Iain Macwhirter

Older readers may remember an economic system called capitalism. Under this method of production, wealthy individuals, or those with access to capital, invested in things called enterprises - like factories, building bridges and railways. If things went well, these would yield a profit, which went to the owner of the capital. If the venture failed, the company went bankrupt, investors lost their money and had to go off and raise more capital. This ensured that only the most efficient firms survived.

Say what you like, it was a hell of a system and gave us the industrial revolution, Isambard Kingdom Brunel and the rail network. But that was then; this is now. Old Capitalism has long gone and has been replaced by New Capitalism, which is like the previous system, but without the risk of failure. Now businesses, like National Express, take on a venture like the railways, and make lots of profit from running it, but then when they stop making profits they hand the keys back to the government and walk off leaving all the losses with the taxpayer.

This is a great improvement on boring old capitalism, because it removes all the danger from the investor, and turns public contracts into a licence to print money. National Express deployed a Special Purpose Vehicle (SPV) for its £1.4-billion contract to run the east coast main line. The SPV has nothing to do with transport, but is rather a shell company of the kind the banks used for derivative trading during the bubble. As soon as the recession hit, National Express just shut its SPV, and waved goodbye to the losses by paying a penalty fee of £72 million to the government. National Express expects, of course, to keep its other rail franchises, because they are still profitable. In the new can't-lose capitalism, it's only when firms make a loss that the taxpayer needs to be involved.

The same thing happened with Network Rail, the privatised company that used to own the track and signalling for the railways. It was privatised in 1996 and the former British Rail bosses made a packet, until people noticed that the trains were crashing all the time because of poor maintenance. So, the loss-making Network Rail was taken back into public ownership again so that we could pay for their mistakes.

Brunel would have marvelled at the sheer inventive brilliance of this new form of no-risk capitalism. Not only is the risk removed, you don't actually have to make anything or provide a service to make a profit. The only engineering the new capitalists do is financial engineering.

The government is hoping to apply some financial engineering to Royal Mail. Peter Mandelson, the first secretary, wants to take most of the £9bn deficit in the Royal Mail pension fund onto the public books and sell off the profitable bits to TNT or some other private operator - though they haven't found one yet.

But when they do, and once the new private operators have made a lot of money from publicly subsidised postal deliveries, they will no doubt hand what's left of the postal service back to the government. It's a kind of revolving door, in which firms can come in for a spell of government ownership to load up on subsidies before returning to the market to distribute profits again.

Then there's the nuclear industry. The cost of decommissioning the last generation of nuclear power stations was around £100bn - paid for by us. It was the most expensive way of producing electricity since the Van Der Graaff generator. The next generation is going to be totally different. Private companies will build and operate super-efficient and totally self-financing nuclear power stations earning healthy profits. Except that, under the deal, when something goes wrong they'll be handed back to the government. This is because the insurance costs are so high for these power plants that if the government hadn't taken on the financial liability for nuclear disasters, the private operators wouldn't have been able to make a decent profit. And, of course, the bulk of the decommissioning costs and the disposal of the nuclear waste, radioactive for a thousand years, will naturally be the taxpayer's responsibility.

The most advanced form of can't-lose capitalism is the Private Finance Initiative, or Public Private Partnerships as Labour called them. These began nearly 20 years ago as a way of getting the private sector to finance building public projects, like schools and hospitals. The idea was that, in exchange for shouldering risk, the investors would make a decent return. This would be a vast improvement on the older, though cheaper, system whereby the government raised money through issuing bonds and used the cash to finance public projects. PFI was very successful - for the private firms. The Major Contractors Group estimated that at the height of the boom, PFI contractors were getting between three and 10 times the normal rate of construction industry profits. However, when things got difficult during the financial crisis, the PFI contractors discovered that they didn't actually have to shoulder any risk at all. The government has had to promise to bail out the PFI contractors with billions of taxpayers' funds.

But, of course, the foremost exponents of subsidy capitalism are our flexible friends, the banks. After a year of turmoil and the loss of hundreds of billions in irresponsible loans, these institutions are now thriving again thanks to transfusions of public funds. Access to £1.3 trillion of our money has allowed the banks to start paying themselves bonuses again. This is what economists call the "green shoots of recovery". Workers may be losing jobs by the thousand in Kilmarnock distilleries and Clyde shipyards, but the bankers are making huge returns again, which, when you come to think of it, is all that really matters.

New Capitalism is a system which cuts out the messy and unpredictable business of making and selling things in a market. Instead of running around and wasting a lot of energy in jobs, we just hand bankers large sums of public money. Their wealth trickles down to the rest of society through the meals they buy in expensive restaurants and the second homes they buy in Scottish villages.

Really, there has never been a more effective system of personal enrichment for the many through the enrichment of the few. The only problem is who pays for all the subsidies that are necessary to keep this system going. Who pays for the losses and who underwrites the profits of all these needy companies? Well, that's simple. You do.