'I was in this game for the money," wrote Andrew Lahde, a hedge fund manager, in a letter to the Financial Times last year as the global economy went into meltdown. "The low hanging fruit, ie idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking.

"These people who were (often) truly not worthy of the education they received (or supposedly received), rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behaviour supporting the aristocracy only made it easier for me to find people stupid enough to take the other side of my trades. God Bless America."

The fruit doesn't hang much lower than Prince Andrew. The best education money can buy and an intellect worthy of the gene puddle from which he was fished. Few look on him for leadership. But the apparent absence of a filter that might temper the more blatant expressions of his regal privilege, makes him an interesting indicator of class entitlement at times. "I don't want to demonise the banking and financial sector. Bonuses, in the scheme of things, are minute," he told the Daily Telegraph this weekend.

"They are easy to target. A number will have abused their privilege of a bonus, so get rid of the excesses, but don't throw the baby out with the bath water." For a man who used £30,000 of taxpayers' money for a 50-mile helicopter ride so that he could have lunch with Arab dignitaries, the million-dollar bonuses received by bankers probably do seem trifling. But the rest of us see extortionate rewards for incompetent people not as the "abuse of privilege" but of abusive privilege – wanton venality embedded in a corrupt system.

Bonuses are the most stark illustration of an economic culture that treats those who actually create wealth – workers – with contempt, while handsomely rewarding those who profit from that wealth. While perfectly competent public sector employees who are doing useful jobs face lay-offs because of the economic crisis, the overpaid people responsible for creating the crisis are getting huge rises.

Resentment is both justified and predictable. On its own, however, it is not particularly productive. The furore over AIG bonuses in March, or Royal Bank of Scotland's former CEO Fred Goodwin's lavish pension, provided an effective vent for widespread outrage. Governments joined in their expressions of disgust, as though the issue were one of bad manners, and then floated all sorts of palliatives that they knew would offer no cure.

Today the bonuses are back because banks that were too big to fail are even bigger, having swallowed the minnows and basked in the oligopoly that greeted the survivors. One of the few things that has changed since this time last year is that we now know just how completely rotten this system is.

So the populist anger at inflated executive pay acted as a diversion from the crisis, rather than tackling the root causes of the popular distress it had caused.

For there is a difference between class envy and class struggle. The former is rooted in the popular antipathy towards the rich on account of their wealth; the latter, meanwhile, targets the system that makes some people rich by making others poor. Envy can lead to struggle. But it doesn't have to.

As a means of propaganda, class envy has its uses. The sight of David Cameron and Boris Johnson in bow ties as members of Oxford University's Bullingdon Club – a high society drinking fraternity where members routinely got trashed, then trashed restaurants and often paid for the damage in full, in cash – certainly whets a class-conscious appetite. But it should never be mistaken for the main dish. The problem is not that they are toffs, but that their expressed aim is to further the political and economic interests of toffs.

By shifting the focus from the institutional to the individual it is easy to identify a potent symbol while ignoring the substantial flaws that made those symbols possible. So while we were directing our anger at bankers, banking and finance has returned to its old ways.

This contradiction has been most obvious in the US, where the administration last week ordered swingeing cuts in the boardroom pay of those companies still dependent on the public purse. But the plan, announced with great fanfare, only actually affects 175 people and even then allows for "exceptions where necessary to retain talent and protect taxpayer interests".

When asked if he thought it would make a difference, Obama's pay tsar, Kenneth Feinberg, said: "I hope so, but that would be voluntary. It's not the government's business." Voluntary regulation with loopholes for all – haven't we been there before? Meanwhile the Federal Reserve has announced plans to crack down on pay deals that are related to excessive risk. That could make a slight difference, if it were to be properly enforced. Yet few believe it will be.

But the most plausible reform that would have the greatest effect is to break up the banks by banning them from owning and trading risky securities. This is not a particularly radical suggestion. It's not an alternative to capitalism – just a change in capitalism as we have come to know it. Versions of it have been championed by, among others, former Fed chairman, Paul Volcker – Obama's most senior economic adviser – and the Bank of England chairman Mervyn King.

"The banks are there to serve the public," Volcker told the New York Times last week, "and that is what they should concentrate on. These other activities create conflicts of interest. They create risks, and if you try to control the risks with supervision, that just creates friction and difficulties," and it ultimately fails.

"People say I'm old-fashioned and banks can no longer be separated from non-bank activity [but] that argument brought us to where we are today."

Back in 1933, during his first presidential inauguration address, Franklin Delano Roosevelt, aimed to do just that. "The money-changers have fled from their high seats in the temple of our civilisation. We must now restore the temple to its ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit ... There must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money."

This time, the outcome of our economic crisis has so far been almost exactly the opposite. The money changers not only remain in their high seats but our governments have bought them cushions, at our expense, that they might perch more comfortably. The last year has seen not a restoration of ancient truths but a resurrection of decrepit institutions and a decaying ideology. Pumping public money into their sclerotic veins, we brought them back from the dead. We have literally paid for the right to be exploited by a system we know doesn't work.

The prince was half right. In "the scheme of things" bonuses are an easy, if legitimate target. So the sooner we address the scheme of things the better.