Ten years ago this month, Britain was on the cusp of change. Two things were about to happen, one planned and one unexpected.

The change everybody knew about was that Tony Blair was going to stand down as prime minister after 10 years in the job, during which time he had won three elections on the trot.

To mark his going, Dan Atkinson and I wrote a book summing up his legacy. Fantasy Island, as the title suggests, was not exactly flattering about Britain’s departing PM. It painted a picture of Britain as mired in debt, where the public sector was on the brink of meltdown, where the country was trying to play the part of world policeman on the cheap, and where the growing size of the trade deficit exposed the perils of allowing manufacturing to shrivel.

Fantasy Island was not exactly a bestseller but it sold reasonably well. The reason for that (apart, obviously, from the book’s razor-sharp analysis and polished prose) was that the biggest financial crisis in a century erupted within two months of its publication and a month after Blair’s departure from Downing Street. This was the unexpected event.

Britain, as a result of what happened between the first inklings of trouble in July 2007 and the bottoming out of a deep slump in the early part of 2009, is an utterly changed country. There has been a lost decade of living standards. Dismal productivity growth and the proliferation of low-paid, insecure jobs have made a mockery of the idea that Britain was forging ahead in the knowledge economy. A decade of investment in the public sector has been followed by a decade of cuts. Without sounding unduly boastful, quite a lot of what was predicted in Fantasy Island came true.

Daily Mail front page, 12 May 2017. Photograph: Daily Mail

And, to be frank, not a lot has changed in the subsequent 10 years. The economy is still over-dependent on the financial sector and on the willingness of households to load up on debt. When the housing market slows – as in 2011-12 and currently – so does the economy. Income and wealth are highly concentrated because not only has growth been slow it has also been unevenly distributed.

In the workplace, management is strong and unions are weak, which helps explain why real wages have grown more slowly since 2007 than in any decade since the 19th Century. London is rich and thriving but might as well be a separate country given how different it is from other, less prosperous, regions. Relative poverty, as the former prime minister Gordon Brown has shown, is heading for levels not experienced even under Margaret Thatcher in the 1980s.

Imperfect though it is, Labour’s draft manifesto at least tries to tackle some of these glaring weaknesses. Sure, there is a perhaps naive belief in the ability of the state to administer top-down solutions. Certainly, the document can – and will – be criticised for being stronger on how to spend money than how to create it. No question, some of the individual measures don’t really cut it. The £8bn bung to scrap tuition fees, for example, is not especially progressive.

That said, though, there are plenty of good things in the manifesto. The employers who whinge constantly about the poor quality of school leavers and graduates will be asked to contribute more to the education budget through higher corporation tax. Labour plans to broaden stamp duty to a wider range of financial instruments, including derivatives, which will raise £5bn and help lessen volatility.

There is a recognition that macro-economic policy since the crisis has been flawed, with far too much emphasis on ultra-low interest rates and quantitative easing and too little on tax and spending measures. Austerity has been tested to destruction, with both deficit reduction and growth much weaker than envisaged. There is a strong case, as the International Monetary Fund has noted, for countries to borrow to invest in infrastructure, especially when they can do so at today’s low interest rates.

Indeed, it is sign of how much ground has been ceded by the left over the last decade that these ideas are seen as dangerously radical. Germany and France have higher levels of corporation tax than Britain, but they also have better trained workforces and higher levels of productivity. A group of eurozone countries are planning a financial transactions tax. Balancing day-to-day spending while borrowing for roads, railways and superfast broadband, which is what John McDonnell is suggesting, is more Keynesian than Marxist.

What’s more, these essentially social-democratic ideas will seem even more mainstream if – as is entirely possible – there is another crisis.

Mohammed El-Erian used to run Pimco, the world’s biggest fund manager. He told the Observer this week that in 2008-09 there was a chance to construct a new growth model, but the opportunity was passed up. Financial markets have been kept happy by an unceasing diet of cheap money but the economic fundamentals are poor. Brexit, the election of Donald Trump and the eclipse of both the traditional parties of government in the French presidential election are warning signs that something is seriously amiss.

El-Erian says the developed world is “either going to take a turn towards higher, more inclusive growth that will reduce political polarisation and the politics of anger. Or alternatively, low growth becomes recession, artificial financial stability becomes unsettling volatility, and the politics get a lot messier”.

Things, in other words, are back where they were in the run-up to the crash of 2007-08. Then, the series of regional financial crises in Mexico, south-east Asia, Russia, and Latin America were warnings that something bigger and much more serious was about to happen. These were akin to someone who is obese and a heavy smoker suffering a series of mini strokes and failing to change their lifestyle.

The leak of Labour’s draft manifesto led to some predictable headlines – “Britain heading back to the 1970s”; “This was the most expensive suicide note in history”. For me, though the most memorable given its personal connotations, was the Daily Mail’s “Corbyn’s fantasy land”.

Think about this for a moment. Real incomes are falling. Inequality is rising. The NHS is kept going on a wing and a prayer. The economy is barely rising despite more than eight years of unprecedented stimulus from the Bank of England. Personal debt is heading back towards its previous record levels. International co-operation has rarely been weaker. There is a profound disconnect between the financial markets, where asset prices regularly scale new heights, and the state of the real economy.

Now ask yourself this. If any of the above rings true, what is the real fantasy: Labour’s idea that income, wealth and power should be a bit more evenly distributed or the idea that the current state of affairs can be sustained for very much longer?

