During the boom years, towns and cities across Britain witnessed the biggest wave of construction since tower blocks and arterial roads transformed communities in the 1950s and 60s.

From Liverpool One to Cabot Circus in Bristol, privately owned and privately controlled places, policed by security guards and round the clock surveillance, came to define our cities. In London, Westfield Stratford City and the Olympic Park represent the high point of this approach, based on property finance and retail and underpinned by large amounts of debt.

The consequence has been the creation of a new environment characterised by high-security, "defensible" architecture and strict rules and regulations governing behaviour. Cycling, skateboarding and inline skating are often banned. So are busking and selling the Big Issue, filming, taking photographs and – critically – political protest. Occupy found this to their cost when they attempted to site their protest outside the London Stock Exchange, which is in privately owned Paternoster Square. In response, the high court awarded an injunction against protests in the square and the police sealed off the entrance, leading the protesters to move to outside St Paul's.

The Olympic Legacy Company executives who planned the Olympic Park often compare this new part of the city to "a great London estate", in the manner of the 18th-century estates run by Grosvenor, the property company behind much of London's Belgravia.

What they omit to mention is that this was a pre-democratic model of land ownership. Today, the Georgian squares and terraces are part of the fabric of the city, but what is no longer visible is that these places were once barricaded and closed to the public.

Following growing public outrage, which paralleled the rise in local government and was reflected by two major parliamentary inquiries, control over the streets was passed to local authorities and the gates, fences and guards were removed. Since then it has been standard for local authorities to "adopt" the streets and public spaces of the city which means that they control and run them whether they own them or not. Until recently, that is. Over the last decade this hard-won democratic achievement has started to go into reverse.

This is a model that was pioneered in the mid-1980s with the creation of Canary Wharf and the Broadgate Centre. At that time, these two emerging finance centres in east London were virtually the only high security, privately owned and privately controlled places that functioned like this. They were exceptional – and controversial – places created to meet the needs of business, in response to the deregulation of the financial markets and "big bang" of 1986, with its demands for big banks and large trading floors.

Today this is the template for all new development but – like the financial system itself – it is also a model which is in deep trouble. Outside London the development of new privately owned places is at a standstill. In Bradford, Westfield's plans for a 23-acre private estate remain no more than a hole in the ground. There are similar stories in Edinburgh, Preston and Leeds.

This is an approach which depends on large amounts of debt which the private sector is now unable to raise – borrow, to use plain English. Following the financial collapse, plans for the Olympic developments also hit crisis point with private sector developers unable to borrow the necessary funds. Nonetheless, the Olympic developments have gone ahead as the government considered that, like the banks, this project was too big to fail. Around the same time the banks were bailed out the government also bailed out the Olympic Park and developments to the tune of nearly £6bn of taxpayer's money.

While the economic rationale for this way of doing things is unravelling, politicians are also beginning to question the consequences of privatising streets and public places. In his Manifesto for Public Space, the mayor of London makes clear his opposition to the private control of streets and states that the adoption of public space is an important principle which should be negotiated in all new development.

As the mayor has planning powers this is an important policy statement. With planning permission for the Olympics granted before it was published and with so little subsequent development occurring, it is hard to assess its impact. But for those concerned about the privatisation of our streets this is a vital policy tool.

Yet despite the mayor's manifesto, very often it is local authorities themselves who are keen to offload their democratic responsibilities. Sir Robin Wales, the elected mayor of Newham claims that his borough cannot afford to run the Olympic Park, a view which is shared by many other cash-strapped local authorities.

That view reduces democracy to an optional extra. The places we create reflect the social and economic realities of the time and provide a litmus test for the health of society and democracy. That fact that we are setting out to create undemocratic places is simply a reflection of the times we live in.

Anna Minton is the author of Ground Control. A new edition of the book, with a new chapter on the true legacy of the Olympics, is published by Penguin.