BBC business editor Robert Peston said we may all have to adjust our expectations and prepare for a long period of low growth before the country can overcome its debt addiction, pay down its existing borrowings and find a sustainable path to future growth.
In How Do We Fix This Mess?, co-authored with Lawrence Knight and recently published in paperback, Peston wrote that we are going to have to make the "transition from a society built on debt-fuelled shopping to one powered by saving, investment and exports" - but the journey is not going to be easy.
"If we curtail domestic household and Government spending too fast, in the absence of global co-ordination that would see stronger economies expanding rapidly and buying vastly more of our goods and services, we will be back in the grips of extreme recession."
In his Book Festival talk, which I chaired, Peston took a packed audience through the causes of the UK's current economic malaise. The overriding problem, which Britain shares with most of the developed world, was too much indebtedness - especially when this is imbalanced by too much saving (and insufficient consumption) in "producer" nations like China.
If all the UK's debt - including financial debt, Government debt, corporate debt and household debt - was added together, Peston said it reaches 507% of GDP, according to figures from management consultancy firm, McKinsey. By this measure, the UK is the world's second-most indebted large nation, trumped only by Japan.
Peston added that, as a proportion of GDP, Britain's total debt is far higher than that of Spain (debt-to-GDP ratio of 363%), Portugal (356%), Italy (314%) and Greece (267%), yet these nations are perceived as being in a much worse predicament.
He suggested that, had Britain been part of the eurozone, it would have crashed the currency accord and killed the euro in the wake of the banking bailouts. Peston also said our debt addiction had been going on for decades. The last time Britain had paid its way in the world was in 1982.
Peston argued that the "cancerous mistrust" that exists between bankers and the rest of the economy must be eradicated before the UK can experience a sustainable recovery. In his book, Peston wrote that former prime minister Gordon Brown had made a "terrible mistake" in providing unlimited financial support to banks like RBS and Lloyds Banking Group without taking direct control and that "the biggest missed opportunity of the crisis" was that the Government had not compelled banks to become much simpler organisations.
Peston said the main reason that the US economy had recovered more swiftly since the crisis - American GDP grew by 2.8% in 2012, compared with the UK's meagre 0.3% growth last year - is because our economy is much more dependent on bank credit. In the US, it accounts for only 20% of what is borrowed by individuals and businesses, compared with 80% here, primarily since US companies rely much more heavily on the bond market for raising finance.
David Boyle - a fellow of the New Economics Foundation who recently completed an independent review of choice in public services for the Cabinet Office - highlighted the removal in the early 1980s of the UK's "corset" as the turning point for the UK economy.
The corset was a system for limiting bank lending that kept the banks out of the mortgage market. Boyle, whose most recent book, Broke: Who Killed the Middle Classes?, was published earlier this year, said its removal, together with the removal of exchange controls and the "Big Bang" financial liberalisation of 1986, unleashed a tide of easy credit for mortgages, which in turn triggered four decades of dramatic house price inflation.
He said the reason for the UK's continuing high house prices has nothing to do with a shortage of homes - "it is just that too much money is going into the mortgage market".
In Broke, he wrote that the financial liberalisation of the 1980s had unleashed a monster which has been good for bankers but disastrous for almost everyone else: "We have plunged into an illusory and inflationary world which now caters increasingly for the needs and protection of a new class of Ubermenschen who take the lion's share of the rewards."
He quoted Dr Paul Woolley, a fund manager-turned-academic in the London School of Economics' financial markets group, as saying that "the largest global industry produces nothing except instability and crises".
Channel 4 News's Faisal Islam was also in Edinburgh last week discussing his new book, The Default Line. In it, Islam writes: "Housing is the only basic human need for which rapid price rises are met with celebration rather than protest. Homes were always castles, not just in England, but also across Europe and the US. But during the madness they evolved into cash machines, surrogate pensions, principal pensions, and even livelihoods."
On housing, Boyle said the decision by Chancellor George Osborne to introduce the Help to Buy scheme has been a disaster. Through this, the Government is providing £130 billion of taxpayer-funded support as security for mortgages that banks would otherwise refuse to advance.
"It's stupid economics and will impoverish our children," Boyle told the Sunday Herald. "If this continues, house price inflation will continue to outpace growth in real wages and only a very few will be able to afford to buy a house. Britain will become an even more unequal society, with less than 1% of the population as predators on everyone else."
Albert Edwards, an analyst at French-based banking and financial services company Societe Generale, has described Help to Buy as "moronic", while Institute of Directors chief economist Graeme Leach has called it "very dangerous".
Boyle said that, overall, a mixture of financial globalisation and misguided economic policies - including the fetishisation of finance - had brought the British middle classes to their knees. He said they were being further squeezed by an uneven playing field in tax which is skewed towards monopolistic players like Starbucks, Google and Amazon - which means their attempts at entrepreneurialism are hamstrung. As well as being too lax on tax, Boyle said both Conservatives and Labour governments have been too weak when it comes to enforcing competition law.
"In supermarkets, we'd be far better off - we'd be wealthier, happier, we'd have far more choice if there was a Big 10 of supermarkets rather than a big four."
Boyle warned that, without a middle class, Britain cannot be an economic success. He argued that middle-class people are needed because they have the disposable income to buy the goods and services that the economy produces.
"Without the middle class, we're going to have a very flat society with a tiny elite and everybody else constrained under the power of tyrannical landlords and tyrannical employers who measure their staff whenever they go to the loo," said Boyle. "They are an inoculation against the highly feudal society which I think is coming.
"The middle-class life isn't to everyone's taste but there is a core of civilisation to it - and it underpins others kinds of civilisation, too."
In terms of recommended cures, Boyle said house prices must be brought down to earth and that this could be done "without ruining everybody". He said one way of doing this would be to build council houses and then to give them away to their occupants. He concluded by saying he is confident that significant policy change is imminent.
Peston argued that better education is going to be key to Britain's renaissance. He said he finds it profoundly depressing that industrialists consistently complain that school-leavers lack the necessary skills for the job. In How Do We Fix This Mess? he wrote: "In the long term we can only win with our brains, which means there is no greater priority than investing in our schools and universities and encouraging students to aim as high as they possibly can."
Boyle was surprisingly confident about the future, however. He said: "This is the calm before the storm. Given the poverty of the current political and economic arrangements - and our own understanding of the way things actually work - I believe that change is about to happen.
"If we meet again here in five years' time, there will be a different political spirit abroad. There will be a much greater focus on finding ways for our children and our children's children to live meaningful, interesting, comfortable lives away from the tyranny of landlords and employers."