Down inside a disused building in central London, its ground floor the size of an aircraft hangar, the rigs were almost ready. The inaugural sound check happened at around nightfall. Those present cheered. Across the city hundreds of revellers waited, watching the web. Shortly after 7pm on 30 October, a pay-as-you go mobile number surfaced on a rave blog. Within moments, the digits were circulating through cyberspace. London's most audacious rave for years, Scumoween: The Squat Monster's Ball, was officially on.

Callers heard an excitable message: "Tonight's party is on Shaftesbury Avenue, just opposite where the End used to be which is West Central Street. We're setting up now, there's a couple of rigs banging out music, give us a couple of hours so we can carry on setting up and you can have the biggest fucking rave to hit central London."

By 9pm, huge crowds were assembling outside the disused parcel-sorting office on the periphery of the West End. Word spread that something "phat" was about to kick off. Encouraged by a fresh slew of texts and tweets, more ravers began descending upon the building. At 11:15pm, police were alerted that a colossal, unlicensed party was under way, triggering a chain of events that would culminate in a stand-off reminiscent of the illegal raves and the law 20 years ago.

For some observers, last Saturday's scenes evoked memories of the second summer of love – the tide of rave culture that swept Britain from 1988 into the early 90s. They recognised similarities in the context – an enduring recession, and a Tory government committed to rolling back the state.

Commentators on youth culture believe that deepening disenchantment with the government could result in a generation turning to illegal raves in an echo of the backlash against the Thatcher government in the mid-1980s. Last week's proposals to raise university tuition fees will be seen by many young Britons, they argue, as the latest example of politicians failing to bequeath opportunities and wealth they enjoyed to the generation that followed.

Duncan Dick, deputy editor of Mixmag, says: "They pulled the ladder up behind them. These guys went to university for free. You'd think when they got into power they might also stop criminalising people for going to raves as they did when they were younger. It's collective amnesia, total hypocrisy."

He predicts that as the coalition's policies bite deeper a fresh counter-culture of like-minded people who share hedonistic experiences, but also a distrust of the state, could be fostered. "It's got the potential to be militant. Thatcher's saying was that there is 'no such thing as society', but if you've gone to an illegal rave organised on Facebook and there's 400 people, there's your community. If those people start getting involved in politics you have a community ready to become militant."

Alex Miller, online editor of the youth culture journal Vice magazine, believes it is too soon to measure the impact of coalition policies on popular culture. "They haven't been in power long enough to have that cultural impact. Maybe in four years there might be some profound social reaction, but six months…?"

Some at Scumoween, however, talked as much about Conservatism as the need for a "wicked time in a period of doom and gloom". One described the blare of techno above police sirens as "the sound of the government getting fucked with a kick drum".

But the recession has also opened up practical opportunities for more urban raves like Scumoween. Dick, aged 30, said: "In a recession, as we've seen with the dawn of acid house and with New York in the 1970s, anywhere where's there's been a really good underground clubbing scene, you get into buildings. When you get into a building you've got the potential to have raves. Instead of gentrification, you've got empty buildings and construction projects are never finished and that creates a vacuum. If the recession continues then history indicates that the underground illegal club scene tends to thrive."

Says Miller, aged 27: "The recession increases the need not to have parties in awful bars where it's £12 on the door and it's populated with arseholes and the drinks are too expensive." But economic variables are, adds Miller, secondary to the influence of the internet in dictating a new rave culture.

"There is a self-entitlement with the generation that has grown up on the internet. They've already destroyed the music and publishing industry, now they're working on destroying the film industry. Next might be the event industry which is crying out to be destroyed.

"There is a genuine feeling that if they want to do it, then why can't they do it? If we want free songs, then why can't we get free songs? If we want these parties in the centre of London then why don't we have these parties in the centre of London?"

As midnight passed last Saturday, the cohort of revellers in West Central Street continued to swell. Officers considered gatecrashing the party to bring it to a halt, but concluded there were already too many people jammed inside. Heavily outnumbered, they abandoned any plans to wield their powers under the Criminal Justice Act 1994, introduced to close gatherings of 100 or more people and credited with killing off the initial rave scene. Instead, roads surrounding the site were shut on safety grounds and attempts at dispersal mounted. By 12:30am gigantic queues had formed outside the building's entrance. Footage on YouTube shows a handful of revellers taunting the police. Soon after, a section of the crowd rushed the thin line of officers. At 12:50am Scotland Yard commanders designated the rave a potentially serious public disorder issue. Orders were passed for the "commissioner's reserve", riot police on standby to quash the threat of civil unrest, to attend the scene immediately.

The arrival of the Territorial Support Group did little to dampen the unrest. The first reports of violence arrived after 1am. Bottles and bricks were thrown at officers. One YouTube clip catches a young man smashing the window of a police van to yelps of laughter and then an "Oh, shit" as riot police approach. As sporadic violence flared, 10 men were arrested for disorder. One police source said: "It was highly unusual to have something like this in the city centre. Normally you might get something like this in the sticks, but its location made it attractive to passers-by." At 1:45am Scotland Yard noted a major influx of fresh ravers. Figures were seen dancing on the fourth floor.

The gig was organised by Scumtek, a grassroots movement that originated from squats and is closely linked to Teknival, a dance subculture that fuses elements of rave, traveller culture and America's Burning Man festival scene. However, last Saturday's event represents a marked departure from previous Teknivals. Traditionally their raves are confined to isolated locations such as remote hillsides in Brecon, Wales, rather then the centre of the capital.

Teknival is understood to have experienced a resurgence this year due in part to escalating policing costs at legal festivals and licensing and sound-level restrictions. But the speed with which Scumoween's organisers were able to mobilise the masses remains central to its growth.

Miller said: "The internet allows young people to spread ideas incredibly quickly and unregulated. These parties are a reflection of that culture, of the notion that in just a few hours an idea can reach millions in a way it never has before." Dick said: "Because of Facebook, Twitter and other social media, organising a rave is so easy. You don't have to worry about flyers or flyposters and getting busted by the police. You can do it online on the day. Bang. There you go."

By last Sunday lunchtime, Scumoween was losing momentum. About 20 officers and clusters of tourists gawped at the stragglers in Halloween outfits as they drifted home in daylight. At 4:15pm, police finally entered the building and declared the party over. As night closed in, the dance blogs began buzzing. Plans for the next major rave were mooted. New year. "It's going to be a fat one," said one.