Two weeks is a lifetime in politics – especially in the political life of the backwards digital economy bill, Labour's gift to the incumbent entertainment industries that government is bent on ramming into law before the election.

In my last column, I bore the bizarre news that the LibDem front-bench Lords had introduced an amendment to the bill that would create a Great Firewall of Britain. This would be a national censorwall to which the record industry could add its least favourite sites, rendering them invisible to Britons (except for those with the nous of a 13-year-old evading her school's censorware). Over the following days, the story got weirder: the LibDem amendment got amended, to add a figleaf of due process to the untenable proposal.

And then it got weirder still: a leaked memo from the BPI (the UK record industry lobby) showed that the "LibDem amendment" had in fact been written – with minor variances – by the BPI. And the BPI continued to leak: someone sent me the weekly internal status update prepared by Richard Mollet, BPI Director of Public Affairs for the core group of plotters behind the bill (someone should teach Mr Mollet about BCC). In the memo, Mollet – himself a prospective Labour parliamentary candidate for the next election – admits that the only reason that the digital economy bill has a hope of passing is that MPs are "resigned" to voting on it without debate. Translation: if MPs got to debate the bill, they would tear it to unrecognisable pieces as they realised what terrible rubbish it really is.

And then, the next day, Bridget Fox, a LibDem prospective parliamentary candidate who had spoken out against her party's new pro-censorship stance, introduced an emergency motion to the LibDems' spring conference. This motion called for the LibDems to follow a policy that puts internet freedom front and centre, categorically rejecting web censorship and disconnection of infringers and their families, and embracing net neutrality and all the other freedoms that you'd expect from the "party of liberty". In other words, the LibDems had declared themselves to be not biddable by the entertainment industry, and indirectly but firmly rebuked the Lords who'd done the BPI's dirty work for them.

By all accounts, the "debate" following Fox's proposal was a one-sided affair. No one came forward to oppose it. Instead, for half an hour, speaker after speaker stood up to declare the importance of a free and open net. When the vote came, it was near-unanimous (I hear that there was one vote against the proposal). If the BPI had hoped to have an ally for the years to come in the LibDems, they blew it by asking for too much – and getting it. Their greed in exploiting their influence over the LibDem Lords galvanised the LibDem rank and file into enshrining a rejection of the BPI's agenda into the party's official policy.

The scene reminded me of the inception of Sweden's Pirate Party, in the wake of a high profile raid on the data-centre that housed The Pirate Bay's servers. The police there acted illegally, taking instruction directly from a minister who was getting his own marching orders from the US entertainment lobby. The Pirate Bay was briefly taken offline before springing up on new servers. But the hundreds of other, legitimate sites that were taken down in the same raid weren't so lucky. The abuses of that raid – punishing the innocent, using the police as private enforcement goons for an offshore corporate cartel – turned Swedes from people who downloaded a little copyrighted music because it was convenient into militants who saw a duty to take down the entertainment companies before they wrecked Swedish democracy.

Here's the thing I can't work out: are these entertainment cartel overshoots the result of arrogance, or are they calculated losses? Is the BPI willing to turn the LibDems from an ally into an enemy if they can get a couple of amendments into the digital economy bill? Was it worth burning this bridge just to move the goalposts on censorship by a few inches? Or did they really believe that there would be no consequences for their actions?

I try to credit them with the "calculated loss" theory when I can, but the evidence really points to an unrealistic view of the world born of the arrogance of power. After all, how else to explain the BPI's contention (in the leaked secret status update) that MI5 may be responsible for the opposition to its plans to undermine Britain's global IT competitiveness, the rule of law, free speech and innovation (MI5 is said to be worried that monitoring online activity will get harder when people take up tools to evade copyright enforcement)?

It really seems like record execs find it easier to believe that their opposition is being propped up by a cabal of spies than that the people of Britain really just don't want to be spied upon, harassed, and deprived of fundamental liberties in order to give a small clutch of entertainment companies slightly higher profits.