You'd think from the horrified response to Vince Cable's comments about capitalism yesterday that he'd called for City traders to be rounded up and sent to re-education camps in Caithness. The Liberal Democrat business secretary, declared the Sun, had launched a "vicious attack on the free market". This was an "all-out assault on capitalism", the Daily Mail warned. The Federation of Small Businesses demanded an instant apology. Was an anti-capitalist business secretary actually possible, one BBC presenter wondered.

It's a measure of how bizarrely constrained political debate remains in Britain that when a government minister makes the blindingly obvious point that markets are often rigged and that capitalism "kills competition where it can", it is regarded as both extraordinary and outrageous. Where have all these people been for the past two years, during the greatest market failure and crisis of capitalism since the 1930s?

It's not as if you have to go back to the days when a Tory prime minister such as Ted Heath felt compelled to denounce the "unacceptable face of capitalism". Establishment hand-wringing about the economic order was routine in the aftermath of the 2008 financial meltdown. But as soon as collapse had been averted, any suggestion of a far-reaching systemic problem – let alone alternatives – was shuffled off to the margins.

By highlighting capitalism's tendency to monopoly and collusion, Cable is merely restating a commonplace, from Adam Smith to Keynes, that brings together all but the most swivel-eyed of market fundamentalists. As the Cambridge economist Ha-Joon Chang points out in his new book about the myths of capitalism, "the free market doesn't exist".

It's not even a necessarily leftwing observation, and entirely within the spirit of classic liberalism. But by spelling out what even the main Labour leadership contenders have flinched from challenging, the business secretary has helped to identify where the new centre ground really is – and the starting point for any genuine recovery from the train crash of neoliberalism.

Any idea, however, that Cable's useful grandstanding is part of a Tory-Lib Dem split or represents any challenge to Nick Clegg is clearly for the birds. The business secretary's sniping at City "spivs and gamblers" is fully licensed by the coalition leadership; yesterday's speech was cleared and signed off by Downing Street, which is evidently a bit more worldly-wise than some of the government's media supporters.

Cable himself was no doubt also keen to draw attention from his unpopular plans to privatise Royal Mail and his failure to win internal coalition battles over bank lending, taxes and bonuses.

But however restrained the Lib Dem conference has been, there has been no mistaking the sense of anxiety among delegates about where their leaders are taking them. Both David Cameron and Clegg know they need to be pacified, as the public will be when it sees bankers piling up billions in new bonuses just as the cuts start to bite deep – and Vince is the man for the job.

But this is strictly for the gallery. When Clegg says the coalition will not "stand idly by" if bankers pay themselves "gratuitous bonuses", he is posturing. This is a Conservative-led government and George Osborne has let it be known there will be no new bonus tax or increased bank levy. Even Cable's planned consultation on corporate takeovers and executive pay is not expected to produce any game-changing reform.

The events of the past few days have driven home that the Liberal Democrats are now in the hands of a very different kind of leadership from those they've had in the past. As their overwhelming rejection of Michael Gove's academies and free schools showed, most of the party's activists remain firmly on the centre-left. But Clegg and his closest allies are somewhere else entirely – and will ignore them.

With his mini-me panegyric to Cameron, his declaration that the state should not "compensate the poor for their predicament", his attempt to redefine social justice as equality "between the generations", and his insistence that the "vocation of Liberalism is not to be a leftwing ghetto", Clegg's message could not be clearer. The Lib Dem leadership has turned its back on a whole spectrum of opinion, both inside and outside the party. For all Cable's efforts, the traditions of Lloyd George and Beveridge and the party's social democratic strand have been decisively marginalised.

Of course, the rightward turn long predates the general election aftermath, which Lib Dem leaders insist gave them no choice but to join a Tory coalition. Clegg and his market-orientated Orange Book friends had been steering the party in this direction for the previous couple of years. That paved the way for a meeting of coalition minds – as did the Lib Dem team that prepared the negotiating options for Clegg in the six months before the election.

The result is that, beyond the cause of civil liberties, the Liberal Democrat leader is now following Tony Blair and Cameron in attempting to define himself against his own party. With four out of 10 of those who voted Lib Dem saying they wish they hadn't, and more than half believing the party "sold out" by joining the Conservatives, Clegg's fortunes are now irrevocably tied to those of Cameron.

Even if next month's cuts bonanza were to prove less destructive to economic recovery than now looks likely, it will be Cameron, not Clegg, who stands to benefit. The Lib Dem leadership has evacuated a swathe of political territory and its left-leaning voters have mostly gone for good – as Clegg has as much as acknowledged.

That has opened up a new space for whoever wins Labour's leadership election this weekend. So has Vince Cable, by stating a few bald truths about the failures of the private enterprise system without the serious prospect of doing anything much about them.

But for the Liberal Democrats, the prospects look grim. It's hard to see why voters should reward them – as Clegg's right-hand man, Danny Alexander, argues – for sticking to what is a Conservative course. Clegg pleaded with his troops this week to imagine a sunlit future after five years of coalition government, and promised the Lib Dems' independence would be protected. But whether the party is actually in one piece by then, or Clegg still their leader, seems very far from certain.