John McTernan: Belief in our economic way is on the wane

After the party, the hangover. When the holidays are over we'll look back ruefully on Christmas and Hogmanay. We'll look over our presents - and according to economists we'll value them at about 80 per cent of what they cost our friends and relatives to buy them.

We'll regret over-indulging ourselves and make resolutions about diet and drink. We'll promise that this year things will be different, we'll stay the course, we'll change our behaviour. We'll mean it, and maybe we'll even do it, but I suspect it won't make us feel any better, for there is a deep malaise in almost every industrialised country.

Governments are being punished by voters. US President Barack Obama has gone from hero to zero. Labour lost the UK General Election, but so did the Tories and the Lib Dems. In Europe, Merkel, Sarkozy, Berlusconi and Zapatero are battered and unpopular. This is deeper that the habitual cynicism about politics that characterises mature democracies. It is an existential unease - people are doubting the very basis of the economic model that has sustained western prosperity.

Now that Christmas has been almost completely secularised, it is a time marked by - and celebrating - consumption. In a way it is the most iconic of our festivals, it says the most about the way we live now. Our modern economy is powered by consumption. We buy new cars, new TVs, new anything, not because we have to, but because we can. Many adults have bought their music collection four or five times over (vinyl, cassette, CD, CD reissue remastered with bonus tracks, and iTunes), only to find it now available on spotify, to which they cheerfully subscribe.

To be, it seems, is to shop. But now even shopping seems to have lost the ability to free us from the surly bonds of everyday life. Partly, we are learning the true cost of cheap goods and clothes, in terms of child labour, low wages and horrendous working conditions. Partly, we are learning the true cost of the cheap credit that allowed us to buy quite so much of this cheap stuff while fitting a new kitchen and holidaying abroad twice a year.

The self-satisfied middle-aged middle classes are starting to realise that the rising house prices that allow them to withdraw equity from the house that was, incidentally, such a bargain, are actually systematic robbery from the younger generation - their kids. The very clever financial instruments that allowed credit of all sorts to be extended so widely and so cheaply have themselves brought the global economy to the brink of a depression. Perhaps, more and more people are wondering, this is not sustainable.

This is the doubt that has seeded itself and is taking root.The most common expression is the concern that 'we don't make anything any more'. The political expression of this concern is the oft-quoted desire to 'rebalance the economy'. In one sense these are both misplaced desires. Britain is still the sixth largest manufacturer in the world - we make more cars than in the 1970s, and Sheffield produces more steel than in the 1980s - it's just that we do it with far fewer workers than before.

In another sense it expresses an unarguable truth, in an economy sustained by trade we are buying more and more from China but what precisely are we selling to pay for it? The rise of China and India has been a political commonplace for most of the last decade, since the global financial crisis it has become real to most people. And for all that trade is not a zero-sum game, there are huge, if unexpressed, public doubts that this rising tide will raise all boats. You don't need to understand savings ratios, the dispute over the value of the renmibi or the role that China played in wrecking any climate change accord at Copenhagen to understand that the world is changing. The economic centre of gravity is the Pacific, and growth seems to be moving south - to Latin America and South Africa - as well as east.

Even more unsettling, no politician has a story to explain how Britain, let alone Europe, thrives and survives in this new world. Financial services? Sure, but we've seen the downside now, as well as the upside. Knowledge industries? Maybe, but have you seen where UK universities are in global rankings? And have we really cracked how to commercialise research? It's the hole at the heart of our modern politics that no-one has a convincing story about how western economies can sustain rising standards of living in the face of real economic competition. Devising and selling the right strategy is a key part in restoring public confidence in the political process. But there's another problem.

When the public question whether our lifestyle is really sustainable, they mean in environmental terms as well as economic. However much we pride ourselves on reducing, reusing and recycling we are running up a down escalator. As new workers join the world economy - at least a billion in the last 20 years - they want what we take for granted.

Nowhere is this clearer than in energy consumption. In just over two centuries the West has consumed almost all the energy resources it took two billion years to create. Future generations will look back on this as an unbelievable self-indulgent act of despoliation. We sit paralysed. Certain that climate change is real and that it is man-made. Keen to make a difference. Doubtful of the efficacy of international action. Certain that what we do will barely weigh in the balance against the multiple actions of the new consumers - the emerging middle-classes in China and India.

This is a toxic mix.A deeply uncertain country fearing the worst, and facing a political class unable to inspire or reassure. That indigestion you feel on Boxing Day? That's not just too much turkey and mince pies. It's the aftertaste of the collapse of an economic strategic advantage that has made Scotland one of the most prosperous places on the planet for the last two centuries. An advantage that's not coming back. Merry Christmas.