Every day now big fish are disappearing down the throats of bigger ones. Barring last-minute accidents, Lloyds TSB is about to open very wide and ingest HBOS.

Every day now big fish are disappearing down the throats of bigger ones. Barring last-minute accidents, Lloyds TSB is about to open very wide and ingest HBOS. Meanwhile, Bradford & Bingley is disappearing down the gullet of the almighty Abbey, which, in turn, has been swallowed by super-sized Santander. Yesterday Citigroup was reaching for the Andrews Liver Salts in anticipation of attempting to digest Wachovia, the fourth-largest bank in the US. And all round the western world tottering financial institutions that cannot be fed to their rivals by the regulators are being hastily propped up by governments and central banks because, we're told, "they're too big to fail".

It's true. For all the ranting about privatising profits while socialising losses, these actions are necessary because inaction could have catastrophic knock-on effects on the real economy: jobs, homes, pensions, business. Think the Great Depression, plus the run on Northern Rock and multiply by 100.

You don't have to be Alf Young to see the problem here. If these huge companies - themselves the end-product of many takeovers and mergers - are too big to fail, the fewer even bigger ones left at the end of this global shake-out will be deemed completely untouchable, however they behave. Of course, there will be lots of fine words about increased regulation and transparency and tying rewards to results, but as soon as the pendulum swings back from fear towards greed, those who run and invest in these monsters will find new ways of feathering their own nests.

Suddenly "derivatives" has become a four-letter word. But they've been around for years. US sub-prime mortgages are merely the latest ingredient in a toxic waste dump of securitised debt. Yet banks and building societies that once prided themselves on their probity have become so skilled at hiding this stuff off their balance sheets and their lending models have become so complex that nobody seemed to have understood what was going on. If property prices had continued to rise forever, they might have got away with it. Big if.

What would E F Schumacher have made of the credit crunch? He used to be chief economic adviser to the National Coal Board and worked with John Maynard Keynes and J K Galbraith, but he's best known for a little book published in 1973 called Small is Beautiful. It challenged the contemporary notions of "growth is good" and "bigger is better", arguing that modern western economies were unsustainable. It's been ranked among the 100 most influential books published since 1945.

If he hadn't died a decade before the 1986 New Building Societies Act opened the option of mutual institutions converting into banks with plc status, he would have campaigned against it. Abbey was the first to take the plunge, three years later. With customers being wooed with free windfalls, it was part of the Thatcherite creed of wider share ownership. Carpetbaggers, dazzled by the prospect of these bonanzas, went round opening accounts in the shrinking band of mutuals, using their votes to press for demutualisation and, of course, the managements were keen too because they stood to become wealthy from stock-based bonus schemes.

Savers were told that the change was necessary because it would give them easier access to capital, which has a hollow ring now. We were even told that stock-market listing would make building societies more transparent.

Today the innate conservatism of a mutual building society, owned by its savers and borrowers and existing solely to serve them, feels like a haven of simplicity and security in a world gone mad. Their constitutions prevent them from indulging in the strange world of derivatives and "asset"- backed securities. They have to raise at least half of the money they lend from their savers.

It doesn't mean they aren't vulnerable to the general downturn. And, like all savings institutions, the cost of borrowing is an issue, especially for the more aggressively-run bodies that have smaller reserves and too many buy-to-let mortgages on their books. We've already seen the Derbyshire and Cheshire building societies swallowed by the Nationwide, and more could follow. But generally mutuals feel like a refuge from uncertainty. What would appeal to Schumacher about them is that because they aren't answerable to the square mile, they aren't slaves to growth. It is their very boring staid quality that now looks so attractive. He called it "enoughness".

For the very embodiment of the small is beautiful philosophy, however, you need a pilgrimage to North Lanarkshire. The Airdrie Savings Bank is the UK's last independent savings bank. Most of the others were swallowed up by the Trustee Savings Bank (now part of Lloyds TSB). But the ASB decided to go it alone and now the bank that time forgot looks like just the ticket. About to celebrate its 175th birthday, it took 81 years to get as far as opening a second branch (in Coatbridge). Today there are eight branches, serving 60,000 customers. It has assets of £130m, reserves of £14m and its modest annual profits are ploughed back into the business.

This is a comforting story of steadiness and prudence and customers who think of it as theirs. (A staff member recently reported seeing a customer straightening the front-door mat, as if it were her own home.) In the past couple of weeks, a steady stream of new customers has been tramping across it, some of them with hefty deposits they no longer trust to High Street banks. Eat your heart out, Northern Rock. I have seen the future in Airdrie and it works. This is not a sentiment generally heard from the lips of a Partick Thistle supporter.

Similar affectionate respect is due to Scotland's thriving credit union movement. It's epitomised by Glasgow Credit Union, which began in 1989 in a small office in the City Chambers with two members of staff. One of them was June Nightingale, now the chief executive. To date this financial cooperative, owned and run by its 22,000 members, has distributed nearly £200m in loans. It now has a growing mortgage book. This year it expects to offer a 5.5% dividend and it is launching a cash ISA later this month. Like the ASB, it is also involved in outreach work in local schools, helping to instil a culture of saving and budgeting.

Yes, but even if you add up around 60 surviving mutuals to the credit unions (of which there are 121 in Scotland) and little jewels like the ASB, they make up only a tiny fraction of the existing market in borrowing and saving, you may say. They are too small. I wonder about that. Just now a lack of trust is what is paralysing the banking system and it's the one commodity these mutually-owned bodies have in spades. My guess is that in the post-crunch world, more and more of us will choose bodies such as these and they will grow and thrive, though if they are sensible not too far or fast. We may have to learn to save for what we want and queue for a mortgage, like our parents did, but that is no bad thing. If this is the end of capitalism in its current form, we should be celebrating.