So far, this recession feels deeply unfair. The financial firms that plunged the world into a credit freeze have, in many cases, been bailed out. The brunt of job losses will be borne by innocent workers who had faithfully manned the shop floors of other businesses. It is not their fault that Woolworths and Whittard had become purveyors of goods that not enough people wanted to buy. Nor that Waterford Crystal, while an eminent brand, had been kept on life support to protect Irish jobs, thus delaying a move to Asia which could have saved some of them. But in corporate terms, this recession has so far been meritocratic. The Darwinian process of natural selection is at work in the economy. These fundamentally flawed firms are its early victims.

There will be many more. Industries caught in the coincidence of their own structural weak-nesses with cyclical recession face extinction. Three types of businesses are vulnerable: first, those that are inefficiently managed, such as Woolworths; second, those that are being overtaken by technology, such as Jessops or photo-processing; third, those, such as textiles, whose relative costs are surely too high for them to be sustainable in Britain much longer. These are businesses that will – and if you believe in creative destruction, should – fail. There is also a fourth category: businesses that banked too heavily on the boom. Some overextended themselves in terms of business activity, such as property development and construction. Others are well managed, but took out loans that are now almost impossible to refinance. Whether and how to support these companies will pose the most difficult choices this year for both private and public sectors. Government will naturally be concerned to ensure that good businesses do not fail on such a scale that Britain suffers a permanent loss of productive capacity, beyond that which is already inevitable from the shrinking of the City of London.

Yet governments have a poor record on intervention. The US Congress has been rightly wary of bailing out a car industry whose problems stem from inefficiencies, high costs and poor product. Public funds should be used to rescue essential services, including the provision of credit, without which no other business can prosper. But it is kinder to force makers of unwanted goods to restructure than to bail them out and postpone reality. The Treasury should let restructuring play out as much as possible. It is scant consolation to those who lose their jobs, who will suffer mightily, but the surviving companies should emerge fitter, shrewder, and better able to create jobs and wealth in the years to come.

The ultimate test of government is not the shape of short-term bailouts, but the framework for restoring the long-term health of the economy. It is clear that the British economy must tilt away from the financial services sector on which it had become so dependent. But towards what? What is the plan for encouraging real long-term job creation? Creating make-work jobs in the public sector will suffocate innovation and entrepreneurship, put a dead-weight tax burden on the private sector and expand already large state-run localities. The Government has made surprisingly little of Britain’s potential to build replacement industries.

In 2009, economic reality will trump political rhetoric. The posturing of Gordon Brown as saviour of the world economy, and David Cameron as supplier of bright ideas, will pass most people by. All they want to know is: where will the jobs of the future come from? Britain should have a tremendous edge in both earth sciences and life sciences. Westminster should get to work on durable remedies for the coming loss of jobs and industries, not sticking plasters for bankrupt businesses.