The free-market economic consensus of the past 30 years is crumbling around us. We indeed live in changed times that demand radically different solutions. Already, we can see the consequences of economic recession: people losing their jobs; families facing the loss of their homes; household brands going to the wall; more people in poverty; and, this week, the advent of industrial unrest and increased insecurity. On the economy and the future of our wider society in the months ahead, there will be stark and difficult choices for all of us, including those in government.

However, in all the choices that we make, there can be no going back. We are not in 1979, 1989 or even 1999; this is 2009 and we must never make the same mistakes again. We can no longer afford simply to leave it to the market. Last week in Davos, David Cameron said that we needed a return to a 1980s style "crusade of popular capitalism". However, it was the pursuit of that popular capitalism of the past that led us to the poor regulation that got us into this almighty mess in the first place. Let us not forget that it was that so-called truly popular crusade of capitalism in the 1980s that sold off our council houses without replacing them, that allowed building societies such as Northern Rock to demutualise to their eventual peril on world markets, and that privatised energy utilities, which now exploit their consumers and employees alike. The country is not bankrupt but the mantra of free markets-the neo-liberal economic consensus of the past 30 years, which I am afraid seduced my Government too-is bankrupt.

I am not against the market but what is government for if it is not to inject the moral component into the market? Just as we witnessed with the Government's intervention in the banking sector-an important step change-we need a wholly different approach to the wider economy.

This week, following on from the banking crisis, the impact of the recession took an equally ugly turn, with industrial unrest growing across the country. But let us be clear: these strikes are not about xenophobia; they are about global corporations and unfettered free markets gone crazy, and it is that which fundamentally needs to be addressed.

These new times demand a radically different approach in government economic policy. We cannot simply go back to some so-called golden economic age of increasing consumption, spiralling consumer debt, and cheap and increasingly deregulated labour. What our country needs now more than ever as a response to the economic recession is not a crusade of popular capitalism but a new crusade of popular social democracy. We need a bold new economic consensus which promotes well-being, social justice and environmental sustainability, and which takes our country in a new direction towards the good society. I believe that a good economy can deliver a good society. However, that should not mean nationalising our banks on the one hand and privatising Royal Mail and the Post Office on the other; nor should it mean setting ambitious carbon reduction targets and then building a third runway at Heathrow.

There are alternatives to the failed neo-liberal economic policies of the past 30 years. There are better ways. When the wealthiest 1 per cent own 21 per cent of the nation's wealth, and when the bottom 50 per cent own just 7 per cent, the good economy should ensure tax justice, greater redistribution of wealth and income equality. It should ensure that those at the top pay their fair share. It should also tackle the irresponsibility culture of the super rich, and that could include a new tax on bonuses, with revenues used to fund tax cuts for those on lower and middle incomes. With millions facing the prospect of unemployment, the good economy should be about embarking on a green New Deal to create hundreds of thousands of new jobs in a green industrial revolution and investing in energy for the future. The good economy should be about making sure that businesses pay their fair share of taxes, and we should close loopholes that enable corporations to avoid paying.

With the biggest banking crisis in our history, the good economy should be about setting up a people's bank, using the existing Post Office network. Now is the time to guarantee every local community access to safe, secure and dependable banking services. We should not be afraid of imposing a maximum APR for loan and credit card companies and ending rip-off credit. Why should companies such as Provident Personal Credit be legally allowed to exploit the poorest in our society and charge 189 per cent APR for a loan of just £50 when the Bank of England base rate is just 1.5 per cent? It is loan sharking and a disgrace.

We should be ending the gender pay gap in a specified timeframe. The good economy should be about insisting on not just a minimum wage, but a living wage for the entire country, just as we have here in London. We should also insist that all companies awarded government public procurement contracts meet a standard maximum ratio of difference between the most and least well paid among their employees. When the Joseph Rowntree Foundation says that child poverty could double in the next decade if we do not find more money to tackle it, the good economy should be about prioritising and finding all the money needed to end child poverty for good.

With that in mind, we should scrap plans for Trident. Spending £70 billion on a nuclear weapons system designed for the 1980s is not a good use of taxpayers' money. We should immediately scrap plans for ID cards, which could cost £18 billion over the next decade. When 6 million of us are faced with fuel poverty this year, the good economy should be about imposing a windfall tax on the greedy energy and oil companies to ensure social and environmental justice and to raise £6 billion to enable the Government to honour their commitment to end fuel poverty by 2010. On student funding, it is absolutely right for Labour to rule out lifting the cap on fees. We should instead be looking at introducing a graduate tax that is fair to everyone. In the good economy of the future, we should allow councils to build the millions of new social houses that are desperately required.

The Government need to seize this moment and make the choice fundamentally and radically to renew our country. The opportunity now exists to usher in a new social democratic economic consensus with the values of equality, social justice, security, and sustainability at its heart. If we choose, we can create a good economy and a good society. We can work together to enable greater freedom for all our people by giving real power to the many, not to the few. I hope that we can rise to the challenge.