Everyone has marvelled at the success of Team GB, but the best haul of medals in 104 years is no accident. It is the result of rejecting the world of public disengagement and laissez faire that delivered one paltry gold medal in Atlanta just 16 years ago. Instead, British sport embraced a new framework of sustained public investment and organised purpose, developing a new ecosystem to support individual sports with superb coaching at its heart. No stone was left unturned to achieve competitive excellence.

The lesson is simple. If we could do the same for economy and society, rejecting the principles that have made us economic also-rans and which the coalition has put at the centre of its economic policy, Britain could be at the top of the economic league table within 20 years.

The turnaround began in the run-up to Sydney in 2000 as the first substantial proceeds from the lottery began to flow into sport. There was investment in infrastructure – tracks, swimming pools, velodromes – but crucially also in the structures supporting individual sportsmen and women. There were funds for world-class coaches, such as Jim Saltonstall in sailing and Dave Brailsford in cycling, and for nutritionists and sports psychologists. Also for science and technology where appropriate, ensuring we had the best bikes and boats.

Crucially, the money was not distributed through one statist institution pursuing a centrally determined strategy, but through the varying intermediate bodies, from the Royal Yachting Association to British Cycling. They knew their sport well, could direct the spending where it was most needed, but still had to show – through results – that they deserved the cash. Last but not least was a ruthless approach to picking potential winners and grooming them for success in a world of intensely global competition, all dramatised by the reality that Britain would host the Olympics.

Everything was underpinned not by a raucous jingoism but by a determined pride in what our country now is and to show that we can be the best, a patriotism that allows us to be open to the cream of the world but also to use it for our own purposes. The alchemy is, as we have seen, extraordinarily powerful.

Not only do we need to sustain these principles so they become structurally and culturally embedded for continuing Olympic success, but they should also be applied elsewhere. The problem is that they are born of an ideological hybrid that wrong-foots our political class. They are mostly rooted in liberal social democratic values that understand the importance of public investment, public organisation and institution-building. But they also involve an unashamed recognition that in the end individual application, resolve and will to win are indispensable.

David Cameron and London mayor Boris Johnson are happy to celebrate the element that is rooted in competition, elitism and individual effort. But they flounder the instant the conversation moves to the role of public investment and the necessity of understanding and sustaining our unique sport ecosystem, just as nearly every Labour politician flounders the other way round.

The number of British politicians who understand this hybridity – and will argue for it – is tiny. Michael Heseltine always has and Peter Mandelson finally got there in the dying days of the New Labour government, a government that should have been all about such hybridity but was racked by the desire to show its "business friendliness" and warmth to the City.

In today's government, only Vince Cable consistently argues for it and is thus nicknamed the "anti-business" secretary by many on the right whose understanding of what drives success in modern economies and societies is close to zero. The big point is that success depends on recognising that both elements count.

So what to do economically? The first part of the alchemy is for the state to trigger substantial public investment in everything that supports enterprise – communications, science, knowledge generation and transfer, housing and education. And to do so with purpose and consistency. It should be running at least £30bn a year higher than the Treasury currently spends, financed either by taxation or borrowing, depending on the particular economic conjuncture. Currently, it should be financed by borrowing at the lowest interest rates for 300 years. A plan B should begin immediately with such an ambition.

But that is only the start. The next step is to reproduce sector by sector the kind of ecosystem that sport has developed. There needs to be specialist knowledge, commitment, long-term finance and coaching for business and a new web of intermediate institutions that can do for companies in life sciences, robotics and new materials what the RYA, British Gymnastics and British Cycling have done for sportsmen and women. For example, the fledgling network of "catapults" designed to transfer technology into varying sectors must become centres of open innovation, coaching and support and scaled up quickly so they can reproduce the Olympic effect for business.

But for any of that to work, engaged owners have to be committed to their companies over time and banks need to behave more as business coaches – not sellers of credit and of useless financial products. They need to become organisations that attempt to co-grow the companies in an active partnership, not organisations that opt for money-laundering, Libor manipulation or mis-selling. This will demand a wholesale recasting of Britain's system of business ownership and finance, informed by the same pride and ambition for Britain as our athletes and Olympic crowds have shown.

There then has to be a commitment to management and performance – a world where achievement is genuinely rewarded and poor performance penalised. The principles are common sense. Wherever applied – from Team GB to the success of the German car industry or American IT industry – they work. Mr Osborne assures us of his complete focus on growth and jobs even as the UK economy remains locked in depression and an escalating balance of payments crisis. But such focus is meaningless unless informed by an understanding of what to do and a determination to do it.

Osborne and Cameron believe in the same ideas – public disengagement, free markets and laissez faire – that brought Olympic failure. Either they change or political leaders who do understand what to do must take their place. Britain could so easily be a world success. But first it has to find politicians who understand the necessity of hybridity. They are not Osborne and Cameron.