finance and politics mean we are now living through a profoundly progressive moment.”

The failures and their impact have been profound; the epochal argument, however, has never really got going.

Yet the further away we get from the Great Fireworks Show of 2008-9, the more exposed become the gaping flaws in our economy. Britain is nowhere near a recovery. Consider: national income per head remains 5% below where it was in 2008. Each of us in work is producing less than we were six years ago – something that’s never happened before. Households still carry Himalayan levels of debt and a giant trade deficit continues to haunt policy-makers. The Bank of England frets over the size of London’s property bubble, but can’t hike rates for fear of pushing the rest of the country off a cliff.

To sum up: Britons are poorer and less productive than they were before Lehman Brothers fell over, and the country still can’t pay its way in the world. All hail the strongman of Europe! This is what George Osborne hails a “major milestone”, or his friends in the press describe as “total vindication”. Utter rubbish, of course, but what emboldens them to daub so much lipstick on this pig is the lack of a cogent counter-argument.

Imagine Labour won an outright majority at the next election. How would they run the economy differently from this lot? The cuts would be a smidgen less savage – but we’d still have another parliament full of them. After a couple of years spent mouthing a platitudinous Keynesianism, the two Eds have got into line and signed up to austerity. The rest of the programme would also be largely the same. Exactly the same blind faith in the need to build more infrastructure – because all three main parties treat new roads and railways and runways as a secular god. The same impotent desire for more “patient capital”, with the private sector magically investing in the smart, green, high-wage industries of tomorrow.

And the same belief that what our predatory banking or energy industries need is more competition – because the best way to cure a failed market is obviously to have … more market. Thus does Labour end up dancing to the coalition tune. For all that Miliband may want to break from Thatcher, his party’s politics continue to be animated by Thatcherism – especially her pretence that in competition lay the cure to the “British disease”.

Take banking, since this week the big high street names report their results. With each disclosure of rebounding profits will come an admission that the banks are putting aside millions more to compensate businesses and households they’ve ripped off through mis-selling. And each time, Chuka Umunna or Chris Leslie will swear that Labour would bring in “challenger banks”, while the coalition will retort that “there is already greater choice on the high street” than there was under Tony Blair.

But what is the point of having more competitors if they’re all doing the same thing? Go online and look for a savings account: there are tons around – most with time-limited offers, or with fiddly rules about how much you must pay in each month. Lots of versions of the same, basic product: the providers simply competing to bamboozle customers. All hail the market!

For Labour to say that more competition will fix predatory industries is to mouth economic theory while ignoring business practice. For Ed Miliband to claim market forces alloyed with some cliches about living wages and an industrial policy will get Britain out of its deep hole is to see the country through Westminster abstraction over real-world specifics.

Britain’s model of capitalism was clearly not working long before 2008. Once you strip out inflation, the typical worker saw no wage rise for most of the past decade. So who prospered during the boomiest boom in economic history? Those at the top, often running or owning businesses well-sheltered from competition (think: water, rail, energy) and shaking them down for bonuses and dividends.

Such rampant market inequality won’t be solved by competition. As for Piketty-esque taxes, they’re little more than slamming the stable door long after the horse has bolted to the Caymans. The answer might lie in a new book Miliband should take on his hols. Called The End of The Experiment, it proposes a system of social licensing in which major businesses earn the right to trade – through dispensing their obligations to the rest of us by sourcing locally, training staff and paying workers fairly. I’ll bet it would be the most refreshing thing the Labour leader’s read in ages.

Twitter: @chakrabortty