Whatever America�s legislators finally decide to do about the Bush administration�s bail-out plan, recovery in the global financial system is going to be a slow and painful process.

Whatever America's legislators finally decide to do about the Bush administration's bail-out plan, recovery in the global financial system is going to be a slow and painful process. And that stark prospect spells, I would argue, tougher times ahead for the real economy, too.

The banking sector is bound to shrink as it restructures, consolidates, and those banks left standing try to rebuild their battered balance sheets. There is bound to be more stringent regulation of that industry. And, given the public outcry about boardroom largesse in the free-booting boom years of banking, there will be irresistible political pressure to curb the worst excesses of the executive culture of bonuses and options, golden hellos and platinum parachutes.

Those on the receiving end will squeal about talent being squandered, chased off to more rewarding occupations. But the crackdown will come at a much bigger price than that. Lines of credit will be harder to come by and more expensive for some considerable time to come.

We may avoid another depression. But tougher lending conditions for businesses and individuals, when set against the damage already inflicted on housing markets on both sides of the Atlantic and accumulating signs of whole economies grinding to a halt, is almost certain to put a severe brake on the growth we can expect for some considerable time to come.

You can find forecasters talking airily of normal service being resumed by the end of next year or early 2010. However, given the scale of the shockwaves still thundering through financial markets, with every prospect of more to follow, I would not be at all surprised if overall economic activity in the western developed world remains muted for, say, the next four or five years.

I'm not suggesting a five-year slump to rival Japan's lost decade in the 1990s. But a year or more of falling, or a best stagnant output, followed by three or four years of below-trend growth could well be on the cards for a number of economies, large and small, around the developed world. The UK and Scotland, could, in my view, be among them.

Since the days when a chairman of the Hydro Board, the late Sir Michael Joughin, teased me for being a latter-day Cassandra, I've tried to curb my glass-half-empty tendencies. But, with this financial tsunami still washing over us, one is hard-pressed to find substantive reasons to be cheerful.

I heard someone suggest the other day that, by the time this banking storm blows itself out, all the wealth it has created since the last major bust will be so much value-free paper. And there is scant respite in the latest UK economic data, reported on our business pages today.

UK manufacturing is contracting at its fastest pace since comparable records began in 1992. Scotland's manufactured exports were flat in the April/June quarter and down marginally year-on-year. And since then, in September, the voice of the sector, Scottish Engineering, has reported the first fall in order intake for five years.

The latest National Statistics estimates for output from the service sector in the UK shows it unchanged in the three months to July, the first time since August 2002 that no increase has been detected. Four of the five main components recorded falls in output. The only one to show a rise was business services and finance. Given what has happened to the banking sector since the summer, that story is bound to have changed for the worse.

Later this month, the first estimate of overall Scottish growth in the April/June quarter will be released. Given that it has now been confirmed that there was zero UK growth over that same period, the prospects here are far from rosy.

Ministers will doubtless put the best gloss on them they can. That's what ministers do, after all. In 2005, in opposition, enterprise minister Jim Mather and leading SNP backbencher Alex Neil published a paper arguing that the real level of Scottish unemployment was three-and-a-half times the official count. Now, when the labour market numbers appear each month, still the product of that same process, Mather routinely gives them the most positive possible spin he can.

If I am right, tougher economic times are going to persist in the UK and in Scotland well into the next decade. That takes us well past the date for the next European, Westminster and Holyrood elections and well past the favoured date for a referendum on Scottish independence.

Politicians of all stripes have been talking the language of consensus in the past couple of days. Can they keep it up, if this momentous financial bust and its consequences for jobs and enterprise in the wider economy linger on for years? Can they, as David Cameron would have it, stay "measured, proportionate and responsible" for that long? Well, there's always a first time.