She is there whenever I go the shops. Every time I think she can't get any more skeletal, she manages it. Wild eyes staring in different directions, she must have been pretty once. I try not to look, for she is often aggressive. Sometimes, though, she is in my face and asking me to go into the shop, from which she has been banned, to buy her something. A scratchcard. She feels lucky. "Maybe some food?" I suggest pointlessly, but food is not what she craves. Food is not crack. Or luck. She has already lost every lottery going.

An addict is the author of their own misfortune. Her poverty is self-inflicted. All these hopeless people: where do they all come from? It is, of course, possible never to really see them, as their distress is so distressing. Who needs it? Poverty, we are often told, is not "actual", because people have TVs. This gradual erosion of empathy is the triumph of an economic climate in which everyone, addicted or not, is personally responsible for their own lack of achievement. Poor people are not simply people like us, but with less money: they are an entirely different species. Their poverty is a personal failing. They have let themselves go. This now applies not just to individuals but to entire countries. Look at the Greeks! What were they thinking with their pensions and minimum wage? That they were like us? Out of the flames, they are now told to rise, phoenix–like, by a rich political elite. Perhaps they can grow money on trees?

Meanwhile, in the US, as this week's shocking Panorama showed, people are living in tents or underground in drains. These ugly people, with ulcers, hernias and bad teeth, are the flipside of the American dream. Trees twist through abandoned civic buildings and factories, while the Republican candidates, an ID parade of Grecian 2000 suspects, bang on about tax cuts for the 1% who own a fifth of America's wealth. To see the Grapes of Wrath recast among post-apocalyptic cityscapes is scary. Huge cognitive dissonance is required to cheerlead for the rich while 47 million citizens live in conditions close to those in the developing world.

This contradiction is also one of the few things we in the UK are good at producing. I heard a radio interview recently with a depressed young man with three A-levels (yes, in properly Govian subjects) who had been unemployed for three years. The response of listeners was that he was lazy and should try harder. Samuel Beckett's "fail better" comes to mind. Understanding what three years of unemployment does to a young person does not produce a job, any more than the scratchcard will change a crackhead's life. But pure condemnation is divisive. This fear and loathing of those at the bottom is deeply disturbing.

Three years ago I was on a panel with Vince Cable at The Convention of Modern Liberty, when Cable was still reckoned a seer for predicting the recession. He said then that the financial crisis would mean civil liberties would be trampled on. But what stuck in my mind was a sentence he mumbled about the pre-conditions for fascism arising. Scaremongering? The emotional pre-condition is absolutely this punitive attitude to the weak and poor.

Our disgust at the poor is tempered only by our sentimentality about children. They are innocent. We feel charitable. Not enough, perhaps, as a Save the Children report tells us that one in four children in developing countries are too malnourished to grow properly. Still, malnourishment isn't starvation, just as anyone who has a mobile phone isn't properly hard-up. Difficult to stomach maybe, but isn't all this the fault of the countries they live in?

At what point, though, can we no longer avoid the poor, our own and the global poor? Or, indeed, avoid the concept that frightens the left as much as the right: redistribution, of wealth, resources, labour, working hours. Whither the left? Busy pretending that there is a way round this, a lot of the time.

The idea that ultimately the poor must help themselves as social mobility grinds to a halt is illogical; it is based on a faith for which there is scant evidence. Yet it is the one thing that has genuinely "trickled down" from the wealthy, so that many people without much themselves continue to despise those who are on a lower rung.

The answer to poverty, you see, lies with the poor themselves, be they drain-dwellers, Greeks, disabled people, or unemployed youth. We will give them bailouts, maybe charity, and lectures on becoming more entrepreneurial. The economy of empathy has crashed, and this putsch is insidious and individualised. No more cruel to be kind. We must be simply cruel.

The argument that there is enough to go round is now a fairytale, like winning the lottery. Poverty is not a sign of collective failure but individual immorality. The psychic coup of neo-liberal thinking is just this: instead of being disgusted by poverty, we are disgusted by poor people themselves. This disgust is a growth industry. We lay this moral bankruptcy at the feet of the poor as we tell ourselves we are better than that.