Given the seemingly unending series of gaffs and setbacks to afflict the government over recent weeks, culminating in the damning economic figures just released by the Office for National Statistics (ONS), it’s a safe bet that the opening of the Olympics could not come quick enough for George Osborne and David Cameron. Indeed, if economics was an Olympic sport Osborne would have been asked to hand his team vest back after a performance since entering Number 11 that has him on course to be the most incompetent Chancellor of the Exchequer in recent history.

Significantly, the news that the UK economy has gone deeper into a double-dip recession under his watch looks to have finally ended the cosy relationship which the Chancellor had previously enjoyed with the City and British business, with numerous calls from both demanding that he ‘do something’ to reverse the tide.

That ‘something’ would of course involve not just a change of course economically – hard for any government to do when it’s under the cosh for fear of being labelled weak – it would also by necessity involve a step-change in ideology. Why? Because the economic policy being followed by this government is more the product of ideological blinkers than sound economic theory. How could it be otherwise when in economic terms the policy being followed has thus far proved disastrous?

Since the economic crisis first hit these shores at the beginning of 2008 the glaring weakness in the economy has been a collapse in demand. Britain’s deficit has been a result of more government borrowing to fill the gap of plunging tax income due to rising unemployment, businesses going bust, and a concomitant increase in people claiming benefit.

But rather than takes steps to tackle the causal factors responsible, this right wing government has focused almost entirely on the symptoms – i.e. getting the deficit down by slashing spending, including benefits, with no thought for how it will only deepen the depression rather than produce a recovery.

As the US economist and nobel laureate Paul Krugman asserts: “Economics is not a morality play.”

Yet this has been precisely the approach to the depression by Osborne, Cameron, Clegg et al. In this morality play it has been overspending, a jamboree of consumption, which has led us to the mess we’re in. Now, in order to clear it up, a national exercise in economic self flagellation is required. Clearly, given the lack of comparable measures introduced to dole out some of the resulting pain to the rich, this national exercise is to be restricted to the poor and ordinary working people – the undeserving poor as opposed to the deserving rich, in other words – making this a Victorian morality play.

Yet strip away the government’s rhetoric over the need to cut spending, the solution to this ongoing economic depression is really very simple. Bringing down the deficit requires growth; growth requires a resurgence of spending; and a resurgence of spending requires the reintroduction of demand into the economy.

This is where the locus of government intervention must be, as the investor and lender of last resort to stimulate economic activity. Investing in infrastructure projects such as housing, roads, transport, the emerging green economy, schools, hospitals etc, will create jobs, which in turn would get people off benefits and back to paying tax and spending in the real economy, thus producing a multiplier effect. Businesses do not create jobs; this is one of the great myths of modern political and economic discourse. Consumers create jobs.

But no one should be in any doubt that the obsession with deficit reduction on the part of the government is really an obsession with keeping the markets happy, which brings into sharp focus the issue of sovereignty. However, even here it doesn’t take a leap of logic to understand that of more importance to the ever-mystical bond markets is the introduction of measures designed to lift the economy out of depression and thus make the prospect of a decent return on UK bonds better over the short to medium term than it is at present. With interests rates at zero and unable to be reduced any further, this requires the implementation of a fiscal stimulus to create the demand already mentioned.

The billions paid to the banks via Quantitative Easing have barely touched the real economy. Banks are refusing to lend because by now there are no customers creating the demand that businesses need to expand. When it comes to the thousands of small to medium businesses which need to borrow to cover the gap between normal operating costs and income, by this point increasing numbers of those have either gone to the wall or been forced to contract as a direct consequence of the present cycle of deepening depression.

Which brings us back to the question of ideology.

The financial and banking meltdown which hit the global economy four years ago was an economic 9/11. And just as that terrible event gave the Bush administration its pretext for going to war in Iraq, its economic equivalent was the pretext needed by the Tories to set about rolling back the state in Britain. The savage attack unleashed on the public sector, the attacks on benefits, pay and conditions across the board, has been accompanied by the demonisation of each of the aforementioned demographics. In other words, the economic crisis has seen class war declared in order to push through the structural readjustment of the economy and with it society in general, with the public sector, a necessary ballast of demand through good times and bad, declared the enemy within in the process.

This is the context in which the latest damning figures, namely a 0.7% contraction in the economic activity across the board over the last three months, have to be considered.