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Here is the second film in which I travelled from the tip of Wales back to south east England to find out whether Britain is flourishing - or at least can flourish - in the new world economy.

"All items of value have been removed," reads the sign on the boarded-up Flag and Whistle pub, the first thing you see when you leave Margate railway station.

For large parts of Britain the phrase sums up the state of things.

I have been on the road for the best part of two weeks trying to look beyond the financial crisis at the structural problems affecting the real economy - travelling from Margate in south-east England to St David's in west Wales - and back.

Along the way I have been asking people - what is wrong with Britain and how do we fix it?

Anti-migrant sentiment

When I first asked the question, on a wind-whipped Margate seafront, the answer was blunt: "Foreigners mate. Take our jobs, undercut our wages."

One person after another told the same story - they cannot get a job and believe migrant workers are undercutting their wages.

This may shock you, but it does not shock me - I have been hearing this message for two or three years now. It is the signature tune of the recession - and one politicians do not really want to hear.

But to me it is evidence of a deeper problem. Social mobility has declined, industry has shrunk from 20% of GDP to 13% under the present government.

Social historian Michael Collins, who has studied the working class diaspora of the South East, tells me that large sections of the population now reject the officially prescribed route upwards - education - in favour of a more tangible one: cash.

Low social mobility and this deep alienation of a section of unskilled manual workers has created a cultural divide in Britain that would have shocked Orwell and Disraeli, between an urban, metropolitan and multi-ethnic working culture in the cities and the one you find on Margate seafront.

Micro-economy

It was all too obvious as I hit London that it is there that the power and wealth in society rests.

In central London - and central Birmingham, Manchester and Glasgow to an extent - you have got a self-sufficient micro-economy whose badge of membership is the cappuccino and the laptop.

It has survived the recession well - the Starbucks barista buys their lunch in Subway, buys a cheap top in Zara, lives in the modern version of a rooming house, which is a ?500k rented London terrace divided into only bedrooms.

The wages are never brilliant, and nobody plans to do this forever, but there is a supercool aspect to the lifestyle that is a world away from life in a small town.

"We've centralised the economy," conservative philosopher Philip Blond told me. "We've taken all the wealth, talent, capital and centralised it inside the M25. And the state underwrites the finance system - so it rewards speculation. Why would capital go anywhere else?"

The results are obvious once you get to a place like Stoke-on-Trent. Most of what Stoke was famous for had already gone by the time the financial crisis hit.

Viewed from the air the city is scarred with demolition sites of the great names of ceramics and steel. What is new are warehouses and cut-price stores - Aldi, B&Q, cheap sofa stores.

Stoke's workforce has fallen from 106,000 to 98,000 in the last three years and on no projection does it ever get back to 106,000.

On a projection that includes government spending cuts, the workforce does not stop shrinking until 2017.

Industrial collapse

The urban landscape of Hanley, a place to which I have returned throughout this recession, is a living demonstration of the failure of an economic model.

There are more than enough pawnbrokers and cheque cashing stores, some temp agencies, with very meagre offers in the window. And at night, silence - save for the trashy student bars where, say the posters, you can get "trollied" for 99p.

Something about the economic model we adopted over the last 20 years has just not worked.

Financial speculation has been rewarded, industry has declined, wages at the bottom end have not kept pace with growth and the basic test of an economy - does it make poor people richer - has been flunked.

What is the answer? For me, the urban landscape of Stoke contains a buried clue. Slicing through the five pottery towns are the canals, flanked by the picturesque ruins of the early kilns that made the names Wedgwood, Spode and Doulton famous.

In the 1770s canals were like the internet - a revolutionary new communications network that made new consumer products like a Staffordshire tea service possible for the masses.

Stoke exists because three or four entrepreneurs said: "A new age is coming, let's be part of it, in fact let's do it first."

Eco businesses

For 20 years we thought we were already in a new age - that it was the age of high finance and call centres. Then the banks collapsed.

In St David's, Britain's smallest city, one thing strikes you - there is no big business.

Once a backwater, Pembrokeshire is now home to a booming seasonal micro-economy of eco-tourism, alternative technology, crafts and organic farming.

It is a kind of middle class nirvana, kept out of the hands of the property wide-boys and lookalike retail chains by the fact that it is inside a National Park.

I went there because I had uncovered a network of local businesses operating in ways that might hold clues to Britain's future.

"We're one of the oldest industrial countries," adventure company boss and deep green business guru Andy Middleton told me, "but we could become the first successful post-industrial economy".

I sat round the table with Andy and his mates - the T-shirt boss, the tepee camp owner, the recycleable furniture designer whose company turns over ?30m a year, and Andy himself whose adventure company morphed into a business consultancy.

"Nothing in nature maximises," Andy told me. "Trees don't ask 'how high can I grow?'"

"If you maximise profit" Chris, former MD of local sportswear group Howies, said, "you've no room for manouver. It's a recipe for boom and bust".

A changing world

It is clear to me there are two big things happening in the world:

A tech revolution that started with the internet, but has now spread to everything from materials science to medicine to robotics;

and a green revolution, that started with carbon reduction and is now changing the way people run businesses and live their lives.

This west Wales cluster of eco-business, who do not want to be part of the city-financed world, and want a bottom line that includes people and planet as well as profit, represent one way forward - but not without some bigger structural changes.

As I retrace my steps (the return journey is featured on Tuesday's Newsnight) I find the beginnings of a more sustainable kind of economy - at Emma Bridgewater's booming family-owned pottery in Stoke, at a London dotcom where they have invented an alternative to banking, and in Margate, with artist Tracey Emin, who believes the new art gallery soon to open there will transform the place.

And I meet the people trying to heal the fractiousness and mistrust of migrant workers through the ingenious means of getting them paid decent wages so the jobs and livelihoods of the existing workforce cannot be undercut.

"We're weaving the social fabric of this country," says the woman standing in the rain on London's Oxford Street, fighting to get cleaners paid above the minimum wage. The irony is not lost on me that she is Polish.

If we are going to be part of a third industrial revolution we are going to have to have a frank discussion about power.

All the power has been centred on finance and the financial model and, funnily enough, we have just hocked our entire economy to save that broken system.

From the coasteering teams in Wales to the boxing clubs of the potteries I sense a deep frustration with this absence of voice and power that traditional politics just does not capture.

But don't just take it from me - join me on Newsnight, Monday 29 March and Tuesday 30 March, to hear it from the brickies, bantamweights, emigrant plasterers, immigrant cleaners, seaweed enthusiasts, pottery painters, city refuseniks and Brit-art geniuses.

Hear their answer to "What's wrong with Britain and how do we fix it?" - and hit the comments button to give us yours.

There are bonkers theories about a new American Civil War: there are predictions of it, even computer games based on it - and then there is reality.

But reality in America is looking a little bit different than it did before the passage of the Obama healthcare bill. Public discourse has reached "mad as hell and not going to take it anymore" levels and, watching it all from the outside, I am wondering where it all ends up.

There has been an outbreak of vandalism - bricks through politicians' windows; there have been threats of violence and a lot of violent language. Democrats, in response have begun to mainstream Republican commentators of stoking up the violence, and in turn they have accused the Democrats of trying to provoke a violent reaction.

All this has made me consider in a new light something said by an oil-man who consults for one of the biggest companies in the world. Last summer he told me:

"We run a mainframe computer simulation of the global political and economic situation, modelling various outcomes of the resource crunch that begins in the back half of the 2010s. And no matter which way we tweak it, it always comes out with the same result: civil war in America in 25 years's time."

For obvious reasons, given that the said company is a global player, they were not very interested in publicising the scenario.

In this oil company scenario the driver is not ideology but simply resources. As explained to me, the question becomes whether the world's biggest consumer of petroleum based products can move away from oil dependency fast enough; and in the scenario the answer is no because its political institutions are too consensual. That is, even where you get politicians who are prepared to act decisively, there are so many checks and balances - state-level opt-outs, Supreme Court, Congressional filibuster, corporate-controlled media etc - that they can never implement the most painful decisions. And as a result the political system fragments once the oil gets scarce.

I am always wary of "ACW 2.0" scenarios because they are a recurrent fantasy for people who don't like the USA. Russian professor Igor Panarin, for example, that the USA would begin to fall apart this year and that the dollar's role as a world currency would end last year. As summarised by the Panarin predicts:

"Economic, financial and demographic trends will provoke a political and social crisis in the U.S. When the going gets tough.. wealthier states will withhold funds from the federal government and effectively secede from the union. Social unrest up to and including a civil war will follow. The U.S. will then split along ethnic lines, and foreign powers will move in."

(Panarin is a Dean at the Russian Ministry of Foreign Affairs Diplomatic Academy.)

Now let's look at current reality. In the aftermath of President Obama's healthcare bill there are three separate strands of conservative opposition brewing.

The most important is the revived Palin/McCain bandwagon that has hit Nevada this week and will move countrywide until mid-April. This is an attempt to ride the wave of the Tax Teaparty movment and turn it into an electoral rout for the Democrats in November's midterm elections.

What liberal commentators have taken offense to is the use of gun language and symbolism, with Sarah Palin's website indicating "target" Democrats using .

The next strand is the . Though the movement is massive, peaceful and encompassing large numbers of grassroots Republicans, some demonstrators in Washington hurled racial and homophobic abuse and threats at Democratic Congressmen; and some placards carried the implicit threat of violence. This was then condoned and stoked up by some right wing radio show hosts.

Then there is the actual violence. Democrat Party office windows were broken in several states. Ten Democrat lawmakers have been offered police protection. This op-ed from the Washington Post contains a .

In this context for the anti-healthcare bill campaign is worth watching. The tone is more in sorrow than in anger but contains the following commentary on the liberal media's response to the verbal abuse on Capitol Hill:

"Why are the Tea Parties always being labeled as terrorist? Why is it? "They're extremists, they're terrorists, they're hatemongers, they're dangerous!" What is it that these evolutionaries want? You'd pick up a gun? You ever thought of that? These people have. Because possibly, maybe the question should be asked: Maybe they're tired of evolution, and they are waiting for revolution."

At the end of the broadcast Beck calls for a return to rational discourse. But those like former Bush aide David Frum who have urged the movement to moderate its language in order to give elected representatives room for manouver .

What seems to me problematic is that the whole 24-hour furyfest is being conducted with almost no overt reference to America's history of political breakdown in the 1850s. Here's why it's worth bearing in mind.

James McPherson's The Battle Cry of Freedom, Allan Nevins' 8-volume Ordeal of the Union and Shelby Foote's trilogy The Civil War: A Narrative all remind us that the actual American Civil war was preceded by a long and complex political breakdown process accompanied by demographic change and economic modernisation.

It was not just "about slavery". It was about the emergence of a new political model of industrial capitalism in the northeast and Midwest and the rise of a political party that represented the new system, and had no support whatseoever in the slave-owning south. That, at the time, was the Republican Party.

As matters degenerated you saw the habitually rowdy electoral process give rise to more systematic violent acts, from the outbreak of political violence in Kansas, to John Brown's guerilla raid on Harper's Ferry, to the maiming of anti-slavery Senator Charles Sumner by pro-slavery Representative Preston Brooks on the floor of the Senate.

Allan Nevins argued that by the late 1850s America contained "two peoples": culturally, socially and ethnically different (black slavery in the south plus 9/10ths of European immigrants headed for the North). McPherson explained that, to the white slave-ocracy and its plebeian supporters, the rise of industrial capitalism and its liberal values did look like a revolution:

"When secessionists protested in 1861 that they were acting to preserve traditional rights and values, they were correct. They fought to preserve their constitutional liberties against the perceived Northern threat to overthrow them. The South's concept of republicanism had not changed in three-quarters of a century; the North's had.... The ascension to power of the Republican Party, with its ideology of competitive, egalitarian free-labor capitalism, was a signal to the South that the Northern majority had turned irrevocably towards this frightening, revolutionary future."

I want to make clear: it would be totally wrong to extrapolate from all this any direct parallel with today's situation in the USA. But in the light of my oil-man's scenario there are pertinent questions worth asking.

The Obama presidency seems determined to confront a number of strategic challenges to the USA: having 32 million people with no access to healthcare was the first. Having 11 million undocumented migrants could be the next.

But Obama's project for America seems to have frightened large demographic slice of the population which did not vote for it. In that sense alone there is a parallel with the economic modernization context of the 1850s.

If America is faced with huge, painful choices contingent on the outbreak of global resource rivalry in the next 20 years you would not ideally want to go into such a period with politics so polarized along ethnic, demographic, social and cultural lines.

Yet, in less than a generation US politics have become polarized in a way the mainstream media and academia are still struggling to understand.

It is worth remembering two things facilitated the run-up to civil war in 1861. First, the breakdown of the party system. The Democrats split along pro-and anti-slavery lines and a plethora of small parties emerged. Second the emergence of mass political engagement, with huge rallies, a viscerally agitated press on both sides.

Again, without over-egging the parallels, you have mass engagement bigtime now, with high-turnout elections ever since the ideological divide opened up, and a raging blogosphere. And you have the possibility of a strategic split in the Republican Party along social and cultural lines, though at present the Palin strategy seems to be to conquer the GOP for the Teaparty movement rather than to split from it.

Where does it all end? The answer will be determined by whether America's constitution and two-party system can contain the new viscerality of its political life. There is a strong chance that it can. Above all because America is the global superpower and has a very strong Federal state machine.

If it does, the outcome may be a long pattern of ideological presidencies, Clinton, Bush, Obama and then maybe Palin; swings to the left and right contained by the ability of states to opt out of stuff they don't like and by Supreme Court rulings, impeachments, lame-duck Presidencies etc. It's not hard to imagine because it's what has characterized the period since the mid 1990s. Liberal metropolitian types would go on living their lifestyle and suburban religious fundamentalists likewise, without coming to any more blows than verbal.

But the fact remains the USA is a country with an unsustainable budget deficit, a role in the world that is being challenged by China; and it is addicted, economically, to a substance that is going to be in contested supply within our lifetimes.

Its political institutions are going to come under strain as a result and the 1850s are a reminder that once politics slides into viciousness, over fundamental strategic questions, it's hard to pull back.

Next week on Newsnight begins with two reports from me looking beyond the financial crisis at the structural problems facing the UK.

I can sum it up for the time challenged: low skills, de-industrialisation, depressed towns and booming London, absence of social mobility.

I can sum up the "easy-win" part of the solutions I've been hearing too: reindustrialise, re-localise, spread out the capital away from the M25 into the regions and nations of the UK. And become part of the green revolution that's sweeping the globe.

And do something to address the growing disenchantment of many among the lowest paid who believe their wages are being undercut by migrant workers, and that nobody in authority cares.

Also, re-boot the finance system so that it supports innovation and employment in the UK rather than City speculation and employment in the far east.

That's how I'd sum up the responses of the businesspeople, experts and social entrepreneurs I spoke to.

But the bigger issue, harder to solve, is what we're going to be good at in this country? I've travelled the breadth of Britain to meet people who are trying to go beyond the policy wonk approach and actually do something to answer this question.

But it's going to be a challenge.

Tune in for the first of two reports on Monday night 2230 on 成人论坛 TWO. Second report same time Tuesday. Hopefully you'll be inspired more than depressed by the end of it.

But whatever, let us know what you think. How should we fix the UK? Its economy, its social fabric, its low self esteem problem? Hit the comments button.

It was a bright cold day in March, and the clocks were striking 13. Winston Zhang, his chin nuzzled into his breast in an effort to escape the air pollution, flashed his digital security pass to gain access to the newsroom, located his cubicle and logged on.

It was the day after Google had pulled out of China - so he was expecting an instruction from the Propaganda Department and sure enough, there it was, flashing in the red-gold colours of the flag from his computer screen - "This is a high impact incident!"

The guidelines were clear:

"1. It is not permitted to hold discussions or investigations on the Google topic
2. Interactive sections do not recommend this topic, do not place this topic and related comments at the top
3. All websites please clean up text, images and sound and videos which attack the Party, State, government agencies, internet policies with the excuse of this event
4. All websites please clean up text, images and sound and videos which support Google, dedicate flowers to Google, ask Google to stay, cheer for Google and others have a different tune from government policy
5. On topics related to Google, carefully manage the information in exchanges, comments and other interactive sessions
6. Chief managers in different regions please assign specific manpower to monitor Google-related information; if there is information about mass incidents, please report it in a timely manner."

... but this is not Orwell. The above bullet points are real, as translated by China Digital Times from what they allege is a leaked memo.

I can't verify its authenticity independently but there are numerous parallel reports and briefings coming out which indicate the Chinese official media is being told to a) censor all independent discussion of the Google issue and b) begin blackening the character of the US web giant.

South China Morning Post reports that Sina.com has received verbal instructions to: "toe the line and stick to [the] official version to prevent our media becoming mouthpieces for [Google] and tools attacking our national polices".

Outside the Google HQ in Beijing on Friday I am told the 40-odd journalists who had initially gathered have dwindled to just one, and those journalists speaking to the company off the record are saying they won't be allowed to print anything.

Meanwhile it appears that the company has become an unperson on China's equivalent to Facebook, Renren. Its profile, with 25,000 "friends", got shut down on Wednesday for "inappropriate behaviour".

Now this may shock you, but such methods are not reserved for dealing with Google. To give you a taste of what Chinese Communist Party (CCP) does not like, here's another recent leak of Propaganda Dept instructions to journalists.

"Propaganda direction: Please every platform block the following information. 《Examining China》（《透视中国》); exposing five industry fields controlled by China's princelings; Wen Jiabao's solo 'democracy' performance; at the crucial moment of the core power transition, political inner-circle releasing subtle messages; Beijing high officials' 'outrageous behaviors' during the 'two sessions' causing many guesses. Please execute."

In the West of course we do things differently. The Bush administration was caught tens of thousands of dollars to promote its policies. And when you get a verbal ear bashing, or a 3am profane text message from a UK government spin-doctor here it's only your career they're threatening, not your liberty.

(In this context, I have to say to the outraged Hong Kong reporter who posted - dream on if you think officials significantly more helpful here!)

All over the world people in power try to heavy journalists and stop them reporting the truth. In China, it's usually over incidents or the actions of forlorn dissidents who, like Gao Zhisheng, just .

But it's going to be hard for China to make Google disappear. For one thing the corporation seems to be toughening its resistance - massively aware of the brand enhancement effect it's having in the West versus its arch rival Microsoft, whose boss, Bill Gates insists:

"The Chinese efforts to censor the Internet have been very limited".

The danger for Google is it finds itself out on a very long limb. The US State Department is not going to burn its boats with China over Google and, as Rio Tinto found out, things can get nasty. Who will blink first?

In the movie business they teach you to hone your film proposals down to a "log-line" - how your movie be described in the TV listings?

I think Wednesday's Budget, beyond all the stats and credibility issues, is best read as part of Labour's search for a new log-line; a new narrative.

As I suggested on Newsnight last night, the essence of that new narrative is state intervention and it has been assembled in three recent interventions by Labour politicians.

First, Peter Mandelson has adopted an overt policy of using government money and influence to try and save and modernise UK manufacturing.

Reversing a decade in which giant British firms were sold off, asset stripped and then closed under the indifferent nose of the DTI, Lord Mandelson has piled in verbally over Kraft, put serious money up to help Sheffield Forgemasters build a new press, pulled new investment from Ford and Nissan into the UK using taxpayer-funded incentives.

You can tell this is something new because he is already being ticked off by the gurus of market orthodoxy at the Financial Times for "picking winners".

Lord Mandelson used to deride "picking winners" - ie the state choosing key firms to promote in the global marketplace - on the grounds that "it's usually losers picking the government" but on Newsnight, on Monday, he gave an explanation of why that's changed.

With the global financial crisis, other countries have poured billions into state aid for their own companies and simply to stand still the UK has to do the same. I think we are likely to see very imminently another example of this if the Corus plant at Redcar can be saved.

Second you had the Budget. A green investment bank, incentives aimed at creating a wind-turbine industry in the UK (10 years too late, of course), all the tax moves designed to boost manufacturers and Small Medium Enterprises (SMEs) at the expense of service industries. And repeated, overt calls for manufacturing to assume a higher proportion of GDP.

Third, and probably most important, the under-reported Ed Miliband gave the Guardian with regard to the manifesto.

If the briefings are right we are probably going to see proposals like capping interest rates, a reformed minimum wage along the lines of the London Citizens "Living Wage" campaign and even more rhetorical emphasis on manufacturing, social entrepreneurship and eco-business.

So what's the Labour log-line?

If I were to write it now it would be: "Traumatised by war, a party goes back to its old home town to rediscover the youthful ideals it had thrown aside are actually relevant in a changed world."

Fans of Joseph Campbell's would have no problem kitting such a movie out with Jungian archetypes.

The protagonists are probably the Miliband brothers; Tony Blair is the "complex villain" (flanked by a Norn-like trio of recently humiliated cash-hungry former aides); Lord Mandelson is the mentor - the wizard character whose wisdom was earned through trauma ("I cleaned my mind," said the Lord of Foy in a recent ). I will not bother you with the temptress, the trickster etc.

Of course not all Labour people are fully signed up to this plotline and it has tended to fray around the edges.

Now here's the challenge: how would you write the Conservatives' log-line as they go into the election?

The reason this is now an issue is the growingly ideological nature of the economics debate. Labour's preparedness to re-embrace state intervention has bigger philosophical overtones.

The argument is, as Alistair Darling put it on Wednesday, that the markets cannot alone drive an economy like the UK out of recession. The state sometimes has to play a leading role.

Now for years there has been a rising theme in centre-left thinking that says something called "Fabianism" - ie top down statism - is a dead end, and a preparedness to embrace bottom-up, co-operative and social entrepreneurial politics.

James Purnell was the most coherent proponent of this, though Charles Clarke and Alan Milburn kicked it all off. But the Brownites never bought it and as the political balance has tipped inside Labour, and you now have the beginnings of a philosophical defence of (an albeit renewed) statism.

On the political right there is also a newly ideological flavour to the discourse. You've got the Institute of Directors calling for the state to be cut to 35% of GDP over the next 10 years, you've got right-leaning think tanks pushing the Swedish or Canadian solution to public spending - across the board cuts, leading to hard paring back of key public services.

Here the philosophical argument is: reduce the size of the state and, instead of depressing economic activity, as Labour argues, you will unleash it. This is backed by evidence from the Swedish, Canadian and other anti-crisis budgets in the 1990s.

What the think tanks, business groups and a broad majority of City types want the Tories to do is to embrace not just the philosophical idea of shrinking the state, but actually using the crisis as an opportunity to shrink the public sector rapidly.

The problem is, as we're seeing from polling, the more the public associates the Conservatives with words like austerity, emergency and fiscal crisis, the more they take fright.

At its heart the Conservative election strategy has been so simple that it doesn't even need a log line - only a slogan: it's time for a change.

When Gordon Brown and his aides were reeling from one crisis to another, at the back end of last year, this seemed to be enough. But now, with the recession over, unemployment falling (even though many economists believe these phenomena to be temporary), I hear growing calls from within business, think-tank land etc for the Conservatives to be more conservative.

It's out there on the blogs, where Newsnight contributor Danny Finkelstein is getting regularly flayed over the strategy of pushing even further into the centre, in order to solidify the "soft" Conservative vote that is worrying the party's election strategists.

Tim Montgomerie, of Conservative Home, to be more of a "rescue" party than a "reassurance" party.

Louise Bagshawe, Conservative PPC for Corby, sums up the wider mood on her today:

"Now is the time for a bit of guts. For some self-belief. For some passion for what we are doing and what we stand for. For some fire to change this country, and, frankly, and I don't think this is an exaggeration, to rescue it."

However, the Cameron strategy remains to push into the centre, to battle for trust, and so - whatever the Conservatives plan to do in their emergency budget after the election, it would break their entire game plan to go ideological right now.

If I were to write the log line for David Cameron the movie now it would be:

"Traumatised by 13 years in the wilderness, party atones for the past, gets in touch with its liberal soul and captivates the hearts of decent people all over England (and a bit of Wales)."

Now, here's the thing. Go back and read the two log-lines I constructed (I will happily take your own versions in the comments section below).

Almost everybody inside the Labour party feels good about the Labour log-line. That's why all the bickering's stopped. Large parts of the Conservative party, and its base in the financial and service sectors and academia, would not really feel good about the one above. Hence the searing arguments raging in the Tory blogosphere.

There's still a battle going on inside British conservatism - and it has echoes of the one raging inside US Republicanism - over economic philosophy, even if it has been won at the top of the party itself.

Of course neither Labour nor the Conservatives is yet prepared to tell us about the ?18 to ?27bn cuts they'll need to make to balance the books.

Politicians and journalists will go hammer and tongs at this issue from now until the election but I doubt we'll hear much more detail.

But the electorate is also listening - maybe as in the movie business - to the narratives, the stories and the subtexts parties give off. To me what explains the narrowing of the polling gap, if it is any reflection of reality, is this issue of coherent "stories" rather than any economic feel good factor.

PS: If you want to have a go at spoof log-lines, you can't do better than begin with the one Richard Polito wrote for the Wizard of Oz:

"Transported to a surreal landscape, a young girl kills the first woman she meets, then teams up with three complete strangers to do it again."

The first time I ever saw Michael Foot was in 1980, in Glasgow. The occasion was the first big demonstration called by the Labour Party against unemployment. I can remember the person next to me heckling him as he spoke. He was in his duffle coat speaking to a massive crowd of miners, shipyard workers, car workers.

He finished off his speech with the famous passage from Shelley, written after the Peterloo Massacre: "Rise like lions after slumber, in unvanquishable number, shake your chains to earth like dew, which in sleep had fallen on you. Ye are many, they are few."

He was not greeted with elation: the unions were still angry with Labour for the mess they had made in government and I remember a number of donkey-jacketed blokes shaking their heads at the rhetoric - shopfloor militancy had a whole different kind of rhetoric of its own. I remember the general feeling in the crowd was: hold on a minute, who's responsible for the slumbering in the first place?

The second memory I have is invoked by the book I've just pulled down off my shelves: "Guilty Men" by "Cato" - Michael Foot's pseudonym. Written in July 1940, my Gollancz edition dustjacket - the 21st impression produced just three months later - proclaims "110,000 copies sold". (Its surtitle is "Victory Book Number 1").

Guilty Men is a piece by piece demolition job on the British establishment in the run-up to World War Two. It did not cause the fall of Chamberlain or the rise of Churchill - that had already happened. But it was one of the seminal pieces of journalism that shaped the anger over Britain's defeat in May 1940 and turned the conflict into what we now know as the "people's war".

It had been an age of deference. After this book it was not. Foot used the fatal words of British ministers and generals against them: Chamberlain's famous claim, on the eve of Dunkirk, that Hitler "has missed the bus"; General Ironside's pronouncement: "Frankly, we could welcome an attack". Within a week, Foot laconically records, the Germans had overrun Norway.

The last time I saw Michael Foot was at a memorial meeting after the death of his nephew, the left wing journalist Paul Foot. Michael Foot had to be helped onto the stage at the Hackney Empire and you could feel the audience worrying that he might not be able to make any sense. Or stand up for long.

But he launched into an eloquent speech which included a reading from CLR James' book "The Black Jacobins": Michael and Paul Foot shared a lifelong obsession with the Haitian slave rebellion and were both fans of James' seminal piece of social history. After he'd finished he said:

"This is my copy of The Black Jacobins. It's a first edition. I lent it to Paul and he thought I'd forgotten it, but I got it back." He flicked a wry grin at the audience, full of the dead man's friends and family: "In fact he had his eye on my books, you know - but he won't be getting them now."

The joke, and the delivery brought the house down.

Michael Foot's political career mirrored that of the Labour tradition: from pacifism to anti-fascist resistance in 30s and 40s. Towards statism and Moscow influence in the 50s. Disorientation faced with the social movements of the 1960s and then schism as the shop floor replaced the House of Commons as the arena many socialists of Michael Foot's era expected to achieve their dreams within.

Freed from frontline politics after the 1983 election debacle Michael Foot continued to produce books, reviews and articles that show, clearer I think than any of his actions in power, what his project was.

Whether he's visiting CLR James in Brixton to talk about the French historian Michelet, or eulogising Nye Bevan, or Heinrich Heine, or rediscovering Hazlitt or writing the life of Byron it seems to me he is doing two things: radicalising the Labour tradition, insisting it engage with the earlier, Liberal and Radical traditions of British politics; and at the same time trying to in some way "civilise" and incorporate within the parliamentary mainstream the hard-line Marxist tradition.

That is a position so alien to today's Labour leadership - as is Foot's atheism - that people born after Michael Foot was Labour leader must today be wondering how on earth he got to be in the post.

The answer is that the central fact in British politics in the 1970s had been union militancy and shopfloor power, and that the election of Michael Foot was not simply an expression of that but a compromise with it.

Michael Foot was, like Margaret Thatcher at the height of her powers: a conviction politician. After the eulogizing is over, we will begin to get articles commenting "that's where conviction politics gets you": 20 years out of office.

The thing is however, we now know where "lack of conviction politics" gets you, on all sides of politics. That world of soapbox speeches, ideology and reckless tactical gambits may be gone forever, on both sides of the House. But an agenda dominated by policy wonk reports, tax domicile issues and expenses scandals - and the total absence of scholarship, poetry and rhetoric - does feel somehow feeble by comparison.

Sterling plummets to $1.47. Cue orchestrated panic in sections of the press. Analysts bombard me with e-mails saying the currency is "facing the abyss". Highly paid economists weigh in to remind the government - current and incoming - to slash the wages of low paid public servants, close museums and let social housing crumble.

But hold on a minute. In April 2009 sterling was $1.37. If you look at the above five year chart of sterling vs. the dollar (what City oldsters still call "cable" because the rate was set over a sub-Atlantic cable after 1866) it is clear there has been a tectonic shift, and it began with the Lehman crisis, or even as early as Norther Rock. Today and Monday's moves in the foreign exchange markets have to be seen in this context.

So what are the factors driving sterling lower long-term?

First: policy. I have been told by a senior former Bank of England source that Governor Mervyn King had, even before Lehman, an "unstated policy of quietly talking down the pound".

Nobody wants to talk about this. The official government line is that the UK has no target exchange rate for sterling.

However, the governor of the Bank of England has repeatedly made statements suggesting that a weaker pound will help UK economic growth.

While it may be true that if he did the opposite - i.e. tried to talk it up - it would have no effect, it's being underplayed at present that UK policy on sterling is effectively "pro-cyclical".

'Awash with cheap money'

Second, as , the long-term unique situation that has developed around sterling: a highly globalised economy (for which read highly unprotected against external shocks); heavily reliant on finance; with its own currency; and a high budget deficit.

Third: a highly volatile foreign exchange market in which not just sterling, but also the Euro and potentially in future the dollar come under pressure to devalue, and for fundamentally similar reasons. High debt, high probability of inflation in the future.

Fourth: the high volume of speculation in currency derivatives. Forex trading floors are opening up and growing all over London as the financial system, awash with cheap money, struggles to find investment opportunities in its former targets - technology (defunct), housing (in a state of collapse), commodities (coming back but with limited liquidity), securitised finance (on its knees) and "green tech" (not really happening).

In fact we will probably look back on the winter of 2009-10 as the start of a foreign exchange phase of what George Soros calls the "super-cycle", in which speculative money sloshes from one vehicle to the next.

You can place a ?1m bet on the Euro right now by risking just ?1 of your own money, .

This in turn is driven by the fundamental policy feature of the post-crash situation - quantitative easing.

Virtually free money pumped into the financial system is giving speculators even greater ability to make high risk bets with almost no risk. Thus the currency "crisis" that is moving around the world and scaring headline writers is, again, just as much the product of policy as it is of predation.

Psychological barrier

Fifth: the permanent hit to output in the UK, and the long-term debt overhang, means a long-term downward pressure on growth here. Long-term forex strategists would expect there to be higher inflation tolerated during any recovery phase, again eroding the value of sterling.

In this context, a wobble such as sterling went through on Monday is not the major event. The "chartist" faction in the markets, which believes graphs have their own logic, point to the "psychological" nature of $1.50, and believe once sterling decisively breaches this it has a long way to fall before it bounces. We will see.

What I think the sterling wobble does adumbrate pretty accurately is the forthcoming battle between markets and government over the UK's combined fiscal, monetary and exchange rate policies. It will be a bit of a cage fight.

Because, basically, you have policymakers saying: the "markets are wrong" and the markets saying "policy is wrong".

Hopefully we are past the era of market fundamentalism where it would be seen as blasphemy to suggest anything but "the markets are always right".

The real question is - even if the markets are "wrong" - can states do anything about it?

Given, as I say, the roots of the crisis lie in policy - both monetary and unstated exchange rate policies and obviously doubts over fiscal policy - clearly they can adopt policy measures.

It is interesting that the debate in the papers focuses on tax and spend. Important though it is for the UK to have a credible fiscal policy, if that policy is fighting the effect of an even bigger monetary policy gambit, and also complicated by an unstated downward policy pressure on sterling it's hard for fiscal policy alone to stave off speculative attacks.

So what can states do?

Curbing short selling

There is a growing theme behind the scenes in Europe that they should do something to combat currency and debt-derivative speculation.

On Newsnight during the Greek crisis French Finance Minister Christine Lagarde .

The Greek Finance Minister, George Papaconstantinou, told me that the EU should "look at" a ban on short selling the Euro.

Now you've got German's finance ministry poring over positions taken in the financial markets to see who was betting against Greece's debt and trying to sink the Euro.

If it were only a question of trying to curb CDS and short selling you would give them about as much chance as King Canute. However, since the Pittsburgh G20 summit there has been growing interest in the Tobin Tax, which has transmuted into the Financial Transactions Tax and now, thanks to Oxfam, the "Robin Hood Tax".

A Tobin-style tax on foreign exchange transactions would be a win-win for the state. It would limit speculation, damp down instability and it would raise money for the exchequer. We are long past the stage where the objection was "you couldn't collect it". It's been modelled and you can.

The barrier up to now has been the absence of global unity on doing it - the EU for it, everyone else, especially the US, against it.

Unilateral action

However, there is now a large and growing temptation for the EU to go it alone on a Robin Hood tax, using repeated speculative attacks on the Euro as justification.

I am told Liberal Democrat treasury spokesman Vince Cable is mulling the possibility of the UK implementing some form of the tax unilaterally.

Since the UK is the global capital of the forex trade and since in a hung parliament there is more than an outside chance that Mr Cable could end up chancellor, I would imagine many in the markets are thinking "watch this space".

I have always said that the endgame to the post-Lehman crisis would come if countries began seeking competitive routes out of the crisis.

The gloomy growth figures here and in Europe, and the appalling debt overhang in the US, are driving talk of a double dip. If we get a double dip, then there is no more fiscal stimulus type ammo in the clip: countries will - and Britain as I say effectively already has - devalue in order to boost competitiveness.

As all students of the Great Depression know, those who devalued first - by coming off the Gold Standard - escaped recession first.

Since everybody has now read the history books on the Depression, and understood the importance of currency (Labour famously "did not know you could" come off Gold pre 1931) we can expect a self-cancelling war of competitive devaluations. And for this reason competitive devaluation is only going to take you so far.

So the real endgame comes when countries realise devaluation is a dead end and go for the only escape route left, which is actual physical trade protectionism accompanied by the creation of currency blocks.

The world, which thought it had escaped catastrophe in a flurry of state-fuelled remedies after the Lehman crisis, is inching back towards one, and it will be about more than just the value of sterling.